Tether is a cryptocurrency token pegged or pegged to the US dollar, so 1 Tether (USDT) is always equivalent to 1 US dollar (USD). To use a similarity, Tether is a bit like a casino chip. Casino chips represent money, not money. However, in theory, at a casino, you can always exchange a chip for cash. Tether works similarly. The Tether token is like a power of attorney for money. Since the cryptocurrency is pegged one to one to the US dollar, it sees the stablecoin Tether.
The Tether token can help sellers and traders take advantage of maintaining a stable price for specified currencies while taking advantage of the operational advantages of the cryptocurrency. The tether can also be very useful for many cryptocurrency exchanges that have difficulty dealing with banks.
In this article, we’ll take a look at Tether’s features and demonstrate how it supports pegging speed. We will also look at the benefits of using the Tether token, as well as some of the controversy surrounding the coin, and cover the following topics:
What is Tether?
Tether is a cryptocurrency token issued by Tether Limited. Tether Limited is registered in Hong Kong with offices in Switzerland. According to CoinMarketCap, Tether has currently ranked as the 14th most popular cryptocurrency with a market cap of USD 2.3 billion as of April 9, 2018.
While Tether Limited’s most popular cryptocurrency is their USDT-backed Tether token, they’ve also released another Tether-backed Euro (EURT) purchase option.
Tether Limited believes that cryptocurrencies are a new technology that needs to be used for transactions, storage, and accounting of assets. However, there are still many obstacles preventing their widespread use. These include price volatility, lack of understanding from the general public, and minor difficulties for non-technical people. Tether Limited saw this problem as an opportunity to link and take advantage of fiat currencies and cryptocurrencies.
Technology Behind Tether
The transactional ledger and Tether token existed on the Bitcoin blockchain using the Omni Protocol, open-source software that allowed the company to develop, create and sell the Tether token. However, in September 2017, Tether announced that they were partnering with Ethfinex to develop and launch the first Ethereum based on Tether.
ERC20 Tether will have weaker network transaction fees and faster confirmation times (15-30 seconds) compared to Tether on the previous Omni network. Tether Limited believes this update will facilitate more efficient exchange arbitrage.
Proof of reserves
Since users trust Tether Limited with their tokens (which are exchangeable for the specified currency), Tether Limited needs to prove that they have sufficient foreign exchange reserves to back up all the tokens in circulation. Tether Limited’s foreign exchange reserve is very similar to the Federal Reserve before 1971 when they backed their dollar in gold.
Tether Limited guarantees that the corresponding total of US Dollars and Euros held in their reserves will be shown by publishing their bank balance sheets and conducting periodic audits.
According to the company’s balance sheet, total assets represent the number of assets Teter currently owns. Their assets are in balance with their liabilities; how many tokens are in circulation. Equity capital is the amount of money they would have left if their assets were liquidated and they paid off their remaining debts.
Disputes over Tether Limited
While the potential benefits of Tether are clear, the cryptocurrency community on Reddit and Twitter have raised many issues related to the Tether approach, many of which relate to security, accountability, and centralization. There are several aspects to the history of Tether that you should take into account:
Massive Growth: Tether has seen strong growth from a $ 7 million market cap to $ 2.2 billion today. Since Tether claims to be backed by fiat reserves, many questions have arisen as to where the additional funding came from.
Bitfinex Exchange: Bitfinex is closely related to Tether Limited. Giancarlo Devansini is the Director of Tether and Bitfinex, and Phil Potter is the Director of Tether and Director of Strategy at Bitfinex. Some call it a commitment.
Bitfinex and Tether were hacked within 18 months: In August 2016, 120,000 2016 BTC were stolen from Bitfinex, however, since the hack in 2017, Bitfinex has not published an official audit. While they mentioned that Bitfinex is “in the process of bringing Ledger Labs to audit our balance sheet,” they soon announced on their blog that Ledger Labs does not conduct audits. In addition to this hack, $ 6 million in Tether dollars was hacked from Bitfinex on November 31. Following the hack, the US Commodity Futures Trading Commission in December 2017, XNUMX, brought Bitfinex and Tether to court. However, the CFTC took no further action.
Regulatory and Auditor Issues: Bitfinex also has ongoing issues with international regulators and auditors. They had problems with their banks. Tether’s historical auditors are no longer associated with the company either.
