The creator of Tether stablecoin is JR Willet, who has been experimenting with creating cryptocurrencies based on Bitcoin since 2012. His first project was the Mastercoin coin, which Willet created the Omni Foundation to promote.
In 2014, he joined forces with other developers and entrepreneurs to create the Realcoin cryptocurrency. It was built on the basis of the Omni Layer protocol, based on the architecture of the Bitcoin network. The coin was pegged to the dollar, worked completely transparently and safely. In the same year, it was renamed to Tether.
Already in 2015, Tether stablecoin began to be traded on cryptocurrency exchanges. The authors stated that the project has reserves in dollars, which allow the exchange rate to be pegged to $1. Later, reasonable doubts arose about this.
How Does Tether Work?
The main difference between Tether stablecoin and other cryptocurrencies is that it does not have its own decentralized network (blockchain). It is always built on the basis of other networks, the development team itself decides which network to run on. Users can choose which of the many supporting networks to work with. This allows users to avoid paying large fees on slow blockchains.
At first, the main network was the Omni network created by JR Willet. Later, the version for the Ethereum network began to gain popularity and it was decided to make it the main one. In addition to them, several networks are available.
Is Tether Backed by USD?
In all networks, the principle of operation is the same: Tether stablecoin always costs $1. Only wallets differ (a separate wallet and address type is used for each network), commission and transaction speed.
Cryptocurrency works via the Proof-of-Reserves (PoR) algorithm. It constantly checks the amount of USDT in circulation on all networks and that this amount matches the available reserves.
In addition to Tether stablecoin pegged to the US dollar, there are versions for other assets.
The version pegged to the US dollar remains the most popular and widely used.
What Is Tether Used For?
Tether was conceived primarily as the equivalent of the dollar for the cryptocurrency environment. Tether measures the value of cryptocurrencies, futures contracts, digital money, and more.
The second goal of Tether stablecoin is to be an asset that is not subject to exchange rate fluctuations. Many cryptocurrencies in certain periods of time show huge jumps in the course up and down. The money invested in them is always at risk of partial loss due to volatility. Tether allows you to “exit” fluctuating cryptocurrencies into a stable asset and not be afraid of a drawdown.
Like any other cryptocurrency, Tether can be used for money transfers.There is no risk of losing part of the money during the transfer process or until the received money is cashed out.
All Tether coins are issued and sold by Tether Limited. Further, already issued coins, users and cryptocurrency services can freely sell and transfer to each other. When a company receives money, it adds it to its reserves, in return issuing 1 USDT for every dollar received.
If desired, tokens can be returned back. To do this, they are sent to a company that issues traditional money and destroys the received coins. For these operations, you will have to provide Tether Limited with your data, including place of residence, last name and first name, email address. You will have to go through paid verification and pay fees for withdrawing USDT to cash. Therefore, the main turnover of coins falls on cryptocurrency exchanges.
The Proof-of-Reserves consensus algorithm constantly makes sure that the number of coins in circulation matches the number of dollars in reserves.
Most of the reserves are held in cash. Tether Limited says it audits its reserves quarterly. It is carried out by independent auditing agencies.
Throughout its history, Tether stablecoin has been faced with honesty doubts, scandals, and litigation. It began literally from the moment the project was launched, which many considered not entirely legal. Despite all these negative points, Tether coins continue to be issued, and are still actively used in the cryptocurrency environment.
Mining Tether is not possible. Passive income can be obtained using decentralized finance services. They pay 7-10% per annum on investments in this coin. Almost all decentralized exchanges work with this cryptocurrency. You can store it on all popular software or hardware wallets.
Is Tether a Good Investment?
The Tether stablecoin is chosen for a number of its advantages:
Stable course. The coin almost never deviates from it and always trades close to $1.
Popularity. There is not a single major cryptocurrency platform or exchange that does not work with Tether. This makes it possible to buy and sell it.
Possibility to choose a network. Tether stablecoin operates on a variety of decentralized networks. You can always choose the one in which the transaction speed is higher and the fees are lower.
A complete replacement for fiat money. The Tether user is exempt from fixing profits in fiat money, Tether is used for this. So funds are not withdrawn from the cryptocurrency ecosystem, and the total commissions paid are reduced.
There are also significant drawbacks that do not allow us to consider USDT a fully secure tool:
Doubts about the availability, quality and adequacy of reserves. Tether Limited does not show its best side, not giving full transparency of reserves.
Constant scandals and claims. Among major cryptocurrencies, Tether is the champion in the number of lawsuits, suspicions, rumors of foul play and controversies.
Despite the shortcomings, the coin has a large capitalization and a huge number of users.
Conclusion
Tether remains the largest stablecoin in the cryptocurrency industry. Cryptocurrency has been maintaining these positions for many years, it does not leave the top ten largest coins by capitalization.
If the project team sorts out the opacity and conducts independent audits of the reserves, the image of the cryptocurrency will greatly improve. Now transparency is what it lacks the most.
