Tether is a cryptocurrency that is labelled as the stable coin. Although the two terms aren’t usually used in the same sentence, Tether brings them together with its framework. Tether is pegged to real-world fiat currencies like USD and EUR. The 1:1 pegging to the Tether reserves means users can use it as fiat currencies in the crypto world. A Japanese Yen version of Tether is on the way as well. The amount of Tether is controlled by the reserve, with tokens created and destroyed as per the funds added or subtracted from the Tether funds.
How Tether Works
Tether maintains reserves through its accounts. Tether tokens are backed by the fiat reserves which Tether Limited, the company behind Tether, maintains. They have always maintained that the account and reserves management is a transparent and audited process to assure the users that there is no foul play behind the scenes. Tether basically takes away the need for the overhead in converting your fiat money into crypto tokens. Since it is pegged 1:1 to USD and EUR, you can straight away get Tether tokens and use them in trading. Tether Limited is also responsible for maintaining the website which stores and transfers Tether tokens as well as for integration of Tether with third parties.
Tether embeds metadata in the Bitcoin blockchain through the Omni protocol. Omni protocol lets tokens represented by the metadata on the Bitcoin blockchain to be created and destroyed.
More and more people are using Tether because it makes entering the crypto market much easier. Since it is pegged to real-world fiat currencies (at least that’s what they’ve been saying so far), it is much more stable than other cryptocurrencies. People also hold on to their Tether when other cryptocurrencies go down.
Tether Pros and Cons
Pegged to USD which makes it a lot more reliable and gives a safer feeling to investors and traders
Transaction fees are virtually zero
To use the tether.io wallet you have to go through a lengthy and cumbersome identity verification process. This proves to be an obstacle for people venturing into the crypto realm for the first time
The details of auditing the reserves are not public, and there is a fear that Tether Limited might be minting fake Tether and be involved in money laundering
The Controversy Regarding Tether
While Tether Limited claims that the reserves are maintained through their auditing which is completely transparent, there is growing speculation that this isn’t the case. The rumours involve not just Tether but Bitfinex as well. Bitfinex is the largest cryptocurrency exchange by volume, and there are rumours that both the parties are in collusion in a money laundering and fake Tether printing business.
Both the concerned parties have come out in public and tried to silence these rumours by labelling them slanderous lies, but the number of people suspicious of their relationship is only increasing. This wasn’t helped when it was disclosed that both Tether Limited and Bitfinex share personnel high up in the hierarchy.
Tether has started to affect fiat currency values as well because the value of Tether tokens has almost reached the value of fiat currencies for other crypto tokens. This is not dangerous at all as long as Tether really is pegged 1:1 to fiat currencies and its reserves are honestly maintained. If the organization upholds its promise of fair auditing and maintaining authentic reserves, then there’s no concern. But if this isn’t the case, a lot of people could lose money.
Since Tether is pegged 1:1 to USD, it has been priced at $1 throughout its history with slight rises and drops. It currently has a daily trading volume of $2.4 billion and a global market cap of $2.2 billion.
Buying & Storing Tether
You can buy Tether through exchanges like Bittrex, Bitfinex, Poloniex, etc. Although they don’t deal in fiat currencies, they use USDT tokens to allow for direct usage through fiat.
You can store Tether tokens in any ERC-20 compatible wallet, while there’s also the option of using the tether.io wallet.
Tether is a cryptocurrency that looks to bring stability in the world of cryptocurrencies. It is pegged 1:1 to USD and allows people to enter the crypto realm without any trouble. Tether Limited maintains its reserves and promises that it does regular auditing to decide on how many Tether tokens to create and destroy. There are rumours that this isn’t the case and there is a partnership with Bitfinex that could harm all the users, but those rumours have been refuted by both Tether Limited and Bitfinex.