Tether (USDT) is a stablecoin, a type of cryptocurrency which aims to keep cryptocurrency valuations stable, and is released on the Bitcoin blockchain through Protocol Omni. Its value exchange rate is fixed or tethered, to the value of the US dollar.
It is used by crypto investors who want to avoid the extreme volatility of other cryptocurrencies while keeping value within the crypto market.
Why is Tether (USDT) important?
It is a known fact, that cryptocurrencies are extremely volatile. Tether (USDT) offers a way for investors to avoid this extreme volatility. USDT helps the trader to reduce the risk of exposure to a sudden drop in the price of cryptocurrencies. It is also much quicker and cheaper to transfer Bitcoin into Tether rather than the U.S. dollar.
Tether was specifically designed to build the necessary bridge between fiat currencies and cryptocurrencies and offer stability, transparency, and minimal transaction charges to users. It aims to keep cryptocurrency valuations stable, as opposed to the wide swings observed in the prices of other popular cryptocurrencies like Bitcoin and Ethereum.
It was designed to hold one-to-one value with the US dollar. The coin exists on many different blockchains and has experienced rising trading volumes and improved liquidity over the past few years. However, there is no guarantee provided by Tether Ltd. for any right of redemption or exchange of Tethers for real money – that is, Tethers cannot be exchanged for U.S. dollars.
Controversies surrounding Tether
Tether has had it’s fair share of controversies in the past.
Back in November 2017, Tether was allegedly hacked, and had $31 million worth of Tether coins stolen, after which a hard fork was performed. It fell under another controversy after three months, as the necessary audit to ensure that the real-world reserve is maintained never took place. Instead, it announced it was parting ways with the audit firm, after which it was issued a subpoena by regulators. Worries about whether the company, accused of a lack of transparency, has enough in reserves to back the coin have been pervasive.
Despite all these controversies, it is still the most trusted and the oldest stablecoin in the crypto ecosystem, and currently, there is more than $19 billion worth of tether in circulation.