Here we’re going to break down what a stablecoin is, and what is Tether exactly. While some might argue that stablecoins don’t grasp the full essence of the decentralized nature of cryptocurrencies, that doesn’t mean that they don’t hold some value in the industry. Let’s uncover what makes Tether unique.
What Are Stablecoins?
Traders have been using stablecoins to leverage their trades for years as it offers an opportunity to make money without going back to fiat. So, what are stablecoins? Stablecoins are cryptocurrencies that are pegged to a fiat currency’s value. This allows the stablecoin to retain its value through the volatile ups and downs of Bitcoin and other cryptocurrency markets.
One of the biggest benefits of stablecoins is the fact that it offers a large amount of liquidity. Referring to the ease of converting one asset to another without affecting the market price, stablecoins’ liquidity is its greatest asset.
What is Tether (USDT)?
One of the first stablecoins to gain traction in the market, Tether, also known as USDT, is pegged to the US dollar. This means that the Tether price value will always remain the same as the US dollar. The USDT to USD ratio will always remain the same, where 1 USDT = $1. Tether was designed to offer traders the benefits of cryptocurrency - transparent, peer-to-peer transactions - without the volatile prices and instead of the stable value of the US dollar.
Not only is Tether one of the largest stablecoins, it is also one of the largest cryptocurrencies by market cap. Due to its high liquidity, Tether is a widely traded cryptocurrency and has firmly established itself in top 5 cryptocurrencies.
History of Tether
Tether’s roots lie in a whitepaper published by J.R. Willett in January 2012. Willet proposed building new currencies on top of the Bitcoin protocol and went on to implement this second-layer protocol in the cryptocurrency Mastercoin. This went on to form the foundation of Tether, with two original members of the Mastercoin Foundation, Brock Pierce and CTO, Craig Sellars.
Originally launched as Realcoin, Tether was officially established in 2014 by Brock Pierce, Reeve Collins, and Craig Sellars. Brock Pierce is also the founder of a number of high-profile blockchain ventures including Block. one and Blockchain Capital, and was the former director of the Bitcoin Foundation. Craig Sellars is a prominent member of the Omni Foundation (formally known as the Mastercoin Foundation), as well as having experience working at several high-profile crypto companies. Their co-founder, Reeve Collins, was the acting CEO for Tether's first two years and has founded a number of equally successful companies within and outside of the blockchain industry. All firmly established in the cryptocurrency and blockchain industries, the three men launched this stablecoin.
In addition to being built on Bitcoin’s blockchain, the stablecoin is now functional on Ethereum, EOS, Tron, Algorand, SLP, and OMG blockchains.
What Makes Tether Unique?
Being a stablecoin in the world of cryptocurrencies, Tether offers a unique opportunity to bypass the volatility of the crypto markets, which have been known to drop significant amounts in a short space of time. Offering a safe haven for crypto traders, Tether allows traders to move their funds over to USDT when markets experience a dive.
Additionally, Tether also offers a convenient solution to cross-border US dollar payments that bypass expensive intermediaries and fees, as well as any market volatility.
According to the company, in September 2020 there are over 14.4 billion USDT tokens in circulation, which are backed by $14.6 billion in assets. There is some controversy surrounding Tether’s reserves as the company is yet to be audited by a third party, however, the company releases daily transparent reports depicting their total number of reserve funds and USDT in circulation.
The concept of being pegged to the US dollar is that Tether holds the US dollar equivalent for every Tether in circulation, which is kept available in reserves.
Another factor in what makes Tether unique is the fact that it does not operate off of its own blockchain. Instead, it is built as a second layer on top of other firmly established blockchains, using their respective hashing algorithms the project is able to maintain security and liquidity.
The Complete Guide To What Is Tether (USDT)
In conclusion, Tether is one of the largest stablecoins in the market, as well as being one of the most traded cryptocurrencies around. The coin offers traders a safe haven in the volatility of the crypto markets, as well as liquidity and a stable value.