Usually, cryptocurrency is understood as a digital decentralized currency that does not have a single issuer. However, in the process of the development of cryptoindustry, a completely new class of electronic coins, called steyblecoins, appeared.
Stablecoin is a special kind of fixed-value cryptocurrency. The developers were able to create in some way a replacement for Fiat, which provides quick, convenient and cheaper payments.
Now there are several "stable" coins, but Tether is a pioneer. The history of the development of this cryptocurrency is far from ideal, but very interesting, since its creators presented a completely new look at digital money. Therefore, it is definitely worth the attention.
History of creation
The coin was created in July 2014 under the name of Realcoin by Starbucks Vice President Stanley Hainsworth. Some time after the launch of the project, the cryptocurrency was added to the popular Bitfinex crypto-exchange. However, it was not in demand among the clients of the exchange.
Therefore, in July 2014, it was decided to conduct a complete rebranding, as a result of which Realcoin was renamed Tether. The managing company and sole issuer of Tether is Tether Limited. The first block in the Tether network was generated on March 12, 2015.
At the heart of Tether is the idea of creating a token secured by real currencies. At the moment, there are already coins provided by US dollars (USDT), euros (EURT), and in the near future it is planned to add the Japanese yen (JPYT). One Tether is equal to one "fiatnoy" unit and according to the statements of the issuer, it is fully provided with a monetary reserve of the Tether platform. Due to this, this cryptocurrency is not subject to volatility as other cryptomonettes.
Most Tether coins are released on the Bitcoin blockchain via the Omni Layer protocol. But in February 2018, the release of tokens on the Ethereum blockchain was held: EUR 86 million and USD 60.1 million. Why did Tether Limited experiment with the release of tokens on Ethereum? According to the official report of the Ethfinex decentralized exchange (a branch of Bitfinex), the purpose of creating the Tether standard ERC20 was to develop tokenized dollars and euros for performing exchange operations in the Ethereum network on Ethfinex (Ethfinex offers trading based on Ethereum exclusively). However, apparently, the experiment failed, so more Ethereum-based Tether tokens were not released.
Separate attention deserves the connection Tether Limited with the popular Bitfinex cryptocheck, which was the first to add the Tether token. Initially, companies did not disclose their connection. However, in 2017, thanks to a leak of documents called Paradise Papers, the crypto community found out that Tether Limited and Bitfinex have the same owners.
As mentioned above, the creator of the project is Stanley Hainsworth. There is no detailed information about the full Tether team. Only the names of the management team are known:
- JL Van Der Velde - CEO. He graduated from the Taiwan National Pedagogical University. In the past, he was Managing Director of Amos Ltd., CEO of Strategic Development and co-founder of Tuxia GmbH and CEO of PAG Asia Inc. Since January 2013, he has also been the CEO of the Bitfinex major cryptocurrency exchange.
- Giancarlo Devasini - Chief Financial Officer. He studied at the University of Milan, has a doctorate in medical sciences. The founder of the company Solo SpA, in which until 2008 was the general director. Since November 2012, he took the position of Bitfinex CFO.
- Stuart Hoegner - Chief Counsel. He studied at Carleton University, majoring in public administration and economics. He holds a Ph.D. in law from the University of Toronto. He is Managing Director at Gaming Counsel PC. Previously, he served as CEO at companies such as Barrister & Solicitor and DXH Professional Corporation.
Technically speaking, Tether consists of three levels, or layers:
1. The Tether transaction registry embedded in the Bitcoin blockchain — The Tether blockchain is integrated into Bitcoin via the Omni protocol (former Masterchain).
2. Omni Layer Protocol - allows you to add complex functions without making changes to the Bitcoin blockchain. Omni is responsible for the following actions:
- Creation and liquidation of Tether tokens;
- Record transactions in Tether blockchain and display details of completed translations;
- Storage of tokens USDT, EURT, JPYT on the wallet Omni Wallet;
- Creating multi-signatures.
3. Tether Limited - a level that represents the management company itself. Responsible for the following functions:
- Providing a report on the stock of tokens stored in the reserve fund;
- Publication of the report on the results of the audit;
- Integration of the Tether token into cryptocurrency exchanges and wallets.
