Tether (USDT) is a controversial cryptocurrency with tokens issued by the company Tether Limited. Tether (USDT) is traded as a so-called stablecoin 1:1 to the US dollar.
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 seeks a fixed exchange ratio of 1:1 to the U.S. dollar. Tether was one of the earliest stablecoins, and built on Mastercoin (Omni), a protocol layer for Bitcoin that introduced the stablecoin concept globally in 2012. They pioneered what is now known as the fiat-backed stablecoin model, and USDT is currently the most widely used stablecoin.
Tether was created as an attempt to solve two main problems with existing cryptocurrencies: High volatility and convertibility between fiat currencies and cryptocurrencies. To address these perceived problems, Tether created a cryptocurrency that is fully backed 1:1 by deposits of US dollars in banks. On Ethereum, USDT tokens are represented as ERC-20 tokens, while on Bitcoin, Tether uses the Omni layer to represent USDT tokens. While the tokens themselves operate on a decentralized network, Hong Kong-based Tether Ltd. is solely responsible for generating and redeeming the tokens and maintaining 1:1 deposit protection.
Exchanges have been the primary users of USDT as an alternative to fiat currencies, reducing or eliminating the need to maintain external banking relationships. Notable exchanges using the token include Bitfinex, Bittrex, Binance, Coinbase, Kraken, Huobi, Poloniex, Liquid.io, Gate.io, and OKEx. Tether Ltd. shares many executives and maintains close ties with Hong Kong-based Bitfinex, with both belonging to the same parent organization, iFinex Inc.
Over the years, there has always been controversy surrounding Tether Limited. They have been accused of price manipulation and holding less than the promised 100% reserves in fiat. Due to the lack of transparency, it is unclear how much of this is actually true. Parent company iFinex Inc. was involved in a lawsuit for allegedly taking $800 million from Tether reserves to make up for lost customer funds. The court case was dropped in February 2021.
Application
Tether enables businesses - including exchanges, wallets, payment processors, financial services, and ATMs - to easily use fiat-backed tokens on the blockchain. By leveraging blockchain technology, Tether enables digital tokens to be stored, sent and received person-to-person, globally, instantly and securely for a fraction of the cost of alternatives.
Currently, there are tens of billions of Tether (USDT) in circulation. The token cannot be mined - only Tether Ltd. can issue new tokens when real U.S. dollars are deposited. Tether's platform is built to be fully transparent at all times. Tether is by far the most popular stablecoin by market capitalization, alongside USDC and PAX.
