The World’s Most Popular and Controversial Stablecoin
Everything about the US Dollar exudes value and stability, explaining why it has been the default global reserve currency for decades now. As a result, institutional and conservative cryptocurrency investors have long sought an asset class that can leverage a combination of the decentralized blockchain technology, and the US Dollar stability. That is how Tether (USDT) came into being. It provides that same option for traders and investors wanting to keep their value constant against crypto volatility.
What are Stablecoins?
Since Tether USDT is one of the stablecoins, let us first define the stablecoin asset class in cryptocurrency. Stablecoins are cryptocurrencies attached to other assets such as the euro and the dollar, making them somewhat stable. They are built with the same features as common cryptocurrencies but with an overarching objective of protecting against sudden price shocks typical in the crypto market. In this case, a Stablecoin will typically mimic traditional (fiat) currencies but exist within a secure blockchain.
What is Tether USDT?
Tether (USDT) is a blockchain-based cryptocurrency that is “backed up” by an equivalent amount of the US Dollar. It was the first stablecoin ever to be issued. Because the cryptocurrency sector is rife with volatility, getting a coin that leverages the stability of the USD is a way to have the best of both worlds. Tether (USDT) provides an option for traders and investors to keep their value constant amidst the problem of crypto volatility.
Since its inception, US Dollar Tether (USDT) has quickly become the most widely used stablecoin as its high volume and liquidity make it an ideal store of value in moments of economic instability or volatility.
The Hong Kong based company Tether Limited is behind the stablecoin that has a $19 billion market cap, USDT. Every single unit of USDT in circulation is backed by $1 represented in different forms of liquid assets such as cash, treasury bills, or notes after the adoption of a Proof of Reserve Process.
The Tether Treasury is tasked with the minting of USDT directly from the Tether platform. As such, every USDT in circulation can be redeemed for USD fiat. Although Ethereum-based USDT is dominant, Stablecoins are issued in Tron, EOS, Liquid, and Algorand blockchains.
USDT is one of the most controversial cryptocurrencies on the market. Despite claims that all coins are backed 100 percent by cash and other liquid assets, it has never been audited by any of the top four auditing firms.
During a court case by the New York Office of the Attorney General (NYOAG) in 2019, a lawyer representing Tether Limited admitted that USDT in circulation was not in fact backed by 100 percent USD, but instead, a conflation of different liquid assets, including cryptocurrencies generally termed as “cash equivalents.”
This called into question their credibility, with some becoming convinced that the issuer had merely become an unregulated bank.
USDT remains one of the most influential cryptocurrencies in circulation today. It is essential for anyone getting into crypto to know what the coin is designed to do, its volatility, applicability to an investor, miner, or trader, and how to store it securely.