What is a Tether coin?
That’s the most common question many cryptocurrency investors ask themselves when they come across the coin for the first time. Tether (USDT) is a cryptocurrency that supports virtual internet payments and was created to be pegged on the American dollar.
It is essential to understand that USDT coin is by far the most stable cryptocurrency with its value at an almost stagnant position of about one dollar, unlike other currencies that rapidly decrease and increase in value over time.
Coins like Tether that serve the purpose of being stable currency replacements on the internet are known as stable coins.
Brief history of Tether
Tether was first brought into the market in the year 2014 after re-branding from Realcoin. Realcoin is what laid the foundation for the creation of the Tether existing today and was founded by Craig Sellars, Brock Pierce, and Reeve Collins.
The main aim of Realcoin founders was to provide people with a cryptocurrency that would have a direct 1:1 ratio with common currencies such as the US dollar so that it could facilitate international internet payments.
Nevertheless, in 2019, the coin re-branded its self again after it indicated that it will be switching from only the USD and will now be backed by other assets including cash.
The cryptocurrency has also scrapped the statement on its website that indicated that it had a 1:1 peg to the USD. The company also put out an official statement stating ;
Every tether [USDT stablecoin] is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.
Unique features of USDT coins
Just like most cryptocurrencies, Tether has some specific and unique solutions it brings to the crypto community. Below, we shall outline a few of these solutions.
- USDT Supports cross-currency transactions; unlike other cryptocurrencies which are usually limited to exchange with the same currency, you can easily use Tether to transact with US dollar, Euros and the Japanese Yen.
- Tether is highly stable; this crypto coin has high stability in the cryptocurrency market. The USDT is pegged on a single US dollar, and the value does not change or will not change any time soon.
- USDT is one of the few coins that actually tether ‘real world’ currencies to digital currencies. The other two coins that support the same are Nubits and Timekoin.
How Tether works
Just like many other cryptocurrencies, USDT also exists on the blockchain running on an Omni protocol layer. The Omni protocol layer is a software that works with blockchains to facilitate the transfer and redemption of Tether coins.
The blockchain technology completes USDT transactions just like other cryptocurrencies such as Bitcoin and Dogecoin. Also, USDT coins are usually issued by Tether limited.
USDT’s stability is brought about by the fact that it was created to use the Bitcoin blockchain technology in its inner core which is by far a very secure and stable blockchain.
It is important to note that over time, USDT has accepted the Ethereum transport protocol which now makes it possible to transfer Tethers into any Ethereum address directly. However, Tether users are cautioned to be very careful when making the transfers so that one does not end up sending his/ her USDT coins into a Bitcoin destination address instead of an Ethereum address.
You can easily exchange your Tethers on common exchange sites such as Kraken, shapeshift, Bitfinex and GoCoin.
Advantages of Tether
- Transparency of the stable coin
Transparency is by far the most important benefit of using Tether coins; openness has made it easy for people to understand how it functions, sells and is regulated. Many people tend not to invest in cryptocurrencies because of the complex nature and non-transparent nature of the market.
Unlike other coins, one Tether is equivalent to one common currency such as USD and the Yen. Therefore, an investor will invest knowing the actual value of the coins he/ she is buying and that the value will not change anytime soon.
With most coins, investors are not certain of what the price of their coins will be in the future since most cryptocurrencies undergo rapid price fluctuations which makes it a risky investment.
In 2017 for example, we saw Bitcoin increase in price by over $1,000 within a few hours and also drop several hundreds within a short period.
Additionally, the company managing USDT usually shares all transactions related to tether which reaffirms the confidence people have in tether.
- Safety of the stable coin
As stated earlier, Tether runs on the bitcoin network which has high-security measures compared to most new platforms. Therefore, Tether users can trade safely knowing that their money has been stored safely. It is also widely known across cryptocurrency communities that it is difficult to break into the blockchain technology.
- Low volatility of the stable coin
(Chart showing the stability of the USDT)
The general perception of people about the cryptocurrency market is that it is a highly volatile market associated with great risks (this has been brought about by many factors such as negative publicity created by governments and media, rapid price fluctuations, etc., but this is a topic for another day). The negative perception has made it hard for many people to invest in this market.
However, with the USDT, there is no such volatility. The value of tether is always fixed at one US dollar regardless of the market situations.
- Quality of customer service at Tether limited
Tether limited has highly skilled and professional customer care agents to serve Tether traders. Their services are usually available for 24 hours throughout the week which makes it convenient for traders to get help at any time. However, the team currently serves English speaking traders, but plans are underway to include other languages.
Set backs of USDT
While Tether brings much into the crypto space it is, however, good to point out that the profits associated with investing in the tether market are minimal if any, and thus people that wish to gain money from the cryptocurrency world should avoid investing in Tether. Once you make the purchase of Tether coins for one dollar, you are not going to sell it any higher price because already its value is fixed at that one dollar.
The primary purpose of the stable coin is to preserve currencies and purchase other Cryptocurrencies when need be and not for direct profit making.
Also, there are unconfirmed allegations that the stable coin is being used to manipulate the price of Bitcoin
Furthermore, though it is said to be secured, the stable coin reportedly lost over $31 million the past to hackers.
Lastly, USDT is considered to be controversial because it has not been able to provide audits it had promised to release showing the reserves backing it.