Tether (USDT)

Tether (USDT) -
One 2 One

Tether aims to combine the benefits of blockchain technology with traditional currency. This is achieved by anchoring, pegging, or tethering, digital tokens to the US Dollars, Euro..

Basic Intro

Name (Ticker)
Tether (USDT)
Price (USD)
$1.00246665297
Rank
2
Active Supply
3.5 billion
Total Supply
3.5 billion
Volume (24H)
13.9 billion
Marketcap
3.5 billion
Fun Name
One 2 One
Website Links
Block Explorer

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Pros

  • Useful for quickly swapping between cash and crypto in exchanges
  • Stable, useful for preventing short term losses by volatile crypto markets

Cons

  • Long term investments may lead to losses
  • Reliant on fiat remaining stable
  • Questionable backing, subject to lots of controvesy in the past

Introduction

"Launched in 2014, Tether is a blockchain-enabled platform designed to facilitate the use of fiat currencies in a digital manner. Tether works to disrupt the conventional financial system via a more modern approach to money. Tether has made headway by giving customers the ability to transact with traditional currencies across the blockchain, without the inherent volatility and complexity typically associated with a digital currency. As the first blockchain-enabled platform to facilitate the digital use of traditional currencies (a familiar, stable accounting unit), Tether has democratised cross-border transactions across the blockchain."

-Tether website

Tether aims to combine the benefits of blockchain technology with traditional currency. This is achieved by anchoring, pegging or tethering  digital tokens to the US Dollars, Euros, and other fiat currencies. Tether exists on two protocols- the Omni Protocol and as an ERC20 token.It is essentially a hybrid crypto-fiat “stablecoin”. The asset is issued by Tether limited. Tether is the world’s most popular stablecoin, and it even acts as a replacement for fiat currency on popular exchanges, like Bittrex, Bitfinex and Binance.

 

Key Features

  • Avoids volatility
  • Provides liquidity

How it works

Tether supposedly holds its value at 1:1 of the underlying asset, therefore 1 US Dollar is equivalent to 1 Tether. This is designed to provide a digital currency that will avoid much of the volatility seen within the free-wheeling crypto market. In theory, as long as the underlying asset holds stable then so will Tether.

Tether is backed 100%. According to the frequently asked questions page on the Tether website –

“Platform currencies are 100% backed by actual fiat currency assets in our reserve account. Tethers are redeemable and exchangeable pursuant to Tether Limited’s terms of service.”

For example, each time Tether limited, the Hong Kong based company that controls the issuing and redemption of Tether tokens, issues a Tether token, the equivalent 1:1 fiat currency is stored in a bank. Correspondingly, each time a Tether token is cashed in, it is supposedly destroyed.

Tether publishes real-time records of what goes in and out of their reserve account. Access to this information provides transparency as to what funds are held in reserves, and is referred to as proof of reserves. The idea behind proof of reserves is that through transparency ultimately you achieve security. The dollar reserves are held in multiple banks around the world, and balances are published frequently, though its important to note that the reserve assurances are not issued by third party audit firms.

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Possible risks

Although Tether Limited has made every attempt to be as open and transparent as possible they have identified some potential risks to users. For example, they could go bankrupt, the bank they use could go insolvent, funds could be confiscated from the bank, and they could abscond with the money.

Tether Limited has attempted to mitigate these identified risks as far as possible. For example, the banks they use are very proactive within the crypto community and were chosen because of this relationship. In other words their bank is on the ball in terms of regulations and what could be expected in the future. Further information on mitigation of other risks can be found in the appendix of their white paper.

https://tether.to/wp-content/uploads/2016/06/TetherWhitePaper.pdf

Tether can provide a home base for cryptocurrency traders, a place where they can move to if volatility erupts in other parts of the market. However, Tether is also reliant on the stability of the underlying asset, which means an incident in the fiat world could plunge the value, unlike storage in hard assets like gold or silver. Other risks have been identified by Tether Limited, e.g. confiscation of reserve funds in the future. However, these have been mitigated to a great extent by their relationships with banking partners whom are aware and confident that Tether’s business model is acceptable, and also by adherence to US and Hong Kong laws and regulation

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Past Controvesy

The stablecoin has been subject to a lot of controvesy. While tether is committed to operating within government compliance and regulationsm USDT has long-faced accusations of being under-capitalized. This is important because if there are not sufficient reserves to back up each USDT in circulation, there could be a run on the asset and its price would plummet. The reason why this is even a question is because up until very recently (November 2018) Tether refused to disclose their banking relationships (Deltec Bank in the Bahamas) and the reserves therein. Without providing the public with this information, it is impossible to audit or verify the company’ fiat reserves. In announcing its relationship with Deltec Bank, the company published a letter from the Bahamian institution demonstrating that the company had approximately $1.8 billion in reserves as of October 31st 2018. This amount would have covered every Tether in circulation at the time.  However, the questions did not end even after this information was disclosed, because the company refused to submit itself to a formal audit from a reputable firm. This matters because it is possible to move funds around to achieve a certain balance on a given day, as this recent Bitfinex controversy demonstrates, but a formal audit looks deeper at the cash inflows and outflows over time, including the company’s underlying processes and controls.

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Tether Wallets

In regards to wallets, MyEtherWallet does a pretty good job for the ERC20 version of the USDT. Just make sure to double-check the address as the wallet's site is often a target for phishing scams. MyEtherWallet is simple to use, just go to www.myetherwallet.com and create a wallet through one of the three avaliable ways- MEWConnect, Keystone File or MnemonicPhrase.

For the other version, you'd best go to an Omni-Protocol supporting wallet, like www.omniwallet.org. It's also quite easy to use, just click on Create Wallet and pick a password you'd want to access your wallet with.

Storing Tether Overview

USDT was originally created using the Omni Layer protocol (using the original bitcoin blockchain), but has since launched an additional version as an ERC20 token, using the Ethereum blockchain. This means that there are two different types of USDT, both with different storage methods. If you want to move the USDT to your own personal wallet, you must first figure out which type of tether you have.

There are multiple ways you can check this. First off, start by looking at the withdrawal address.

-Withdrawal addresses that start with a random string of numbers or letters are Omni-Layer based

-Withdrawal addresses that start with a "0x" mean that the exchange is using the ERC20-based version of the token.

Its always wise to either contact the support of the exchange and/or test the wallet with a small amount before doing any big transactions.

Buying Tether

If for some reason you want to buy Tether, the most popular way of obtaining it is through exchanging your BTC for it on pretty much any top 10 exchange, like Bitfinex, Bittrex or Binance. Simply register to a site like https://www.bitfinex.com/, send your BTC from your wallet to the exchange-generated wallet and trade away. It is important to note that you can convert almost any major cryptocurrency to tether, so its not just BTC. Most big exchanges have tether pairs with every top 10 cryptocurrency and beyond.

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