Tether is often the most-traded Altcoin and is regarded as the third or fourth largest cryptocurrency with a market worth of over $30 billion. We at Dhanguard strive to provide you all the necessary knowledge about Tether and all other relevant aspects related to it.
What is Tether?
Tether (USDT) is a stablecoin, which is a cryptocurrency that actively seeks to maintain its value through market mechanisms. It's utilized by investors who wish to protect their cryptocurrency assets from the inherent volatility of the market while still keeping their money in the crypto market, ready to spend. It is a fiat-collateralized stablecoin, which means it is backed by a fiat currency such as the US dollar, Canadian dollar, Australian dollar, or Japanese yen (JPY).
Tether was developed to fill the gap between fiat currencies and blockchain assets, while also providing USDT consumers with transparency, stability, and cheap fees. It is a cryptocurrency that is 1:1 tied to the US dollar. It is also a major source of crypto liquidity, according to a research from CryptoCompare, accounting for roughly 80% of Bitcoin trading. Tether Ltd. does not guarantee any right of redemption or exchange of Tether to USD.
The Tether Corporation does not allow USDT to be traded directly for USD. It is a key cryptocurrency in many investor strategies because it serves numerous objectives in the market. While it's difficult to imagine a crypto market without Tether now, that wasn't always the case. To reach the top slot, the Tether project overcame a lot of opposition. Therefore it now serves as a source of liquidity and a hedge against market volatility.
There are now four Tether stablecoin currencies: USDT (linked to the US dollar), EURT (linked to the Euro), CNHT (linked to the Chinese Yuan), and XAUT (linked to the Australian dollar) (tied to one ounce of gold per token).
History of Tether
Tether Ltd is the company that creates Tether tokens. Tether was launched in 2014 under the name Realcoin and then rebranded to Tether. The cryptocurrency's co-founders are Brock Pierce, Reeve Collins, and Craig Sellars, and it was first introduced on the Bitcoin blockchain's Omni Layer. It first opened for business in 2015. The founders created three separate forms of Tether, each pegged to a different fiat currency and each token supposedly worth one unit of that currency. In terms of market capitalization, it is now the largest stablecoin. It's also found in Ethereum, Bitcoin Cash, TRON, EOS, and Liquid Network, in addition to the Omni Layer of Bitcoin.
The name Realcoin didn't endure long. Tether was born in November 2014, when the Santa Monica-based firm decided it was time to change its name. Tether, for example, took a three-pronged strategy to the market. As part of its entry plan, the platform launched three stablecoins. USTether was the first cryptocurrency. This coin was pegged to the US dollar at a 1:1 ratio. The second currency was based on Euros, while the third coin was based on the Japanese Yen, which was dubbed YenTether.
What does Stablecoins mean?
Stablecoins are blockchain assets whose value is tied to external commodities. The benefits that these coins provide to the market are indisputable. For one thing, their steadiness reduces the overall volatility of cryptocurrencies. Stablecoins are used by investors to get out of unfavorable markets without having to transfer their cash back into fiat currency.
How does Tether (USDT) operates?
Each Tether (USDT) is backed by a dollar's worth of assets. Tether was first created via the Omni Layer protocol on the Bitcoin blockchain, but it can now be issued on any chain that Tether currently supports. A tether (a single unit of USDT) can be used in the same way as any other money or token on the chain on which it was issued. Tether is currently compatible with the blockchains of Bitcoin, Ethereum, EOS, Tron, Algorand, and the OMG Network. It implements Proof of Reserves, which ensures that their reserves will always be equal to or more than the number of Tether in circulation at any one time. This is verifiable on their website.
What sets Tether (USDT) apart?
