It can be difficult for investors to hold cryptocurrencies. Many are incredibly volatile. This doesn’t make them suitable as actual currencies because their value can change quickly, making an agreed price hard to come by.
What is Tether?
Tether is a type of cryptocurrency known as a stablecoin.
The important point is that Tether is pegged to the U.S. dollar. Every token is backed by a dollar held in reserve by its parent company of the same name. Its value is kept stable by bots buying and selling whenever its value fluctuates from the dollar.
Tether is also available for the euro and the Japanese yen.
Who created Tether?
Tether Limited developed the cryptocurrency towards the end of 2014. Based in the British Virgin Islands, the company’s head offices are in Hong Kong. It shares most of its management team with the cryptocurrency exchange Bitfinex. This includes the CEO, Chief Strategy Officer and General Counsel.
Did you know?
One of Tether’s founders, Brock Pierce starred in multiple Disney films when he was a child actor in the early 1990s.
A brief history.
- July 2014 - Realcoin, a token backed by the US dollar, launches.
- November 2014 - Realcoin rebrands to Tether and enters private beta.
- January 2015 - Bitfinex lists Tether.
- February 2015 - Tether begins trading.
- December 2017 - The Tether supply surpasses one billion tokens.
What’s so special about it?
🗿 - Stable - With a value backed by fiat currency, Tether holders are not subjected to the same high levels of volatility that other cryptocurrencies are. It gives users easy access to the cryptocurrency market, without exposure to wild price fluctuations.
📭 - Widely accepted - Tether is a popular cryptocurrency that can be bought and sold on most exchanges. Many exchanges use it as a trading pair.
🐻 - Familiar - Being backed by international currencies makes Tether’s value intuitive; useful for traders purchasing other cryptocurrencies with it.
How is Tether produced?
Tether cannot be mined. Tether Limited generate new tokens and issue them via the crypto exchange Bitfinex following fiat currency being deposited into their reserves. Tether can be bought at most crypto exchanges.
Did you know?
New York-based accountancy firm, Friedman LLP, was contracted to audit Tether’s accounts. This relationship dissolved in January 2018. As a result, the amount held in Tether’s reserves has never been independently verified.
How does Tether work?
Tether is based on something called the Omni layer. This is a meta-protocol built on top of the Bitcoin blockchain that allows projects to create and trade their own currencies. Tether tokens started to be issued on Omni software layer for the Litecoin blockchain in the summer of 2017.
There are also Ethereum-based Tethers built using the ERC-20 standard.
What can you do with Tether?
Tether is widely accepted on most exchanges and can be used to easily purchase cryptocurrencies. It is frequently used by traders and investors as a way to maintain a stable store of value while still holding a position in the market.
It is also a popular asset for the exchanges themselves. Tether trading pairs are a common way to denominate prices in fiat currency, which most people can more readily understand. As many exchanges find it impossible to set up a fiat bank account, some have turned to holding their funds in Tether tokens.
Did you know?
A research paper published in June 2018 accused Tether Limited and Bitfinex of artificially inflating the price of Bitcoin in December 2017.
Tether has proven itself to be a useful tool for the cryptocurrency community. Investors have been quick to buy over the past year as a way to protect themselves from market downslides. It continues to be popular, with tokens sometimes changing hands more than once a day. This has made it a useful source of liquidity for the market, which helps to keep prices stable.
That said, there is a lot of uncertainty surrounding Tether. No one knows if they have as much in reserve as they say they do. Tether’s future will rely on whether it can maintain market confidence. There could be serious repercussions if it turned out that Tether wasn’t in fact tethered to actual fiat currency. The loss of confidence could lead to insolvency for many cryptocurrency exchanges who use it to store value.