What Is Tether?

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What Is Tether?

So, What Exactly Is Tether?

As much as its name might give you a clue on its nature, a more formal presentation is always good. So what is a Tether, well – keep on reading and we will try to give you as good an explanation as you can want.

Tether is a cryptocurrency based upon blockchain technology. Whilst it shares some similarities with other popular coins, such as Bitcoin and Ethereum, Tether is a stablecoin. This segment of cryptocurrencies is not as volatile as major coins and is seen as a more reliable form of payment method.

The coin’s price is maintained relatively stable as it is backed by traditional currencies, such as the US Dollar, Euro or Japanese Yen. This reflects the way upon which most of the world’s currencies obtained their value. These were normally backed by real gold, silver, or other valuable metal. Today, most fiat currencies are no longer backed by their value in precious metals and are instead given value by central banks.

Since Tether was one of the world’s first stablecoins and was backed by the USD it adopted the trade code USDT. It is commonly traded on a variety of exchanges and accepted as payment in a growing number of stores and platforms. As a result of its stable nature, it’s not commonly speculated over, with traders preferred more volatile coins such as Litecoin or Bitcoin.

Anyone who is averse to investing in too volatile options might be well served by questioning themselves “What is a Tether, and might this be something for me?”.

Who Invented Tether?

The whitepaper which would eventually lead to the creation of Tether was published in 2012 by J.R. Willett. He developed a new protocol based upon the Bitcoin Protocol, calling it Mastercoin. With the Mastercoin Protocol, he was able to create new coins, including Tether. Joining Willett on this journey was Craig Sellars, the CTO of the Mastercoin Foundation.

Before Tether got its name, it was referred to as Realcoin and was set up by Craig Sellars, Reeve Collins, and Brock Pierce. The Santa Monica-based startup issued its first tokens in October 2014. These were available on the Bitcoin blockchain using the Omni Layer Protocol. Just one month later, Realcoin was rebranded to Tether, with the startup also rebranding to Tether Ltd.

Why Was It Invented?

Tether’s main goal was to bridge the gap between traditional currencies and cryptocurrencies. The creation of cryptocurrencies introduced exciting new possibilities for the financial sector but also created significant uncertainty. Initial coins, especially Bitcoin, became popular amongst speculators and this led to highly volatile price changes. Bitcoin millionaires were created and lost every day, and although the media welcomed the increased attention of crypto, financial regulators and institutions saw it as a high-risk liability.

In order to create trust with financial authorities and governments, Tether promised to offer transparency, low financial charges, and, most importantly, price stability. According to Tether Ltd, the coin was pegged and maintained a 1:1 ratio with the US Dollar. The need and success of Tether are evidenced by data from the Wall Street Journal which has found that around 80% of all Bitcoin trading is done in Tether. USDT provides much-needed liquidity to the sector and has helped several exchanges to expand their market reach.

Tether’s Troubles

Over the years, Tether has suffered one setback after another. In November 2017, the coin was allegedly hacked and around $31 million worth of coins were stolen. This prompted a hard fork, but the community’s confidence dropped further when, in January 2018, a promised audit on the coin’s real-world money reserves never materialised.

USDT and its owner, Tether Ltd were scrutinised by regulators and the community, with serious doubts cast on its USD pegging. The company admitted that the coin was no longer directly pegged with the US Dollar, but maintained that it had reserved in several currencies. Which currencies remains a mystery, and many believe that the coin might actually be backed by other cryptocurrencies as well as crypto loans.

How Does Tether Differ From Traditional Currencies?

Tether vs Traditional Currencies

As a cryptocurrency, Tether enjoys several advantages over traditional currencies. These include:

  • Anonymity
  • Security
  • Transaction Time & Price

Anonymity

Tether exists within a Blockchain which is, essentially, a distributed public ledger of transactions. Although public addresses of senders and receivers are relatively simple to view, the identities of the address owners are not. As a result, individuals can send and receive USDT without needing to share their personal details with third parties. This has several advantages, such as the possibility to play at online casinos without sharing details with a bank.

Security

As with any cryptocurrency, Tether can be stored securely in one of several hardware and software wallets. Unlike fiat currency stored in a wallet, USDT coins are not physically in the wallet. Instead, the wallet’s address is stored on the blockchain, with only a code actually stored in the wallet. This means that if you were to lose your Tether wallet you would be able to recover your funds by setting up a new wallet and entering your passcode and private key.

Transaction Time & Price

Carrying out transactions and currency conversions using fiat currency is a slow and expensive process. By using Tether in currency conversions, or as a way to send payments, users can benefit from significantly faster speeds as well as extremely low fees. In some cases, transactions are also completely free. This allows Tether to be a popular medium for such transactions, competing with similar coins, including XRP.

Tether And Blockchain

Tether was originally released on the Bitcoin blockchain through the Omni Platform. Since its release, Ethereum blockchain-based coins have also started to be released.

USDT, along with most cryptocurrencies, exist in a blockchain as it provides the necessary technological infrastructure to complete transactions whilst preventing fraud. Blockchain technology provides an environment where a coin can be decentralised and can be transferred peer-to-peer without requiring any financial intermediaries.

Tether And Bitcoin

Since Tether was originally created as an offshoot of the Bitcoin blockchain, it shares several features with the world’s first cryptocurrency. Like BTC, USDT can be mined by anyone with sufficient computing power. However, whilst Bitcoin rewards miners according to the Proof of Work (PoW) system, most USDT miners get rewarded using the Proof of Stake (PoS) algorithm.

