Founded in July 2014 by Brock Pierce, Craig Sellars, and Reeve Collins, Tether (USDT), originally known as “Realcoin”, is a cryptocurrency commonly known as a “stablecoin” that aims to keep a fixed 1:1 exchange ratio with the U.S. dollar. Tether was one of the earliest stablecoins created, built upon Mastercoin (Omni), which was a protocol layer for Bitcoin that introduced the stablecoin concept to the world in 2012. Tether pioneered what is now known as a fiat-collateralized stablecoin model, and is now the most widely used stablecoin today.
Tether was created as an attempt to solve two major issues with existing cryptocurrencies: high volatility and convertibility between fiat currencies and cryptocurrencies. To address these perceived issues Tether created a cryptocurrency that is fully backed 1:1 by deposits of U.S. dollars held at banks. On Ethereum, USDT tokens are represented as ERC-20 tokens, while on Bitcoin, Tether utilizes the Omni layer, to represent USDT tokens. While the tokens themselves operate in a decentralized network, Hong Kong based Tether Ltd is solely responsible for creating and redeeming tokens as well as maintaining the 1:1 deposit backing.
Exchanges have been the primary users of USDT as an alternative to fiat currencies, reducing or eliminating the need to maintain outside banking relationships. Notable exchanges that utilize the token include Bitfinex, Bittrex, Binance, Coinbase, Kraken, Huobi, Poloniex, Liquid.io, Gate.io, and OKEx. Tether Ltd shares many executives and has strong ties with Hong Kong based Bitfinex with both sharing the same parent organization iFinex Inc.
Since its founding in 2014, Tether has been the subject of ongoing controversy due to the failure of Tether to provided audited financial statements proving it has adequate reserves backing USDT. Historically Tether has failed to disclose its banking relationships, only recently announcing its banking partners in November 2018 to quell rumors about its solvency raised by associated crypto exchange, Bitfinex.
In March 2019, Tether updated its disclosure statement claiming that its tokens are no longer backed 100% by U.S. dollar deposits. Tether is instead now backed 100% backed by reserves, which include traditional currency and cash equivalents and, from time to time, other assets and receivables from loans made by Tether to third parties, which may include affiliated entities.