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What is Tether? – A 5-Minute Guide

  • Tether was launched by Tether Limited in 2015.
  • The current market cap of Tether has crossed $38 billion.
  • As of now, Tether issues four stablecoins and these are pegged to the USD, Euro, the Japanese Yen and Chinese Yuan.

Source: Coindesk

Tether is one of the biggest names in the crypto industry. As a pioneer of stablecoins, it represents an integral part of the crypto ecosystem today. Tether has seen its share of controversies which we will discuss in our detailed guide below.

What is Tether? A Quick Look

Tether has played a monumental role in establishing the importance of stablecoins in the cryptocurrency market. Stablecoins such as Tether add required liquidity to the market and help to protect crypto traders and investors against the dreaded volatility of cryptocurrencies. 

As we have described above, Tether is a stablecoin. It derives its value from fiat currencies such as the US dollar and the Euro, among others. The company which issues Tether stablecoin is Tether Limited. 

Being one of the most popular stablecoins, Tether is traded on most crypto exchanges worldwide. It even holds a position of a dollar replacement on some of the world’s leading exchanges like Poloniex and Bitfinex. 

A USD-backed stablecoin means that for every Tether issued, an equal amount of the US dollar is kept in reserve. However, it does not mean that there’s no impact on global market movements on US dollars. It is also subjected to fluctuations.

How Does Tether Work?

In its infancy, Tether was only based on the Omni protocol and Liquid Protocol, both of which are anchored to the Bitcoin blockchain. Today, Tether based on OMG, SLP, Algorand, and Tron blockchains are also available. 

All of the blockchain platforms on which Tether is built, consist of open-source software. It allows for the issuance and redemption of Tether as the open-source software is in interface with the blockchains. 

Initially, Tether had only envisioned using the Bitcoin network, specifically, the Omni Layer as its transport protocol. Soon after, Tether also started using Ethereum blockchain as a transport layer. It granted Tether the capabilities of an ERC20 token. This resulted in the availability of Tether in Ethereum-based decentralized applications and smart contracts.

Controversial BitFinex Connection 

Source: Cointelegraph

BitFinex was the first cryptocurrency exchange to list Tether, in January 2015. Within a short space of time, stablecoins became a market favorite and gained tremendous success. 

An increase in the trading volume of Tether and other stablecoins on BitFinex benefited the exchange, by driving traffic and user activity to the platform. BitFinex was at the top of the table in terms of the total trading volume of Tether.  

The success of Tether also attracted criticism toward it. Many of its detractors started raising questions about Tether’s solvency. The sudden rise of Tether made researchers look into the BitFinex connection of Tether.

The worst fears about a secret connection between Tether and BitFinex came to the limelight in 2017. This news came out with Paradise Papers in 2017, which was released by the International Consortium of Investigative Journalists.

Price Movements 

Tether, also known as USDT, was launched in 2015. As its value is pegged to the US dollar, each USDT or Tether was available for $1. Due to being pegged against the US dollar, Tether is comparatively stable and is always worth around $1. 

By the end of April 2017, each Tether was available for $0.926. It went through similar ups and downs throughout 2017 to current times. From May 2017 to the current month, its prices remained between $0.99 to $1.02. The current price of USDT is stable at $1.00 with a current market cap exceeding $17 billion.

The Road Ahead For Tether

Source: INTLBM

There was a time when Tether accounted for almost 99% of the stablecoin market cap. Tether’s stablecoin dominance has reduced considerably with the introduction of stablecoins such as USDC, DAI, Binance USD and others. 

Despite facing plenty of competition, Tether still remains at the top of the stablecoin market. It has a market cap of nearly $40b and a 24hr trading volume of over $100b. 

Tether has also remained true to its innovative roots as a Chinese Yuan backed Tether was introduced in the market in 2019. With innovation and market factors creating favorable conditions for stablecoins, we expect to see continuous growth ahead for Tether.

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