February 8, 2019
Name of Token: Tether (USDT)
Leadership: Reeve Collins
Token Ecosystem: Stablecoin
Main Use Case: Leveraged Trading
Market Cap: $2,025,118,619 USD (February 8th, 2019)
Volume: $3,500,043,960 USD (February 8th, 2019)
Price: $1.00 USD
Circulation Supply: 2,021,103,317 USDT
Total Supply: 2,580,057,493 USDT
History of the USDT Token:
USDT is a crypto asset issued on the Bitcoin blockchain via the Omni Layer Protocol. Developed by Tether Limited, it is a stablecoin designed to always be worth $1 USD. Each crypto unit is backed by a U.S. dollar and can be redeemed via the Tether Platform. The crypto can be transferred, stored, and spent just like any other cryptocurrency. Users can transact and store tethers with any Omni Layer enables wallet.
The token was created with the objective of facilitating the transfer of national currencies and to provide users a stable alternative to Bitcoin. The token uses a Proof of Solvency model by introducing a Proof of Reserves Process. In this system, the total amount of USDT in circulation can be accessed on the blockchain, while the correlating total amount of U.S. dollars held in Tether’s reserves is checked with the publishing of their books that undergo systematic audits by third-party professionals. Professional auditors regularly sign-off, verify, and publish the underlying balance and financial transfer statements. You can check the circulation of the token here, and Tether Limited’s bank account balance on its website’s Transparency page. The amount of USDT in circulation must always correspond to the amount of U.S. dollars in their bank account. Each Tether is issued as a liability for Tether Limited.
So, what is Tether? It’s a secured and transparent system that provides its users with a price-stable asset for national currencies. Tether promises better price discovery, market transparency, and liquidity.
In late 2017, Tether was hacked for about $31 million U.S. dollars. The company responded by temporarily freezing their exchange, marking the stolen tokens, and later performed a hard fork to fully remove any legitimacy from the stolen tokens. This control measure was successful.
Industry Case Studies:
Tether acts as a gateway between fiat and crypto. Users will typically purchase USDT with their national currency, which is then used to buy a cryptocurrency of their choice. The advantage here is that transactions become completely straightforward. Buying an altcoin generally requires for the purchase of a more well-known cryptocurrency like Bitcoin or Ether, to then send this purchased cryptocurrency on another exchange to acquire the altcoin. If an exchange supports USDT, the process cuts out unneeded transactions and simplifies the process because you can acquire the altcoin immediately.
The main use case of Tether is to provide stability to a volatile crypto market and provide a stable use case to blockchain companies, exchanges, individuals, and traders. By leveraging blockchain technology as a means to exchange value, Tether allows you to store, send, and receive digital tokens that are directly pegged to fiat currencies like the U.S. dollar, the euro, and yen person-to-person, globally, instantly, and securely for a fraction of the cost of any of its alternatives. In our tokenized world, it is important to have stablecoins like Tether due to the safety net it can provide in case of a bear market.
A user can buy USDT from many exchanges as the token is used to bypass banking regulations. Tether becomes the main facilitator in such transactions and that is why many popular crypto exchanges offer USDT.
Major Partnerships, News, and Notable Achievements:
Tether is registered with the Financial Crimes Enforcement Network of the US Department of Treasury and claims to maintain the highest standards of AML (Anti Money Laundering) and CFT procedures. However, when you hold as much power as Tether does in both the crypto and finance world, controversies are bound to arise.
In late December 2018, cryptocurrency exchange Bitfinex announced it will support trading of USDT against fiat USD. This is highly controversial as the two companies have deep ties to each other, as their top management tiers share an alarming number of executives. Tether has also been accused of printing digital fiat USDT token used on the exchange to artificially pump and dump crypto markets – heavy allegations that, if true, could lead to legal issues and reputation damages. All efforts to fairly audit Tether have failed as the company’s relationships with their auditors (most recently Friedman LLP in January 2018) have been dissolved.
In October 2018, USDT broke out of its tight range around $1, falling as low as $0.94, fueling speculation that investors may be losing faith in the coin. In November, it emerged that the U.S. Justice Department was investigating whether Bitcoin’s epic rally in late 2017 was fuelled in part by manipulation using Tether.
The same month, Tether Limited announced that it established a banking relationship with Deltec Bank & Trust Limited, a financial institution Headquartered in The Bahamas. After Deltec’s due diligence review of Tether, which led to the opening of Tether’s bank account with the institution, Deltec will review the company’s holdings on an ongoing basis.
After losing considerable shares in the stablecoin race to PAX (Paxos Standard) in the past months, Tether’s objectives will be to re-establish itself as a viable stablecoin and distance itself from its past controversy. Still today, USDT is among the most actively traded cryptocurrencies and its fate may have big ramifications for blockchain as a whole.
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