Tether Coin

What is Tether?

Tether (USDT) is a cryptocurrency stablecoin pegged to the U.S. dollar and 100% backed by Tether’s reserves. Tether is owned by iFinex, a Hong Kong-registered business that also owns cryptocurrency exchange BitFinex.

As of January 2023, Tether is the third-largest cryptocurrency and largest stablecoin after Bitcoin (BTC) and Ethereum (ETH), with a market capitalization of nearly $68 billion. In 2022, Tether accounted for the majority of transactions outside of Bitcoin by value.

History of Tether

Tether was founded in 2014 by Reeve Collins, Craig Sellars, and Brock Pierce, and saw modest initial adoption of their stablecoin Realcoin. However, in 2015, Tether was acquired by new owners based in Hong Kong, who also owned the Bitfinex crypto centralized exchange, and subsequently integrated Tether into the Bitfinex ecosystem, increasing its popularity.

As Tether developed, its partner, a Taiwanese bank, became increasingly concerned about the transfer of stablecoins to circulate on numerous blockchains, so it eventually terminated its banking relationship with Tether in 2017, jeopardizing Tether's transfer of fiat The ability to convert currencies into cryptocurrencies.

However, they managed to find banking partners in Puerto Rico and the Bahamas, and during the ensuing cryptocurrency bull run, Tether’s stablecoin became the most popular, with its flagship product USDT topping the list in terms of trading volume and market capitalization. Tether was originally created for use with the Bitcoin network but has now expanded to many leading blockchains. 

How Does Tether Work?

Tether is a crypto token issued on a major blockchain that is pegged to its matching fiat currency, the U.S. dollar. Tether's original goal was to make 1 Tether convertible into 1 U.S. dollar. To achieve this goal, Tether Limited maintains reserves to support the tokens it issues.

Every time Tether Limited mints 1,000 USDT, it is required to have $1,000 in reserves, meaning each USDT Tether token is backed by an equal amount of cash, making it a safe investment in times of economic uncertainty. Additionally, USDT can be used to purchase goods and services. But in reality, Tether Limited has issues with its credibility regarding its reserves.

To avoid the volatility of other cryptocurrencies, USDT is minted or destroyed based on demand. When more USDT is needed, new tokens are minted and deposited into the exchange. Conversely, when demand for USDT decreases, the tokens are burned to reduce the supply. This supply and demand match helps ensure that each Tether token remains pegged to the U.S. dollar. Therefore, USDT provides investors with a safe and stable way to store value. Tether was first released on the Bitcoin blockchain via the Omni Layer protocol, but it can now be issued on all Tether-enabled blockchains. As of February 2023, there are over 50 chains doing this, including Ethereum, BNB Smart Chain, Terra Classic, Polygon, Fantom, Optimism, Tron, Bitcoin Cash, Solana, NEAR, Dogechain, and many more.

Uses of Tether Coin

Currently, there are more cryptocurrency trading pairs denominated in USDT and other stablecoins than there are trading pairs denominated in USD. The three most common use cases for Tether are trading, lending, and cross-border payments.

Trading 

Users can exchange the currency required for transactions into USDT and then use it to obtain other cryptocurrencies to reduce costs and waiting times.

Loan

Since lenders do not have to worry about losses due to volatility, USDT is widely used as a collateral asset. 

Cross-Border Payment

International money transfers between any region in the world can be completed in minutes.

Pros of Tether

• Tether (USDT) has been stable and reliable, trading at around $1 per unit for most of its existence with little price volatility.

• The cryptocurrency community trusts Tether, making it one of the most stable cryptocurrencies in value.

• Tether has been used for some time, and this has built a history of reliability and trust that makes people trust cryptocurrencies even more.

• USDT is widely available on most major exchanges, making it easy for people to buy and sell with it.

Risks of Tether

• Tether has not been transparent about its inner workings to be accountable to the public, which worries many who hold USDT as investors are unsure whether their investments are safe.

• There are allegations that USDT is used to manipulate the price of Bitcoin or to launder money for criminal activities.

• Tether (USDT) is not divisible, which limits its functionality.

Is Tether Worth Investing in?

Tether is not exactly an investment as its main goal is to maintain a price of $1. Tether’s value will not increase like other cryptocurrencies and crypto stocks. But you can still use Tether to generate passive income. There are many lending platforms available that will pay interest rates on your Tether. This is a way to earn more interest than a savings account.

But it's far from risk-free, as your Tether isn't insured or guaranteed like money in a bank account. Although Tether has generally maintained its value of $1, the price of Tether cannot be easily verified, and many people suspect that USDT is used for illegal activities, which is a major cause for concern.

If Tether crashes or goes out of business, then all Tether coins will become worthless because they have nothing to back them up except people's trust in the cryptocurrency. For this reason, if Tether ceased to exist, it might also endanger other cryptocurrencies because people would no longer trust them.