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What USDT Is, Its History and How It Operates
If you’re a fan of fiat-collateralized stablecoins, you’ve probably heard of Tether (USDT). It’s the globe’s most popular one, built to maintain the stability of different crypto valuations. Those who invest in USDT have one thing in common; they want to save the growing cryptocurrency market from the high volatility it is susceptible to.
Tether was the world’s first stablecoin. Its worth has massively increased since its creation in 2014. As of mid-April 2021, CoinMarketCap approximated its market capitalization to be more than $48 billion. Then, its price was $1.01.
In this post, we’ll discuss Tether, its history, and how it works. Let’s begin!
History of Tether
According to the USDT white paper, this cryptocurrency was co-founded by Reeve Collins, Brock Pierce, and Craig Sellars. During its launch in 2014, it went by the name “Realcoin,” but later on, the trio decided to rename it “Tether.”
As with all stablecoins, Tether had to peg its value to other commodities/currencies. For it, these were:
- The U.S. Dollar
- The Euro
- The Japanese Yuan
Tether was created to reflect the value of the U.S. dollar. This translates into that every USD can be redeemed for a USDT that Tether Limited, a Hong Kong-based organization, issues. This stablecoin lacks its own blockchain. Even so, it can comfortably operate on an array of networks, including Bitcoin, Tron, SLP, Ethereum, EOS, Algorand, and OMG.
Tether Complications
Tether’s journey to the top hasn’t been a walk in the park. In 2017, USDT worth $31 million was allegedly stolen by hackers. This led to many controversies, with a large part of the Tether community doubting this stablecoin’s transparency and security.
Then, April 2019 saw Letitia James, New York Attorney General, accuse USDT’s parent organization, Ifinex, of failing to disclose an $850 million loss. Instead, Bitfinex, the crypto exchange run by the company, took about $700M of Tether’s money to cover up the loss.
During this incident, many investors in the crypto scene expressed concerns about the relationship that Tether shared with Bitfinex. It is worth noting that the latter was the first platform to introduce USDT.
Despite all the negative publicity, Tether found its footing and thrived, becoming one of the top-ranking stablecoins today.
How Tether Works
As mentioned above, Tether was developed to offer the cryptocurrency market stability and create the much-needed link between digital currencies and fiat currencies. USDT relies on the Omni blockchain network to function as expected. This protocol is pretty versatile and has been known for its capability to anchor other cryptocurrencies such as Bitcoin.
Tether has continued to win over digital currency investors worldwide because it can replace USD on top exchanges. Using this crypto to make payments allows them to enjoy accountability because of its equivalence to the fiat currency.
Besides, USDT is a smart and safe option for those who wish to send cash but can only do it after converting it into digital money. With its liquidity, no one has to deal with a fiat currency if they prefer otherwise.