Tether’s trading symbol is USDT.
Hong Kong-located Tether was launched in 2014. The aim was to peg it to the U.S. dollar. It means its value would be backed by a dollar reserve equal to the amount of USDT.
Tether was originally called Realcoin when launched by a trio of serial entrepreneurs. The token’s development has ensured its full compatibility with a number of blockchains, including Ethereum, EOS, Tron and Algorand, SLP and OMG.
Tether was invented to function as digital currency that bridges cryptocurrencies and traditional currency, or fiat money.
Because its value is pegged to the U.S. dollar, the Tether tokens are meant to store value in a similar way and avoid wild volatility that is characteristic of Bitcoin due to investor speculation.
Since its volatility is low, Tether’s return on investment is also minimal. It’s a substitute for cash, in other words.
How’s Tether different from other stablecoins?
The key selling – or buying – point that makes USDT is that it’s tethered to the USD.
Whenever new USDT tokens are minted, at least in theory, the parent organization has the corresponding amount of cash or securities that can be converted into cash.
This benchmarking serves to reassure and empower investors, who can exchange their stablecoins such as USDT for more volatile cryptos when they want to actively trade.
Tether offers a convenient and practical way for crypto investors to convert their crypto holdings without a USD cash-out.
USDT is a one of a handful of stablecoins pegged to fiat money, others pegged to commodities.
The Unique Selling Proposition of Tether
The ultimate use of USDT is to move money around fast within many blockchain transactions without the money losing value.
Transactions are quick from one country to another, on the same continent or around the world, easy and convenient.
In doing this, Tether gives users an alternative to banks and financial service companies. It’s all about competition and innovation at the end of the day.
Are there any downsides to Tether?
A number of parties, such as state financial regulators and courts in the U.S., have tried to validate the tether-to-dollar peg because Tether’s reserves haven’t been examined by an independent third-party audit to verify its claims.
Because of the perceived difference in reserves, USDT’s price dropped to a low of $0.88 per token at one point.
It was revealed as part of U.S. court proceeding that Tether was backed 74% by cash and short-term securities, but legal counsel for Tether made attempts to justify the discrepancy.
What’s the amount of USDT currently in circulation?
Tether’s circulation is correlated to the cash and securities under the control of the private company that backs it.
According to the website CoinMarketCap, 14.4 billion USDT tokens were circulating globally in September, backed by $14.6 billion in assets.
Tether is not limiting USDT to a hard cap similar to that of Bitcoin, but the company also doesn’t provide advance notice for issuing additional tokens. In lieu of that, Tether does issue daily transparency reports that amounts to their balance sheet, with asset reserve and liabilities.