Tether is a popular stablecoin that crypto enthusiasts have used for years to leverage their cryptocurrency trades.
USDT is pegged to the U.S. dollar, and in theory it should be unaffected by the market volatility that can so dramatically impact the valuation of other cryptocurrencies, such as
Bitcoin.
Tether Is a Stablecoin
Tether aims to provide a “safe” digital asset that maintains a stable valuation. That’s what makes USDC a stablecoin, whose value is pegged to the price of the U.S. dollar. The goal is that Tether should always maintain the same value as its peg.
Tether’s stablecoin competitors include USD Coin, Dai and Pax Dollar, to name a few.
Crypto traders use Tether to provide steady, reliable liquidity to get in and out of other cryptocurrency trades without facing unpredictable losses (or gains) from volatile price changes.
Tether had a 24 hour trading volume of $58 billion (£47 billion) at the time of this writing. That makes Tether the most liquid cryptocurrency - beating even crypto market stalwarts Bitcoin and Ethereum. It is also among the top three largest cryptos by market capitalisation. This goes to explain then why there are so many
Tether casinos popping up.
How Does Tether Work?
When a user deposits fiat currency into Tether’s reserve, selling fiat to buy USDT, Tether then issues the corresponding digital amount in tokens. The USDT can then be sent, stored or exchanged.
If a user deposits $100 (£80) in the Tether reserve, then in keeping with a one to one dollar parity, they will receive 100 Tether tokens. Tether coins are destroyed and removed from circulation when users redeem the tokens for fiat currency.
Tether moves across blockchains like many other digital currencies. There are Tether tokens available on various blockchains, such as the original one with Omni on the Bitcoin platform as well as Liquid, in addition to
Ethereum and TRON, among others.
A Brief History of Tether
The roots of Tether date back a decade, to when J R Willet was looking to build new cryptocurrencies on the Bitcoin protocol. Willet implemented this idea with Mastercoin, and one of its original members would later become the co founder of Tether back in 2014.
Using Tether for liquidity began when it was added to the Bit Finex exchange back in January 2015.
How Is Tether Backed?
Despite stablecoins being a popular choice among crypto traders, Tether has some additional controversies regarding liquidity issues and whether its reserves are adequate to cover the number of USDT tokens in circulation.
According to Tether’s website in 2019, the site claimed the stablecoin was backed by reserves in traditional currency and cash equivalents.
Crypto experts say it is somewhat accepted that Tether is not “fully” collateralised in the crypto marketplace. And that it was an issue of controversy more than a year ago. Markets have worked through that concept of how comfortable they are – it’s very clear Tether is not backed by dollars.