Principle of operation
All Tether tokens (USDT, EURT, JPYT) in their “life” go through five stages.
- A user who wishes to purchase Tether coins will deposit Fiat to the account of Tether Limited.
- After crediting the money, Tether launches new coins, while the number of tokens issued corresponds exactly to the amount of fiat units credited to the account in a 1: 1 ratio.
- Tokens are credited to the user's Tether account. He can dispose of them at his discretion: for example, exchange them for other cryptocurrencies.
- When a user wants to exchange tokens for fiat money, the reverse is done. The client sends the desired number of coins to the crypto account of the company Tether Limited.
- The issuer “burns” the received quantity of tokens and credits Fiat money to the user's bank account.
Tether uses a unique network consensus algorithm that is not found in any other cryptocurrency - Proof-of-Reserves. The principle of this algorithm is that it compares the number of issued tokens USDT and EURT with the real reserves of euro and dollars in reserve accounts of Tether Limited. This process is due to the capabilities of the Omni protocol.
Due to the fact that this protocol involves integration with the open Bitcoin blockchain, any user can verify the authenticity of the results through Tether Browser. This is what this ratio looks like at the time of this writing (early November 2018):
It is also worth saying that the Proof-of-Reserves consensus algorithm does not imply mining (like coins working at PoW, for example, Bitcoin) or forging (when consensus is reached through PoS, for example, NEO).
Advantages and disadvantages
Tether is, in fact, not a cryptocurrency, but fiat money converted to digital form. If you compare a token with other coins and fiatny money, it has several undeniable advantages:
- Almost zero volatility - unlike conventional cryptocurrencies, the cost of Tether is almost always equal to the current price of fiat currency, i.e. 1 USD = 1 USDT. The biggest deviation from the norm this year was $ 0.92 for the USDT.
- The low cost of transfers and the speed of payments - unlike regular money, Tether allows you to receive a transaction within a few minutes after sending. In addition, transfers are completely free (subject to sending transactions between Omni Wallet wallets), while in banks, transfers for equivalent amounts will cost tens of thousands of dollars depending on the amount of payment.
- The use of technology Omni Layer - this protocol is one of the most reliable due to the storage of data in the bitcoin blockchain.
But despite the presence of these very powerful advantages, there are still more disadvantages:
- Lack of decentralization - the consensus algorithm does not involve mining Tether, and the only issuer of this steyblecoin is the management company. Therefore, it is not necessary to speak about decentralization.
- Exposure to inflation - due to the fact that Tether is pegged to the US dollar, it is just like the latter is subject to inflation and gradually depreciates.
- Constant scandals around the cryptocurrency - for the company Tether Limited is noticed the conduct of a very opaque activity. For example, recently 500 million USDT tokens were burned without providing clear reasons for making such a decision. In addition, Tether does not disclose its real reserves and refuses to conduct an independent audit.
- Limited exchange for fiat - most cryptobirds offer to exchange USDT only for other cryptocurrencies, and a pair of USDT / USD from known platforms is added only to Kraken and Bittrex.
- The need for KYC verification - users must be tested by Know Your Customer if they want to link their account with a bank card to exchange USDT for real dollars.
- The decline in popularity due to the emergence of more responsible competitors - Tether is not the only stablecoin, now a number of other coins are actively strengthening their positions on the market, such as USD Coin (USDC), Gemini Dollar (GUSD), Paxos Standard (PAX), Trust token ( True USD).
Tether acts solely as a means of payment, so various platforms (mainly cryptocurrency exchanges and exchangers) simply add a coin without entering into any cooperation agreements. But with some companies, Tether has an established partnership:
- FxOpen is a well-known forex broker who is known for his positive attitude to cryptocurrencies. Now, among other available methods, customers will be able to replenish the deposit with the help of USDT and EURT.
- Deltec Bank is a bank located in the Bahamas. In the framework of cooperation, the bank must become the guarantor of Tether “solvency”.
- Madoff and Associates is an auditing company that will conduct Tether fiat reserves audits.
