Tether – USDT

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Tether – USDT

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Tether – USDT is the world’s biggest stablecoin to date. All USD Tether tokens in circulation are backed by the U.S. Dollar on a 1:1 ratio. But is this claim valid? The popular stablecoin has endured a lot of controversy and criticism. Find out more in this article.

What is Tether – USDT?

Tether is a stablecoin that launched in 2015, as it was introduced on the trading platform Bitfinex. Tether – USDT is originally designed to always be worth $1.00. It maintains its peg to $1.00 by adding a new real US Dollar each time a tether is minted. Meaning dollars are in reserves at financial institutions and are used collateral.

Stablecoins are cryptocurrencies that have their price pegged to or backed by a stable asset, or group of assets. Stablecoin plays an important role in transactions, payments and settlement, and Decentralized Finance – DeFi.

This review of Tether – USDT was created for informational purposes. This article is not intended for promotion.

General info about Tether – USDT

Blockchain

Tether – USDT is on the blockchain. Meaning their transactions will be recorded in a way that uses an immutable cryptographic signature to eliminate or minimize the risk of hacking or cheating the system.

On what blockchains does Tether – USDT exist? 

Tether – USDT can be traded and transferred to almost all blockchains; Ethereum, Binance Smart Chain, Avalanche, Polygon, Arbitrum and many more…

Can Tether – USDT pauze withdrawals?

Yes, Tether can and has blacklisted some addresses in the past. If law enforcement asks them specifically to freeze accounts, Tether will do do so. To check out the blacklisting feed visit this twitter account that posts new USDT blacklistings.

Stability

USDT’s stability is quite reliable historically speaking, as the stablecoin has always managed to remain steady at around the $1 mark. It achieves this price stability through collateralization of buying and selling the ‘real’ assets. Volatility can ofcourse occur, but the price has always returned to its original value of one dollar.

Controversy has rised surrounding Tether’s claim that it has enough dollar reserves for its current circulating supply of Tethers.

What are the benefits of using Tether – USDT

  • Quick Transactions: Stablecoin transactions are instant in comparison to fiat currencies that can take one to four business days to show in your bank account. 
  • Availability: Stablecoin exchanges are possible 24/7 in comparison to the blackout of weekends and holidays normal banks work with. 
  • Transaction Fees: Stablecoins will have a low transaction cost, depending on which blockchain the transaction is made. 
  • Stability: Prices of stablecoins remain pegged to the fiat currencies they’re pegged to.
  • Transparency: Stablecoins issuers have to be audited. This is still a controversial topic among regulators and investors. But still more transparent than regular banking services.

Team

On 2014, Brock Pierce, Reeve Collins, and Craig Sellars launched Realcoin in California. which would rebrand  into Tether later that year. Tether Holdings Limited was founded  by Bitfinex Chief Strategy Officer, Phil Potter and Giancarlo Devasini . JL Van de Velde took on the roll of CEO of Tether-USDT besides his functiono as CEO of the Bitfinex cryptocurrency exchange.

 

Controversy and Criticism

Tether is one of the oldest cryptocurrencies and one of the first successful stablecoins. USDT rose very quickly and with this came the skepticism and controversy. 

Initially, Tether was listed on the Bitfinex exchange, but the identical management of Tether and Bitfinex, was for some critics worrysome. We take a look at some highlighted controversies;

  • 2017: Tether admits it has just $61.5 million in cash held in trust by its general counsel Stuart Hoegner.
  • 2017: Crypto experts claimed that Tether was used to artificially create liquidity and drive up the price of Bitcoin.
  • 2019: The parent company of Tether – iFinex, was accused of hiding a $850 million loss using the Tether reserves. Tether had to pay $85 million and cease trading operations in New York. Check out the legal document here!
  • 2020: A class action was filed against Tether, accusing Tether of manipulating the markets by issuing USDT to itself without dollar backing. The newly issued USDT was then sold to the cryptocurrency exchange Bitfinex, who has identical owners and management.

 

Feel free to do your own research about Tether controversies as the list is longer then described here…

Is Tether fully backed by real US Dollars?

Tether claims that every USDT is backed 1:1 by U.S. dollar in its reserves. But the reality is a lot more nuanced. In 2021 Tether published their reserves breakdown. Indicating that Tether had 75.85% in “cash and cash equivalents.” Where 65.4% here-off is in commercial paper and only 3.87% is in cash. Meaning the claim of 100% US dollar backing is false.

The chart above indicates that Tether is in reality backed by;

  • Cash
  • Cash equivalents
  • Secured loans
  • Corporate bonds
  • Other investments

Tokenomics

  • Circulating Supply: 17,747,431,589
  • Total Supply: 17,747,431,589
  • Max Supply: Undefined

Use case of Tether – USDT

We look at two general use-cases of the stablecoin Tether – USDT;

Crypto Trading Pairs

Trading pairs refer to assets that users can trade for one another through an exchange. These allow buyers to compare the costs of various digital assets. 

For instance, a BTC/USDT crypto pair will let you know how many USDT equals one BTC.

If you have Tether – USDT and want to trade it, you can check for the pairing on the exchange. You may find different pairs on different exchanges. The most liquid trading pairs for USDT will be located at top exchanges such as Binance or Huobi. 

DeFi

Lending or yield farming in DeFi offers you an interest when lending your stablecoins to a borrower. Benefiting users that can get a loan at much lower rates than rates centralized exchanges offer.  But there are also benefits for long-term investors, that can earn interest rates on the stablecoins they lend. 

Where to buy and sell Tether – USDT?

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What do we think about Tether – USDT?

Ongoing controversy around Tether makes it hard to say whether Tether, as a stablecoin, is totally valid. We therefore advise to manage your risk and hold for ‘a stable of horses’ instead of betting on one single horse.

Altough Tether is considered the original stablecoin with his biggest market share and third ranking of all cryptocrrencies, it is not the only of his kind. There are several other stablecoins, such as; DAI, USDC and BUSD.

Is Tether – USDT safe? 

There are a lot of red flags around the stablecoin, but the crypto has been backed by many exchanges, protocols and wallets. If Tether were to fall, there will be a lot of organisations that lose interest and reputation. To minimize this risk, there will be a lot of money ready to back Tether, in worst case scenarios.

Time will tell the true nature of the Tether claims…

Tether – USDT conclusion

Despite the controversies and criticisms Tether – USDT is ranking as the third biggest cryptocurrency worldwide. Tether can be used for trading, loaning and earning interest and will be forever remembered as the first stablecoin that made stablecoins popular.

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