Tether (USDT)

One of the biggest limitations the cryptocurrency technologies battle is the huge price swings in their valuations which render them slightly impractical for day-to-day trading. Keeping this concern in mind, a new breed of cryptocurrency known as stablecoins was introduced. Stablecoins are backed by real-world fiat currencies like the US Dollar or Japanese Yen. Tether (USDT) is a Blockchain cryptocurrency backed by the US dollar (Blockgeeks, 2018).

Tether was created with the sole intention of introducing a Blockchain-based cryptocurrency that will be stabilized so that it becomes a recognized and accepted means of exchange rather than a tool of investment. It is essential to tackle the problem of wide price swings if we want to see a future where cryptocurrencies could be used to run day-to-day business transactions. Tether aims to achieve that. Its fixed-price follows that of the US Dollar, which provides an incentive to the masses to spend token rather than ‘HODL-ing’ them (Frankenfield, 2019).

Tether is a token issued on the ‘Omni-layer’ in the bitcoin network. The Omni protocol basically provides a platform for new products to be launched on the Bitcoin Blockchain. As a result, every Omni transaction shares the same transaction hash as the Bitcoin transaction which produces it in the first place. There are other stablecoins launched on the Omni Protocol but Tether enjoys a massive share of 90% of Omni’s transactions (Blockgeeks, 2018).

Tether was initially founded by Brock Pierce, the director of the Bitcoin Foundation, with the technical assistance of the software engineer Craig Sellers and the entrepreneurial skills of Reeve Collins. Back then, in July 2014, the project was named Realcoin and its main objective was to develop a utility token that had a 1:1 parity with some real-world fiat currency (Jenkinson, 2018).

According to a recent development, it has been alleged in the leaked Paradise Papers, that Tether shares common management employees with the famous crypto-exchange, Bitfinex. Giancarlo Devasini is as of the time of this article, serving as a director for both companies, while Phil Potter is a director at Tether and holds the position of Chief Strategy Officer at Bitfinex. This allegation gave way to some serious suspicions regarding the transparency of Tether and the working and legitimacy of Bitfinex (John Ian Woong, 2017).

The main representative body behind Tether is the Tether Foundation whose current CEO is JL Van der Velde while Stuart Hoegner serves as the General Counsel for the firm.

Tether’s concept has been published in detail in the whitepaper provided by the parent company Tether Limited. The main code is developed by the company itself under the supervision of the software engineer Craig Sellers. The technology itself relies on the already developed major Blockchain of Bitcoin. Using the open-source Omni Protocol, the team was able to build a token whose value could be pegged to US dollar and whose transactions could be monitored using the Bitcoin network.

Tether has been recently swimming in controversy, which has painted the cryptocurrency with a scandalous brush. With the entry of many other stablecoins, the crypto-world might run toward the new entrants, relegating Tether coin to the background, and this move will be aggravated by the ongoing negative atmosphere that has surrounded the Tether coin.

Tether was initially launched under the umbrella of the Tether Foundation to create a Blockchain-based token that could bridge the gap between the cryptocurrencies and the real-world currencies. However, Tether has not been having a positive press, and that has affected its reputation, but despite all the negative stories about Tether, technology is being used in many projects. HubSpot is using Tether in projects like Select, Shepherd, Tooltip, Drop, etc.

Tether could potentially become the only stablecoin for cryptocurrency exchanges, but this is very unlikely, as many other stablecoins are already being used by cryptocurrency exchanges.

Since this stable coin was brought into the mainstream, it has managed to capture a considerable amount of cryptocurrency exchange activity. Tether is used in about 40-80 percent of all transactions happening on the leading exchanges of Binance and Huobi. A large part of the transactions sees the purchase of Bitcoin using Tether tokens. In August 2019, amidst the devastating performances of many cryptocurrencies, Tether managed to record its all-time high activity with a total market capital reaching up to $4 billion (Cuen, 2019).

However, Tether’s history has not always been right on track. In November 2017, a cyber-attack on the Tether network resulted in a theft of about $31 million tokens. This caused panic and made Stablecoin users more security conscious. A little fast forward to January 2018 and Tether was faced with another controversy which was as a result of the bad faith demonstrated by the parent company Tether Ltd. As Tether, and all other stable coins are backed by a real-world currency that is supposed to be deposited in a bank account as collateral. Each Tether token is paired by a US Dollar. Tether Limited did not go through with the mandatory audit which was supposed to ensure that the real world reserves are maintained. This lack of transparency gave rise to the winds of suspicion and mistrust (Seth, 2018).

Tether Foundation is the main body that supplies Tether tokens. They used to state that every Tether token is backed by a real-world US Dollar deposited in reserves. However, it was alleged that this was not the case. As much as 25% of the Tether valuations come from loans taken to fill the reserve which is something to be worried about. Contrary to their popular claim that each Tether is backed by a US Dollar, it has been established now that these claims were evidently empty. According to a Tether’s spokesperson and the official website as well (under the Transparency description), it has been revealed that instead of 100% US dollar reserves, it has ‘cash equivalents’. Interestingly, these ‘cash equivalents’ are presumed to be loans and other cryptocurrencies as well. So the whole concept of pairing the cryptocurrency to a stable fiat currency goes down the drain because the ‘equivalent-reserves’ are themselves highly volatile in nature. So, in short, Tether has also become an unregulated crypto-currency and the investors might be in for a surprise; perhaps, not a good one (Coppola, 2019).

Tether’s community, essentially, is limited to users only. Since there is not much development required on the Tether technology, members of the community haven’t been doing a lot to improve the technology. The community only includes frequent trade exchange users. According to some stats, around 40-80 percent of Bitcoin transactions are made through Tether token.

Tether has a number of notable industry partners, most of which ranges from trade exchanges to online banks. Industry supporters include Omni, Poloniex, Ambisafe, MegaChange, etc., while many trade exchanges like Bitfinex, Bittrex, HitBTC, etc. are listed as Tether’s partner. Recently, Bahamian Bank revealed its partnership with Tether Limited (Baker, 2018).

In another interesting development, Tron’s CEO, Justin Sun has announced his intention to adopt and introduce Tether token on the Tron network (De, 2019).

An array of stablecoins have been launched since Tether has consolidated its position in the crypto-world. Some of the substitutes considered next to Tether token are USD Coin (USDC), Paxos Standard (PAX), Gemini Dollar (GUSD) and MakerDAO (DAI) Stablecoin (Puckrin, 2019).