Most of the cryptocurrencies we know are characterized by a fluctuating rate, which creates their volatility and the determination of their value by the game of supply and demand. The Tether cryptocurrency is an exception to this widely shared rule. This cryptocurrency has a fixed rate: 1 tether = 1 US dollar, everywhere, and all the time. How is this explained? Perhaps you are one of the many people who know little or nothing about this cryptocurrency. If so, then you’ve come to the right place! Immediate boarding for the presentation of Tether, why and how to buy it, what Tether is, and what it is not.
By the way, what is Tether?
Let’s start, to facilitate the understanding of the beast, with an etymological angle. In English Tether means “to bind”, “to attach”. This first sense is necessary to understand what Tether is, and its intimate relationship with fiat currencies.
Tether, the digital currency linked to fiat currencies
The name of this currency probably comes from the fact that it is supposed to be attached, intrinsically linked to the value of the dollar. which it is supposed to reflect the exact value. It was about sort of creating a digital dollar. Consequently, 1 Tether aims to be worth 1 dollar. This is why this cryptocurrency is qualified as Stablecoin.
How Tether works
This cryptocurrency works on the blockchain Omni layer. Like much of recent cryptocurrency, Tether was originally built from a fork of bitcoin. The Omni Layer blockchain is governed by a consensus rule which is the Proof of work, that is to say the proof of work. The algorithm used for Tether is called Scrypt. The Tether emission is theoretically infinite – as well as the strong dollar of its well-known syndrome known as the “money printing” – , which sets it apart from many other cryptocurrencies (bitcoin, Litecoin).
Interest and peculiarities of Tether
Before talking about the peculiarity of Tether, let’s remember what brings it closer to other cryptocurrencies: Tether is based on a platform decentralized open-source. As for the difference of Tether from bitcoin and other cryptocurrencies, it is mainly about the stability erected for Tether as a cardinal value.
Stability, the first advantage of Tether
Bitcoin has sometimes been seen to lose 30 to 60% of its value in very short times. This indicates the great volatility and instability that characterizes these cryptocurrencies that we can name – all proportions kept –traditional, that is, those whose value is solely determined by supply and demand. Conversely, it is possible to bet on Tether without fear of a depreciation of the investment. The expected stability of Tether is therefore its main advantage compared to other cryptocurrencies.
To ensure this stability, the company Tether (which therefore issues altcoin of the same name) issues new units of its cryptocurrency, in proportion to the amount of dollars saved in its account. Technically then, if we find in circulation two billion Tether, we must be able to consider that Tether’s bank account is topped with $ 2 billion.
It’s because of his stability that stablecoin is qualified as a system of refuge, because at the scale of investment in cryptocurrency, Tether is one of the least risky digital currencies.
An easier gateway to the fiduciary
While other cryptocurrencies struggle to be accepted by banks and other financial institutions, Tether can pride himself on sparing this procedure. This cryptocurrency is, in essence, linked to a fiat currency. Tether therefore has the advantage of not requiring the high cost (in financial terms and time) to devote to a fiduciary compliance file.
Brief history of Tether
In 2012, JR Willett discusses the possibility of a cryptocurrency other than Bitcoin. Based on this idea, he will participate with Brock Pierce and Craig Sellars in the creation of cryptocurrency Mastercoin to which has been attached Omni Foundation (previously called Mastercoin Foundation). It is from the Mastercoin protocol that Tether will be designed. Ah, and by the way, Willet, it was also the guy who first imagined the concept of ICO (Initial Coin Offering, i.e. fundraising in crypto).
In 2014, what would later become Tether, was still presented under the name of Realcoin, and was essentially a start-up based in Santa Monica. At the start of the last quarter (precisely October 6, 2014) of the same year, the first Tether tokens are issued. November 20, 2014, Reeve collins (then first manager of Tether Limited) announces the transition from Realcoin to Tether but also that the cryptocurrency would support three fiat currencies for which it would ensure exchange stability: thus came into the world the USDTether for the US dollar, l’’EuroTether for the euro, and the YenTether for the Japanese Yen.
But the most interesting is that Tether claimed that any tether token was fully backed (guaranteed) by a similar amount of its original currency held by the company. From January 2015, it became possible to trade Tether on the cryptocurrency platform Bitfinex. And it was at this very moment that doubts and controversies began.
