USD Tethering: WWWWWH?
Tether Explained
When someone says that cryptocurrency isn’t a viable form of investment due to
its lack of support from national currencies, tell them that they’re wrong!
That’s right, as it turns out there is in fact a cryptocurrency that is backed
by the U.S. Dollar, called Tether. Each USDT asset is
backed by a U.S. Dollar held in the reserves of the Tether
Limited and can be redeemed through the Tether
Platform. So, without further adieu, let’s go over
everything there is to know about Tether.
This is not financial investment advice.This article will explain Tether and
its use cases.
Who?
So then, who exactly is Tether? Well, Tether is a
blockchain-based cryptocurrency whose coins in circulation are backed by an
equivalent amount of traditional fiat
currencies, like the
dollar,
the euro or the Japanese
yen, which are held in a
designated bank account. Tether tokens, the native tokens of the Tether network,
trade under the USDT symbol.
What?
Tether belongs to a new breed of
cryptocurrencies called
stablecoins that aims
to keep cryptocurrency valuations stable, as opposed to the wide swings observed
in the prices of other popular cryptocurrencies like
Bitcoin and
Ethereum. Essentially, this would allow it to be
used as a medium of exchange and a mode of storage of value, instead of being
used as a medium of speculative investments.
When?
Tether was launched as
RealCoin
in July 2014 and was rebranded as Tether in November by Tether
Limited, the company
responsible for maintaining the reserve amounts of fiat currency. It started
trading in February of 2015 but was allegedly
hacked
with $31 million worth of Tether coins stolen in November 2017.
In January 2018, it hit another hurdle when the required audit to ensure that
the real world reserve is maintained never actually took
place.
Instead, it announced it was parting ways with the audit firm. Moving forward,
Tether continues to be listed on CoinMarketCap as
one of the top coins in terms of market capitalization.
Where?
If you want to invest in Tether, there are actually several exchanges that trade
on the USDT market. You can trade in the USDT
market on one of the
following exchanges:
These are the exchanges that hold some of the highest volumes for Tether
trading, but you can look through all of
them and trade on the
exchange that you prefer.
Why?
Tether was specifically designed to build the necessary bridge between fiat
currencies and
cryptocurrencies and
offer stability, transparency and minimal transaction charges to users. It is
pegged against the US Dollar and
maintains a 1-to-1 ratio with the US Dollar in terms of value. However, there’s
no guarantee provided by Tether Ltd. for any right of redemption or exchange of
Tethers for real money. All this means is that Tethers cannot be exchanged for
actual US Dollars.
How?
You may be wondering how all of this is made possible given Tether’s large
market capitalization.
Well, the blockchain verifies the USDT in
circulation
and the TUSD which is the total USDT in circulation at any time. This amount
must equal the amount in the bank account used by Tether Limited to receive and
send money to buyers or to pay tethers on the Tether platform. Resultantly, they
have regular audits by specialists to check balances, deposits, withdrawals, and
transfer reports.
In the Tether Proof of Reserves
system,
the amount of USDT in circulation can be checked on the Bitcoin blockchain by
checking their wallet website, while
the corresponding total amount of USD held in reserves is proved by publishing
the bank balance and undergoing periodic audits by professionals.
Conclusion
There you have it, this was a brief introduction on what you need to know about
USDT — Tether. From when it was founded to how it manages
to keep one dollar in reserves to back each asset, Tether is one of many
stablecoins that aims to keep cryptocurrency valuations stable as opposed to the
wide swings observed in the prices of other popular cryptocurrencies. Moving
forward, keep an eye out for Tether as it continues to legitimize itself as one
of the more stable coins in the market, filling a niche where high volatility
and fluctuations will not suffice. As with any cryptocurrency, always be sure to
perform your own research and view each headline with a grain of salt.
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