Tether (CRYPTO:USDT) is a stable coin that is linked to the US dollar. That is, 1 USDT is intended to be worth $1, and it usually is, but there have been price variations in the past.
Stable coins are excellent for those who wish to invest in a digital currency that has a steady value and is backed by an asset. Tether is particularly well-known for this, but it is also possibly the most contentious stable coin. In this article, we’ll go over that as well as everything else you need to know about Tether.
What distinguishes Tether?
There are several stable coins available, many of which are tethered to the US dollar. Although it technically provides the same service as its rivals, Tether’s popularity (and that of one of its key competitors, USD Coin (CRYPTO:USDC)) distinguishes it.
Tether has the highest market capitalization of any stable coin. What’s more, it has a substantially bigger daily trading volume. Tether, in fact, has the biggest 24-hour trading volume of any cryptocurrency, therefore it plays a significant role in the digital token ecosystem.
Stable coins have an advantage over other forms of cryptocurrency in that they have a known price range under typical conditions. Because they are not volatile, they are utilized differently from cryptocurrencies purchased as an investment. The following are the most popular applications for stable coins such as Tether:
- Sending money digitally to a recipient anywhere in the globe.
- Transferring your own funds from one cryptocurrency exchange to another.
- You may make a lot of money by lending out your stable coins (some lending platforms pay more than 10 percent ).
- Storing funds on an exchange so that they can be quickly exchanged for other cryptocurrencies.
Tether is easier to use than other stable coins due to its popularity and high trading volume. For example, if you want to purchase, sell, or trade Tether, you may do it on the majority of the popular crypto applications. And, given the trading activity, you should have no problem utilizing your Tether.
Tether’s most popular crypto token is USDT, but it also offers tokens tied to the euro, yuan, and gold.
The origins of Tether
Tether was created in 2014 by Brock Pierce, Reeve Collins, and Craig Sellars. The project was initially named Realcoin, but soon after its inception, the name was changed to Tether. Tether Limited, the company behind Tether, is in charge of issuing it and managing the reserves.
Bitfinex was the first major cryptocurrency exchange to offer Tether trading, beginning in January 2015. Although Bitfinex and Tether Limited are separate entities, Paradise Papers leaks in 2017 revealed that Bitfinex officials established Tether Limited. A spokesperson for both companies stated in 2018 that they share the same CEO.
Tether is a cryptocurrency token that is issued on multiple major blockchains. Tether’s goal is for 1 USDT to be interchangeable for $1. To do that, Tether Limited keeps reserves to back the tokens that it produces.
For Tether Limited to mint 1,000 USDT, it has to have $1,000 in its reserves, assuring that if customers want their money back, they can obtain it. Although that’s how Tether is intended to function in principle, the reality is a bit more difficult; there have been concerns with Tether Limited’s credibility over its reserves. Initially, the company claimed that each USDT was backed one-to-one by $1. That proved to be untrue.
Tether Limited’s lawyer stated in 2019 that 74% of USDT tokens were backed by cash or cash equivalents. However, when Tether Limited disclosed its reserves in 2021, only 2.9 percent of USDT tokens were backed by cash. The remaining reserves were made up of secured loans, corporate bonds, and commercial paper.
To summaries, Tether Limited claims that all USDT is backed 100 percent by the company’s reserves. These reserves are made up of a variety of assets, therefore they are not entirely cash. It should also be noted that there is no legal guarantee that a USDT token will be redeemable for $1.
Tether has amassed a wide range of connections and partnerships over the course of its existence.
The most significant link is with the bitcoin exchange Bitfinex. The exchange and Tether are both controlled by the same people.
Tether has been integrated into several blockchains, allowing it to become more widely available. Tether is presently supported by the following blockchains:
- Bitcoin (CRYPTO:BTC)
- Ethereum (ETH) (CRYPTO:ETH)
- TRONIX (CRYPTO:TRX)
- EOS is an abbreviation for Electronic (CRYPTO:EOS)
- LIQUID FORMULA (CRYPTO:LIQUID)
- Algorand (CRYPTO:ALGO)
- Bitcoin Cash (CRYPTO:BCH)
- Solana (CRYPTO:SOL)
One of Tether’s most intriguing recent collaborations is with the Swiss city of Lugano. Tether Limited struck a collaboration deal with Lugano in March 2022 to apply blockchain technology in the local community. This will enable the city’s businesses and individuals to pay their taxes in Tether.
Is it possible to get passive income using Tether?
Tether may be used to generate passive revenue via crypto lending services. One possibility is to deposit your Tether using a decentralized lending protocol such as Aave (CRYPTO:AAVE) or Compound (CRYPTO:COMP) (CRYPTO:COMP). These decentralized finance (DeFi) systems enable you to lend cryptocurrency without creating an account.
There are other cryptocurrency exchanges with their own loan schemes. Celsius and KuCoin are two exchanges that let you to earn income by lending Tether. It should be noted that inhabitants of the United States are not permitted to use KuCoin.
Risks that are unique
The most serious problem with Tether has been its dubious business practices. As previously stated, Tether Limited has in the past overstated its reserves. It was hesitant to release specific details on those reserves for many years.
Tether Limited has encountered legal challenges as a result of its partnership with Bitfinex. The two corporations were sued by the New York Attorney General in 2019. It claimed that when $850 million in Bitfinex cash went missing in 2018, it took $700 million from Tether’s reserves to assist offset the loss. Despite the fact that the company did not confess any wrongdoing, the owner was fined $18.5 million in 2021.
To be fair, Tether has attempted to increase transparency. It currently releases regular updates on its reserves and makes information about them available on its website. However, some individuals are still skeptical because of recent blunders.
Is it wise to invest in Tether?
Tether isn’t precisely an investment since it’s intended to keep its price at $1. The value will not rise in the same way that other cryptocurrencies and cryptocurrency stocks have.
As previously stated, Tether may be used to produce passive revenue. There are several loan sites that will give you a competitive interest rate for your Tether. It’s one method to earn more interest than a traditional savings account.
Keep in mind that this is not without danger. Your Tether is not insured or guaranteed in the same way that money in a bank account is. Although Tether’s value has largely remained constant at $1, this might change in the future.
How to Purchase Tether
Sign up for an account with a cryptocurrency exchange that sells Tether. Because Tether is one of the most popular cryptocurrencies, there are various excellent sites to acquire it.
After you’ve registered, make a deposit into your account. The cheapest method to deposit money and acquire crypto at most exchanges is via a bank account transfer. You may then make your purchase.
Tether is one of the first names that comes to mind when people think about stable coins. Despite its flaws, it remains a popular alternative for crypto lending and trading.
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