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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 $17 billion.
  • As of now, Tether issues four stablecoin 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 world. As a pioneer of stablecoins, it represents an integral part of the crypto ecosystem today. But Tether, too, has seen its share of controversies. We will discuss all of these in our detailed guide on Tether.

What is Tether? A Quick Look

Let’s start with the fact that Tether has played a monumental role in establishing the importance of stablecoins in the cryptocurrency market. There’s no denying that! Stablecoins such as Tether adds required liquidity to the crypto market. It also helps 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 dollars, 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 of the crypto exchanges worldwide. It even holds a position of a dollar replacement on some of the world’s leading exchanges like Poloniex and Bitfinex. 

Are you wondering what’s the meaning of USD-backed stablecoin? Well, it means that for every Tether issued, an equal amount of the US dollar is kept in reserve. Of course, it doesn’t mean that there’s no impact on global market movements on US dollars. It is also subjected to fluctuations. 

How Does Tether Work?

It’s time to get to know the technical side of Tether. During the initial days, Tether was only based on the Omni protocol and Liquid Protocol, which are anchored to the Bitcoin blockchain. Today, Tether based on OMG, SLP, Algorand, and Tron blockchains are also available. 

All the blockchain platforms, on which Tether is built, consists 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

The BitFinex connection of Tether raised many questions. BitFinex was the first cryptocurrency exchange where Tether was introduced. Tether started being available on Bitfinex from January 2015. Within no time, stablecoins became a market favorite and gained tremendous success. 

An increase in the trading volume of Tether and other stablecoins on BitFinex benefited BitFinex as well. It led to an increase in user activity on 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, popularly 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. It has decreased considerably as many new stablecoins were introduced in the market such as USDC, DAI, Binance USD, among others. 

Regardless of facing fierce competition, Tether still stands tall. It is leading the tally with the highest trading volume among all stablecoins. With the global market in turmoil because of COVID, interest in stablecoins such as Tether is increasing. 

Athe the same time, Tether remains 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 will see continuous growth ahead for Tether.

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