Tether (USDT) has been accepted and used for years, and it has a level of legitimacy that few other projects can match, despite its frequent challenges. Many businesses and protocols in the blockchain ecosystem accept it as a payment method and medium of exchange. Tether is immune to market dangers such as Black Swan events because to its vast reserves. USDT has the same benefits as other cryptocurrency tokens on the network, such as peer-to-peer trading and Proof of Stake (PoS) or Proof of Work (PoW) security, making it a viable hedge for both traders and consumers.
The Tether Technology
Tether's transactional ledger and Tether token were created and traded using the Omni Protocol, an open-source programme that enables the company to develop, generate, and trade the Tether token on the Bitcoin blockchain. Tether, on the other hand, revealed in September 2017 that they are working with Ethfinex to develop and deploy the first Ethereum-based Tether.
Flow of Money
In the average lifecycle of a Tether token, there are five main phases.
- A user fills Tether Limited's bank account with fiat cash.
- While Tether tokens are issued to the user and circulated, Tether Limited credits the user's Tether account. (The user received Tethers equivalent to the amount of fiat currency they deposited from Tether Limited.)
- The Tethers are used to conduct business. Tethers can be transferred, exchanged, and stored using a peer-to-peer, pseudo-anonymous platform.
- Tethers are subsequently deposited with Tether Limited, and the user's fiat cash is redeemed.
- Tether Limited burns the Tethers and replaces them with fiat currency in the user's account.
Proof of Reserves (PoR)
Tether Limited must demonstrate that it has enough cash reserves to back up all of the tokens in circulation because users are entrusting it with their tokens (which are redeemable in fiat money). Tether Limited's currency reserve is quite similar to the Federal Reserve before to 1971, when the dollar was backed by gold. Tether Limited publishes their bank balance and undergoes periodic audits to guarantee that the total amount of USD and EUR kept in their reserves is reported. Users can find this information on the company's transparency page, which is updated on a regular basis and available 24 hours a day, seven days a week.
Importance or Advantages of Tether in UAE
Tether is one of the most widely used cryptocurrencies nowadays. It gives investors more options because it may be used as a dollar substitute on several popular exchanges. Here are a few of the reasons why Tether is still popular:
In the crypto world, market volatility is a huge problem. When the bears seize control of the market, investors are left with only a few options. They have the option to sell their holdings and convert them back to fiat currency. This procedure takes a long time and entails as many expenses as feasible. Alternatively, they might ride out the bear market and accept the losses. It brings a third option into the mix also avoids fees and volatility by converting to Tether.
Tether, in a similar vein, provides exchanges with more liquidity. This token allows exchanges to avoid dealing with fiat currencies entirely. Exchanges can limit the amount of KYC that their platform must comply with in this fashion.
Because Tether is a blockchain asset, it's as simple as exchanging Bitcoin for Ethereum to convert from Bitcoin or any other cryptocurrency to Tether. This conversion provided investors with a simple solution to avoid volatility and stay in the cryptomarket.
Cryptocurrency in Transit
Tether, moreover, makes it easier to convert actual money into digital money. In some parts of the world, this is a big task. Remember that converting bitcoin to fiat currency can be challenging in some places. The practise is prohibited in several nations. It is a viable option in all of these areas.
Tether, like most cryptocurrencies, has the potential to transform international payment networks. Without the need to convert cash or pay additional transfer fees, USDT can be sent anywhere in the world. The argument is that Tether is just as simple to send around the world as Bitcoin.
No one can deny Tether's importance in the business after so many years of success. There is no scarcity of stablecoins in the market nowadays. Tether, on the other hand, was the first stablecoin to spark this movement. Tether deserves a pat on the back for that.
Should I invest in Tether or sell it?
Because Tether is closely linked to a fiat currency, it is less volatile than many other cryptocurrencies. So, if you're considering buying or trading Tether, don't expect a windfall or the kind of volatility that a cryptocurrency like Bitcoin or Dogecoin would provide. Tether also contains very few speculative aspects, making it a generally safe and reliable cryptocurrency investment. It's been compared to buying and holding cash or another foreign currency by some.