One of the key differences between the two coins is that whilst USDT is pegged to other currencies, BTC is not. As a result, Tether maintains a relatively stable price, whereas Bitcoin’s price fluctuates significantly throughout the day. Traders and cryptocurrency investors are more attracted to Bitcoin, whereas merchants and cryptocurrency users tend to prefer Tether for payments.

Buying, selling, and trading Tether is legal in most countries around the world. Whilst some jurisdictions have no specific laws relating to cryptocurrencies, others treat USDT and other coins as assets. Such countries require traders to comply with local laws, including paying tax on cryptocurrency gains. As a Tether owner you should be able to use the coin freely in most parts of the world, however, keep in mind that cryptocurrencies are still illegal in several countries.

Where Can You Buy Tether?

There are two main ways to buy Tether, online and offline. Each of these ways provides you with several key advantages, although they might also carry some risks.

Online

Cryptocurrency exchanges provide the best and easiest way to buy Tether instantly. Although there are thousands of exchange platforms to choose from, not all support this currency or are reputable. As a result, finding the right platform to buy Tether can be tricky.

Binance is probably one of the best exchange platforms which support the coin and let you buy Tether using a debit or credit card. Considered to be one of the largest cryptocurrency exchanges, Binance supports over 450 different coins and tokens, allowing you to buy the coin using either fiat currency or another digital coin. In addition, the exchange provides a free, in-built cryptocurrency wallet where to store your Tether conveniently.

Offline

You can find Tether sellers in your area using online forums. These sellers might accept PayPal payments but might also accept cash or cheque payments in person. Although this might represent your only solution if you do not have access to a bank card, be wary that many scammers are present in these forums. Ensure that before paying the seller you receive your coins in your wallet.

How Much Is Tether Worth?

Tether vs Bitcoin
Image Source: CoinMarketCap

Every currency, whether crypto or traditional, experiences constant price changes throughout the day. Several factors, both internal and external, lead to these changes, and this means that the price of a coin at the time of writing would most likely change by the time you read this article.

Currently, USDT’s price is showing as equivalent to $0.999237 and 0.00010877 BTC. The coin ranks third in terms of market capitalisation, with a total value of over $9 billion traded. Interest in the coin is clearly growing, and there are several days when more Tether is traded than Bitcoin.

What Can You Buy With Tether?

Since Tether is a stablecoin, merchants are more inclined to accept it over more volatile cryptocurrencies. Accepting Tether is cheaper than accepting traditional card payments, and transactions are only marginally slower. As a result, you can today use Tether to buy practically anything over the web. Several top hotel booking brands, retail outlets, and online casinos accept this coin and more join every day.

Selling Your USDT

Several cryptocurrency exchanges let you sell USDT online easily. If your goal is to sell the coin in exchange for fiat currency, platforms such as Kraken and Changelly are probably best. On the other hand, if you would like to exchange this cryptocurrency for another, Binance provides you with the widest choice at the lowest fees. In most cases, selling your USDT is an instantaneous process, although transactions may be slower during busier periods.

You can also sell your Tether in person and get paid in cash. As with buying Tether offline, you should take precautions not to get scammed out of your funds.

Is Tether Available Worldwide?

You can access your Tether funds anywhere in the world since they exist on blockchains accessible through the Internet. The coin is decentralised and no single entity can block it off or take it over. With the exception of countries which ban the use of cryptocurrencies, you can trade and use Tether whenever and wherever you like.

Is Tether Safe?

Although the coin has gone through some rough patches it has overcome them and today ranks in the top 3 largest cryptocurrencies in the world. The coin’s transactions are verified by decentralised nodes which virtually eliminates the risk of successful fraudulent transactions. In addition, unlike with traditional currency payments, Tether payments cannot experience chargeback claims.

The Advantages And Disadvantages Of Tether

Using Tether as a stablecoin with which to perform online payments and other transactions provides several advantages. Tether payments, especially those on the Ethereum blockchain, are faster than Bitcoin payments, and also significantly cheaper. The coin maintains a stable value, and this makes it a top crypto contender to replace traditional currencies.

Tether’s murky past has unfortunately given it a negative reputation when it comes to transparency and honesty. Although users are happy to use the coin to carry out transactions, most would not store any significant portion of their wealth in Tether.

Concluding Thoughts

When it was first launched, Tether promised to revolutionise cryptocurrencies by providing a solution which would be greeted by financial regulators and the community alike. Unfortunately, decisions taken behind closed doors have damaged the stablecoin’s reputation. The coin’s recent performance suggests that the worst may be behind it and that Tether might actually rank as the most traded cryptocurrency in the world.

So despite the no-go on revolutionizing the market, it has still made an impact. So what is a Tether worth in the future? Well, your guess is as good as ours but it certainly looks optimistic so far.

Is USDT a fiat currency?

No, USDT is a cryptocurrency which exists on a blockchain. However, the coin shares several similarities with fiat currencies, including maintaining a relatively stable price and being commonly used for payments and transactions.

Can I exchange Tether for Bitcoin?

Yes, you can exchange Tether for virtually any other cryptocurrency by using a reputable cryptocurrency exchange which supports both coins.

Does Tether offer a guarantee to exchange the coin to USD?

Although Tether is said to be pegged with the USD, the company clearly states that it does not offer any guarantee that the cryptocurrency will be exchanged for USD or any other fiat currency.

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