Tether: Everything to Know
By Beluga Research July 14, 2023
- Tether is a stablecoin pegged to the U.S. dollar
- The number of Tether coins is backed by an equal amount of U.S. dollars
- Tether is built on several different blockchains
- The company Tether Limited controls the supply and backing of Tether coins
Tether, also known as USDT, is a stablecoin cryptocurrency that is meant to be pegged to the U.S. dollar. The idea is for Tether and stablecoins like it to provide a stable store of value for cryptocurrency traders. One of the primary advantages of Tether is that traders using it do not have to move their funds between different cryptocurrency exchanges. Users can therefore skip the step of converting their funds into U.S. dollars, an action that is time-consuming and expensive.
Tether is designed to maintain a 1:1 ratio with the U.S. dollar. For every Tether token that is issued, an equivalent amount of U.S. dollars should be held in reserve.
A Brief History
In 2014, a group of cryptocurrency enthusiasts formed a company called Tether Limited. This company created Tether. The company wanted to establish a stablecoin pegged to the U.S. dollar. The idea was to create a cryptocurrency that would be less volatile than other cryptocurrencies. Cryptocurrencies that are not stablecoins can experience significant price swings in a short amount of time.
Initially, Tether was only available on the Bitfinex cryptocurrency exchange. It quickly gained popularity and was eventually listed on other exchanges as well. As of 2023, Tether is one of the most widely used stablecoins in the cryptocurrency world.
What is Tether?
Tether is a stablecoin pegged to the U.S. dollar. It is designed to maintain a 1:1 ratio with the U.S. dollar. Tether is built on many different blockchains including Omni, Ethereum and Avalanche. It is designed as a digital token that can be sent between users. Tether can be sent or received, as well as used to purchase goods and services. A number of merchants accept Tether.
Tether provides a stable store of value for cryptocurrency traders. There have been concerns about the legitimacy of Tether and whether it is actually backed by U.S. dollars. Some critics have accused Tether of being a "phantom" stablecoin. They question whether Tether Limited has enough U.S. dollars in reserve to back all of the Tether coins currently in circulation.
Tether has also been the subject of controversy because of its relationship with the Bitfinex cryptocurrency exchange. In 2018, it was revealed that Bitfinex had used Tether to cover up a $850 million loss. This led to concerns about the legitimacy of Bitfinex and Tether.
- Purchase Tether. Tether can be purchased on a variety of cryptocurrency exchanges.
- Store Tether. It can be stored in any wallet that supports the Omni protocol or other other native blockchains.
- Send or receive Tether. Tether can be sent to or received from other users.
- Use Tether to purchase goods and services. A variety of merchants accept Tether.
- Pegged to the U.S. dollar. Unlike other cryptocurrencies that can experience price swings, Tether is designed to remain stable in relation to the U.S. dollar. This makes Tether a popular choice among traders who want to move money between cryptocurrency exchanges. Tether helps them move money without being exposed to market volatility.
- Backed by real-world assets. Tether Limited holds dollars in reserve to back the value of Tether. For every Tether in circulation, Tether Limited holds a dollar in reserve. This makes Tether more stable than other cryptocurrencies that are not backed by real-world assets.
- Built on many blockchains. Tether transactions are processed on many different chains. This makes Tether more secure than other cryptocurrencies that are built on their own respective blockchains.
- Price stability. Tether is designed to maintain a stable value by being pegged to the U.S. dollar. This makes it less volatile than other cryptocurrencies. Other cryptocurrencies experience significant price fluctuations in a short period.
- Wide acceptance. Tether has become one of the most widely accepted cryptocurrencies. Many cryptocurrency exchanges and merchants accept it as a form of payment. The widespread acceptance has made it easier for people to use cryptocurrencies for everyday transactions.
- Fast transactions. Tether transactions are processed quickly on the blockchain network, which allows for fast and efficient transfers of funds. This is particularly useful for users who need to send money quickly and securely across borders.
- Transparency. Tether Limited publishes regular reports that provide details of the funds held in reserve to back the value of Tether coins. The company's actions offer transparency and reassurance to users that users' funds are backed by real assets of measurable and stable worth.
- Centralization. Tether is issued and controlled by Tether Limited. The company's control over the currency raises concerns about centralization. Tether Limited has the power to manipulate the price of this digital coin and control the supply of coins.
- Regulatory concerns. Since Tether is pegged to the U.S. dollar, it falls under the jurisdiction of U.S. regulators. This has raised concerns about the legality of Tether. The fact is particularly relevant in relation to the U.S. Security and Exchange Commission's review of anti-money laundering actions and promulgation of know-your-customer regulations.
- Lack of transparency. Despite Tether Limited's claims of transparency, users have raised concerns about the accuracy of Tether Limited's reports. They are worried that Tether is not fully backed by real assets. If these allegations are true, this could result in a loss of confidence in the cryptocurrency.
- Security risks. There are security risks associated with Tether, as is true for all cryptocurrencies. There have been instances of Tether coins being stolen in hacks and security breaches. Such incidents result in the loss of funds for users. They also decrease user confidence in this cryptocurrency and in the cryptocurrency ecosystem overall. This is particularly true because Tether is a stablecoin which was designed to be more secure and less volatile than a number of other cryptocurrencies.