What is Tether (USDT)?
Tether (USDT) is a stablecoin, a type of cryptocurrency that works to keep the value of cryptocurrency stable through the market mechanism. It is the third-biggest cryptocurrency in the world by market value, but it is very different from other surrounding digital cryptocurrencies. Tether is mostly utilized by crypto investors who wanted to avoid volatility of other cryptocurrencies.
Tether was launched in July 2014 as a Realcoin and was rebranded as Tether in November 2014. Tether was originally based on Bitcoin blockchain and now supports Bitcoin’s Omni and liquid protocols as well as the TRON, Solana, EOS etc.
The native coin of Tether network are known as Tether token, which were created by the crypto exchange BitFinex and traded under USDT symbol.
Who created Tether?
Tether was launched on October 6th,2014 as a Realcoin by Reeve Collins, Brock Pierce and Craig Sellars, a member of Omni foundation. This permitted them to build tether on Omni Protocol which enables the users to create and trade the smart contracts based properties as well as currencies on Bitcoin’s blockchain. In November 20, 2014, CEO of Tether Reeve Collins announced that the name of their token would be changed from Realcoin to Tether (USDT).
How does it works?
When a user sells fiat currency to buy USDT, Tether then issues the equivalent digital amount in the form of tokens. If a user deposits $200 in the Tether reserve, then in keeping with a 1 to 1 dollar equality, they will receive 200 Tether tokens.
Tether coins are removed and destroyed from the circulation when users save the token for fiat currency.
Tether moves across blockchains like various digital currencies. There are tether’s token available on the many blockchain, such as the original one with Omni on Bitcoin platform as well as the Liquid, in addition to Ethereum and TRON among others.
Uses of Tether
There are three most common uses of tether:
- Trading- Traders can convert the currency they need for trading into USDT and then use it to acquire the other cryptocurrencies to cut the costs and wait times.
- Cross Border payments-International money transfer to any area of the world can be completed in the seconds.
- Lending- Because lenders do not have to worry about the losses due to volatility, so tether is extensively used as a landing asset.
Advantages of Tether
- Tether is widely available on major exchanges which makes it easy to buy or sell.
- Tether is known to be stable and trustworthy , trading at around $1 per unit.
- The community of cryptocurrency trusts tether, leading it to be among the most stable crypto in value.
Disadvantages of Tether
- The functionality of tether is limited because it is not divisible.
- Tether has not make much efforts to make its workings accountable and transparent to public.
- There are claim that Tether has been used to manipulate the price of BTC.
Tether vs Bitcoin
As per Daniel Rodriguez words, the main difference between Tether and Bitcoin is that Tether is tied to a real-life commodity, the USD, while Bitcoin is not tied to any real-life commodity.
Tether is a centralized cryptocurrency, whereas Bitcoin is decentralized by not being linked to any real-life currencies. For that reason, the value of tether should remain more stable than the value of Bitcoin.
Crypto that are not pegged to a real-life currency are subject to market volatility. Most digital cryptocurrencies like Bitcoin, Litecoin and Ethereum will face extreme volatility and fluctuations with the market, interest rates and inflation.
Frequently Asked Questions (FAQ)s
Is Tether a Stablecoin?
Yes, it is the first well-known stablecoin in the crypto world.
Is Tether a competitor to Bitcoin?
No, it is created to help the users with their liquidity on the bitcoin network.
What proof does Tether (USDT ) use?
Tether (USDT) uses Proof of Reserves, which means that at any point of time their reserves will be equal or greater than the number of tether in circulation.
What is the disadvantage of Tether?
The main disadvantage of tether is that it is less secure than the traditional cryptocurrencies.
Who controls Tether?
Tether is owned and controlled by the Hong-kong based company iFinex Inc.
Conclusion
In this article you saw that what is Tether, how does it works, advantages and disadvantages of Tether.
If you have any questions rewarding tether feel free to drop them in the comment section.
Hope this article has helped you to clearly understand Tether.
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