Tether

What is Tether (USDT)?

Tether Limited is a Hong Kong company that released a controversial stablecoin called USDT. In fact, USDT is the first and most popular stablecoin in the cryptocurrency market.

The term “stablecoinEssentially, this means that the price of Tether does not change much based on market fluctuations. This is so because the token is USDT pegged to the US dollar at the rate of 1:1. Thus, one USDT token is approximately equal to 1 US dollar. Check out the Tether price chart above to see for yourself. Its value remains fairly close to $1 even when the market fluctuates.

To be more precise, Tether is secured stablecoin. It is backed by the assets and reserves owned by the company. To maintain USDT’s peg to the US dollar, all Tether coin reserves must be equal to or less than the total number of USDT tokens in circulation. Thus, Tether must allocate an equal amount of US dollars to its reserves every time it issues new USDT tokens to ensure that USDT is fully backed by cash.

Also, please note that USDT works like this second level token because it doesn’t have its own blockchain. Although it was initially based only on the Bitcoin network, over time it has been integrated into other blockchains including Tron, EOS, Bitcoin Cash, Solana, Ethereum, Kusama and so on. Therefore, the token is protected by the hashing algorithms of the above-mentioned blockchains.

History of Tether

In a white paper published online in January 2012, software developer J.R. Willett discussed the potential of creating new crypto assets on top of the Bitcoin blockchain. This is when the concept of Tether came into being. Willett later put his concept into practice, creating Mastercoin. The Mastercoin protocol was then used as the basis for the creation of Tether.

The USDT token was originally released in 2014 as Realcoin. Realcoin was a second layer token created on top of the Bitcoin network. Omni-layer (transport protocol) was used to develop the token. However, after some time it was renamed USTether, which eventually became USDT.

Craig Sellars and Brock Pierce were members of the Mastercoin Foundation and two founders of Tether. Reeve Collins was the third founder of Tether. In addition to being the founders of Tether, they have all also contributed to various other cryptocurrency, entertainment, and technology projects.

Purpose of Tether

Essentially, Tether tokens combine the decentralization of a cryptocurrency with the stable value of the US dollar. Thus, transactions with USDT tokens can be made without any intermediaries or financial institutions. However, they also manage to keep their value stable by pegging it to the US dollar.

Below are the three main use cases for Tether coins:

• A way to combat crypto market volatility. High volatility is one of the most important characteristics of the crypto market. This is influenced by a huge number of factors that cause the prices of various crypto assets to fluctuate. However, this does not apply to the price of USDT since it is backed by the US dollar. Thus, by maintaining a stable price, USDT helps reduce volatility in the entire market.
• Backup plan for investors. Tether crypto assets often become a salvation for investors when the cryptocurrency market begins to fluctuate wildly. They can link their portfolios to Tether, allowing them to avoid a complete withdrawal of their assets. Since USDT is not really affected by market volatility, it allows investors to keep the value of their assets the same.
• An alternative for depositing or withdrawing funds. Users can easily transfer their US dollars between regions, countries and even continents thanks to the widespread adoption of Tether. So, instead of sending US dollars to some other country, they can send USDT tokens, which can then be converted into US dollars.

Supply of Tether coins

Essentially, the total supply of Tether tokens has no actual limit. Since USDT is technically owned by a private company, its release is limited solely by Tether’s own policies. However, Tether does not announce USDT release schedules in advance.

The company only offers daily transparency reports which detail the total value of its reserves of assets and liabilities. These reports can be used to determine the number of USDT tokens in circulation.

However, in reality, the supply of Tether cannot be infinite. The number of tokens is limited by the actual cash reserves of the company. This is so because Tether states that every US dollar must be backed by one US dollar. Therefore, if Tether is unable to raise more money, it will also be unable to issue more USDT tokens.

Returning to the price of Tether, it is important to highlight that although it is a stablecoin, USDT price may still fluctuate a bit. If you look at the Tether price chart above, you will notice that the line is not straight. However, one way or another, it remains close to $1.

Tether controversy

It was mentioned at the beginning that Tether is a controversial token. Why? Well, first of all, some have questioned Tether’s claims regarding the reliability of its dollar reserves. This even led to large fluctuations in the price of USDT when it managed to drop below $0.9.

Additionally, some people tend to question the security of Tether. The fact that Tether’s reserves have never been scrutinized by an impartial third party has drawn some criticism. In addition, the company has repeatedly received fines for making false statements about the state of its financial statements.

Overall, there are definitely some doubts about the USDT token. However, despite some skepticism regarding this asset, many people believe that Tether will not fail due to how “big” This.