Tether is an Ethereum-based cryptocurrency that looks to disrupt the conventional financial system by providing a stable digital currency. This is referred to as a stablecoin because the value of the coin is fixed. Tether is tied to the USD and is listed as USDT on exchanges. Each Tether token is valued at one USD.
By: Evan Jones | Dec 16, 2019 | Modified May 13, 2020
Initially Tether claimed that each token was backed by a an actual USD at a 1:1 ratio, but it has since been revealed to much controversy that it is not only USD, but also loans to affiliate companies, combined with USD and other traditional currencies such as the Japanese yen and the Euro, which make up the company’s asset reserves. The company who released Tether, Tether Limited, states that customers have no legal claim, right, or guarantee that their USDT can be exchanged for USD.
Tether has since been released on other blockchain platforms, in a bid to create a stable coin that is interoperable with all major blockchains. Two of those platforms are EOS and Tron, two very large and popular blockchain platforms for a range of activities and applications.
All-time low: $.90 USD (Oct. 15, 2018)
All-time high: $1.21 USD (May 27, 2017)
All-time high: $107,480,990 (May 27, 2017)
Transactions per second: 30 transactions per second
Reason: Tethers disbursement fluctuates, with rising and falling deposits into the tether system. Most tether exists on Ethereum, while other tether sits on the EOS, or TRON blockchains.
Tether: According to FCAS Crypto, the developer engagement of Tether devs is relatively low. Tether does not have an open source GitHub repository for the world to see their development, which is counter to the classic Bitcoin Open Source Transparency ethos.
Reason: Tether is one of the most widely held and traded coins in the world, due to the ability for people to hedge their bets against volatile assets such as Ethereum or Bitcoin. Tether is the goto stable coin because it was essentially the first asset to provide reliable stability in the crypto markets.
The first Tether (USDT) tokens were released in late 2014. At the time the CEO announced that every USDT token was 100% backed by its original currency and could be redeemed at any time with no exchange risk. This statement has since been retracted, Tether Limited offers no legal guarantee of customers being able to redeem their tokens for USD. Tether has at no point been able to provide financial verification that they have enough reserves to cover the issued tokens.
In early 2015, Bitfinex became the first exchange to enable trading of USDT on their platform, which led to more controversy as it was discovered that the holdings for Tether were set up by Bitfinex officials. In addition, the CEO of both Bitfinex and Tether Limited is the same person, Jan Ludovicus van der Velde, who is the overlap between the two companies’ personnel, combined with the suspicious amount of USDT trading on Bitfinex has led many to believe that there was price manipulation. While this has been investigated, no proof of price manipulation has been found yet, though it should be noted that during the investigation, which is still ongoing, a major official who worked for both Tether and Bitfinex, left Bitfinex.
In September 2017, Tether posted a memorandum which had a public accounting firm state that all USDT were fully backed by USD. However, independent auditors said that the document was phrased in such a way to avoid explicitly stating that they were in fact backed by dollar, and it failed to make clear whether the balances may be encumbered in another way.
In November 2017, $31 million USDT tokens were stolen from Tether Limited, and Tether subsequently created a hard fork in order to render all the stolen USDT un-tradable.
Tether exists both on the Omni Layer (built on Bitcoin’s blockchain), the Ethereum blockchain as well as EOS and Tron. Tether is meant to work as a stablecoin, meaning its value remains fixed, or pegged, to the USD at a 1:1 ratio. This value is to be maintained through collateral, meaning in theory there should be one USD in Tether’s accounts for every USDT that has been issued. This creates stable value by ending the wild fluctuations most cryptocurrencies experience. However, if the USD were to fall in value, USDT would fall in value as well.
The purpose of Tether is to be a stable digital currency that can be used across international borders with no worry of your currency being devalued through exchange rates. It can be used in exchange for good and services wherever it is accepted and always has a value equivalent to one USD.
You’ll likely want to purchase Tether on a cryptocurrency exchange. As it happens Tether is one of the most popular methods for on-boarding people to other cryptocurrency such as Bitcoin or Ethereum. It’s significantly easier to purchase Tether with fiat currency (such as USD or CAD) so it’s listed on a number of exchanges. It’s also a stablecoin for people who want their money online but not in an extremely volatile asset.
Here’s a list of the exchanges where you can purchase Tether:
Because USDT essentially provides little to no opportunity for financial gains, some may wonder why anyone would use it. In reality it is a useful alternative to traditional currencies for several reasons.
One of the main advantages of USDT is related to transaction times. Regular USD deposits and withdrawals made through foreign exchanges can take days to process and can be extended due to a host of other factors. In contrast to this, Tether transactions are completed in minutes.
Another advantage of USDT is related to transaction fees. Foreign currency exchanges average fees of $30, and if your currency is not normally supported by the exchange then there is an extra charge on top of that. Tether charges nothing for transactions between Tether wallets.
Finally, USDT is price stable, whereas generally cryptocurrencies are known for their price volatility. This is big advantage because rather than being concerned with the price of Bitcoin or Ethereum, you are simply concerned with the price of the USD. In addition, the perceived lack of risk can be extremely appealing.
The main disadvantage related to USDT is due to Tether Limited’s inability to provide proof that each token is backed at a 1:1 ratio with USD. In fact, the company changed the statement on its website to reflect the fact that there is not a USD for every USDT issued, but instead may be backed by assets or receivables from loans made by Tether to third parties.
In addition, at present there are very few exchanges that USDT is directly convertible to USD, and if you wish to go through Tether directly you are required to have a $100K minimum and will be charged considerable fees.
Technically Tether’s price never goes up or down, it is supposed to be valued at one USD. However, the value of USDT is therefore tied to the USD, so if the value of the USD rises or falls, USDT follows the same fluctuation in value compared to other currencies but is still worth one USD.
Tether exists in order to combat the price fluctuations associated with other cryptocurrencies. As a stablecoin, it is meant to provide customers with a consistent value token that they can use to purchase goods and services with or send currency across international borders with minimal transaction times and fees.
Tether was originally issued by Tether Limited, the first exchange to enable trading of USDT was Bitfinex. Tether can still be purchased directly through the company until they reach the maximum supply, and otherwise can be purchased on various exchanges.
No, while Tether is valued at a 1:1 ratio with the USD it is not the same as a USD. Tether Limited offers no guarantee that each token is redeemable for one USD and most audits indicate that the company does not have an equivalent number of USD for all the USDT that are circulating. In addition it is currently difficult to find an exchange that will give you a 1:1 ratio and in order to exchange through Tether directly you need $100K worth of USDT.
Yes, Tether is decentralized in theory. However, due to the necessity to back up its tokens with traditional banking assets it is reliant on traditional banking systems and thus both the company and its assets are subject to government action. In addition, Tether has shown the ability to reverse transactions and force hard forks, something that should not be possible with true decentralization.
Tether has been hacked once, $31 million worth of USDT tokens were stolen in November 2017, but it has not been hacked since.
Regarding the security of Tether in relation to its liquidity, it is currently not guaranteed to be redeemable at a 1:1 ratio for USD by Tether Limited which raises questions as to its overall stability and security long term.
Yes! You can store Tether on Trezor hardware wallets. It is also storable on Ledger hardware wallets, Ledger Nano X and Ledger Nano S, along with a variety of software wallets such as Exodus and Coinomi. In addition Tether has its own software wallet which solely supports Tether, though the use of this wallet was suspended when the hack occurred in 2017.