Tether (USDT) is a cryptocurrency with a value meant to mirror the value of the U.S. dollar. The idea was to create a stable cryptocurrency that can be used like digital dollars.
Coins that serve this purpose of being a stable dollar substitute are called “stable coins.” Tether is the most popular stable coin and even acts as a dollar replacement on many popular exchanges!
Why was Tether created?
Tether Limited’s aim is to create a stable coin (Tether) that’s tied (or tethered) to the value of the U.S. dollar. By linking to a fiat currency, USDT becomes a port in the storm of constantly fluctuating cryptocurrency values.
Who created Tether?
The precursor to Tether, originally named "Realcoin", was announced in July 2014 by co-founders Brock Pierce, Reeve Collins, and Craig Sellars as a Santa Monica based startup.
Which Technology does Tether use?
Like other cryptos it uses blockchain. Tether uses the Omni Layer Protocol to issue assets on the Bitcoin blockchain.
How does Tether work?
- Tether converts cash into digital currency, to anchor or “tether” the value of the coin to the price of national currencies like the US dollar, the Euro, and the Yen.
- When someone wants USDT, they make a payment to Tether. The company then adds those funds to its reserves and mints new USDT for the customer. USDT is removed from circulation in the same way. When someone wants to redeem USDT for USD, they can sell it back to the Tether company. Redeemed USDT is then destroyed and removed from circulation.
What problems does Tether solve?
- Tether was the first so-called 'stable coin', with the idea being that each token issued would be backed by one US dollar. Major cryptocurrency exchanges like Bitfinex adopted tether as a medium of exchange for traders to buy bitcoin, ethereum, and other digital currencies, while banks in Taiwan used it to process international transactions.
- But last year, questions began to emerge about whether tether really was pegged to the US dollar, resulting in dramatic price swings for bitcoin.
Is Tether anonymous/safe?
- Tether is not 100% backed, but it is at least 74% backed.
- The markets don’t mind that Tether isn’t fully backed, and traders still reliably value USDT Tether at around $1 each.
What makes Tether special?
Tether trades at $1 on all exchanges and can be used in place of a dollar. The primary use of Tether is that it offers some stability to the otherwise volatile crypto space and offers liquidity to exchanges who can’t deal in dollars and with banks