Tether, one of the most controversial cryptocurrencies
Tether is constantly the subject of controversy. Indeed, two questions commonly animate the controversy around this cryptocurrency: the connections with Bitfinex but also the evidence deemed to be faulty as regards the reality of the dollar reserves held by the company.
Tether and Bitfinex, an inconvenient proximity
So officially, Bitfinex and Tether are supposed to be completely separate and unrelated, suspicions appear at the time of the Panama Papers who claim that Bitfinex managers were at the origin of the creation in 2014 of Tether Holdings Limited in the British Virgin Islands. At the same time, it is also the presence of Jan Ludovicus van der Velde at the head of Tether who bothers, because he would also be the first responsible for Bitfinex, which concretely implies that he is both seller and buyer of the same product: Tether, a good big potential conflict of interest.
Quarrel over reservations
The basic premise of Tether is that this dollar-backed electronic money is stable, so if you only take into account the USDT, each Tether is equivalent to one dollar, the existence and availability of which the firm TETHER guarantees. The concern is that in January 2018, an audit of the company was unsuccessful. This audit was stopped because it was supposed to have become too complex to carry out. In clear terms, no one has been able to guarantee until today that the reserve of the 2 billion dollars really exists as fiduciary value of the 2 billion Tether issued by the company.
In April 2019, Letitia james New York’s Attorney General has filed a lawsuit against Bitfinex which she accuses of using Tether’s reserves to bridge the gap created by her $ 850 million gap. If the procedure has already experienced some ups and downs (not always to the disadvantage of Bitfinex by the way), doubt persists about the firm and its cryptocurrency.
A confused relationship with bitcoin
To these two main controversies is added that linked to a fuzzy game between the value of bitcoin and Tether, especially in 2017. Indeed, each time the amount of bitcoin has increased, a high number of Tether had been previously created. This is to believe that the creation of Tether is mainly used to play with the value of bitcoin. The consequence of this almost anarchic creation of Tether in 2017 is that the following year, there were 2 billion USD Tether in circulation, without being able to establish the real availability of the $ 2 billion on the firm’s accounts.
On the side of Tether, we always proclaim the reliability of stablecoin. The company particularly insists that its cryptocurrency would be guaranteed with the fiat currency USD, but no evidence of this allegation is provided to date.
Cryptocurrency Tether has been talked about enough in recent months, especially since the New York reserve trial. This controversy, but also the ambition displayed by the Tether have brought to the fore the first responsible for the cryptocurrency, namely Jan Ludovicus van der Velde, the current CEO of Tether Limited, which deals with the cryptocurrency.
Tether disruption potential
The Tether cryptocurrency could have offered real stability to the world of virtual currency exchanges because of its link with fiat currencies. However, the numerous controversies and criticisms leveled against this platform have relatively reduced investor interest in this currency. (even if everything indicates that a large part of them are interested in stablecoins of all kinds)
Where to buy Tether ?
Like all cryptocurrencies, the purchase of Tether can be done on specialized platforms like Binance, HitBTC or Bittrex. A question that people often ask is whether they can use another cryptocurrency to buy Tether. This question calls for a nuanced answer. In fact, not all cryptocurrencies can be traded against Tether. Only a few are: Bitcoin, BNB Ethereum, Neo… What is recommended is to exchange the cryptocurrency you have for bitcoin and then exchange bitcoin for Tether.
In summary, what to remember?
- Tether is the cryptocurrency of the company called Tether Limited.
- The specificity of this cryptocurrency is that it is indexed to the fiat currencies: the Dollars (USDT), the Euro (EURT) and the Yen (JPYT).
- It is mainly a controversial currency, because of the questionable reports that it maintains with bitcoin but also with Bitfinex which is suspected of using Tether to influence the price of bitcoin.
- Finally, Tether can be acquired on the usual cryptocurrency exchange platforms, but to acquire it with other virtual currencies, you will essentially have to first convert said currency into bitcoin before exchanging it for Tether.
The whole question one can ask about Tether is whether this cryptocurrency will disappear as some postulate or whether it will weather the storm that is currently shaking it. Only time will tell.