Tether is one of the most scandalous cryptocurrencies, which has a very ambiguous history of development, as, for example, the coin Tezosabout which we recently wrote. At the very beginning of Tether’s existence, participants in the crypto community noted that the management of both Bitfinex and Tether Limited is made up of the same people. The companies did not comment on this fact in any way, but the connection was obvious, since, in addition to the same management team, Bitfinex was involved in all controversial situations involving Tether.
One of the most obvious evidence of Tether Limited’s close connection with Bitfinex is that as soon as another batch of new USDT-tokens is released, most of them end up on Bitfinex. In addition, scientists from the University of Texas during the experiment came to the conclusion that every time after adding a new portion of new Tether to Bitfinex and making mass purchases of Bitcoin for USDT, the price of Bitcoin grew rapidly. Those. Tether Limited together with Bitfinex manipulated the growth of Bitcoin.
The following proof of a close relationship is a recent case involving the burning of half a million Tether tokens. It all started with the fact that when the Noble Bank, a Puerto Rican bank that most likely served both companies, announced problems, Bitfinex abruptly stopped accepting fiat deposits and offered an alternative as the USDT. However, traders were not led to this trick and began to massively exchange Tether for popular cryptocurrencies. This led to the fact that the USDT on October 15, 2018 failed to $ 0.92. As a result, the USDT lost $ 1 billion in capitalization, and its cost was stabilized and returned to the $ 1 mark only after burning 500 million tokens.
The next and constant problem is the unwillingness of the token’s leadership to work according to the rules of transparency and openness. Tether Limited with all arms and legs unlocked from the passage of an independent audit. In June 2018, a kind of audit was conducted by the law firm Freeh Sporkin & Sullivan (FSS), which allegedly confirmed that Tether Limited had $ 2.5 billion in accounts. However, as the FSS representatives later said, this audit was not a full-fledged audit, since the USDT issuer did not provide financial reporting documents, but only showed information about the company's accounts.
Comparison with other stablecocks
Tether is the leading steelcoin, but this idea was supported by a number of other companies that issued their “stable” coins. Some of them, despite their "youth", are much more successful and inspire more confidence, especially against the background of the constant scandals in which Tether is wrapped. The most popular type of steakblock is coins tied to the US dollar.
Comparison of several popular “stable” cryptocurrencies is shown in the picture below:
Course and capitalization. Where to buy
At the time of this writing (early November 2018), the cost of one USDT coin is $ 0.999, and the capitalization is almost $ 1.8 billion. In the Coinmarketcap Tether rating it is in 8th place.
The schedule and capitalization of the crypto currency since the beginning of 2018 looks like this:
Despite the fact that Tether (USDT) is a stablebcoin and its value must be strictly tied to the dollar, in reality, the price of this cryptocurrency directly depends on market demand. If you look at the chart of the USDT rate, then the deviation from the norm of one dollar was 1-20 cents up or down. In October 2018, capitalization also showed serious “jumps”. So, if in early October it was almost $ 2.8 billion, by the end of October this figure dropped to $ 1.8 billion, i.e. over the month, capitalization has sagged more than 1.5 times.
Tether (USDT) is one of the most popular stebblokoinov. However, it is possible to buy it for Fiat not from the issuer company on a limited number of exchanges, from popular ones it is Bittrex and Kraken, to which a pair of USDT / USD is added. The rest of the well-known sites offer USDT exchange only for cryptocurrencies.
The official wallet for storing USDT and EURT tokens is the Omni Wallet. In addition, USDT has been added to the Ledger hardware wallet.
Despite the fact that Tether is a very ambiguous token, at the moment it is the most popular and most sought after. This is indicated in particular by the daily turnover of trading. For example, in USDT it is almost $ 2.2 billion, and in the still-young, but very promising, steeplockcoin GUSD - only $ 2.1 million.
But the big problem with Tether is the lack of transparency and the unwillingness of the leadership to “correct” in this direction. However, since the beginning of November 2018, Tether Limited entered into a cooperation agreement with Deltec Bank, which confirmed that Tether had $ 1, 831, 322, 838 billion in accounts of Tether as of October 31, 2018. According to the statements of the bank, employees conducted a thorough review of the internal processes and documentation of Tether Limited. This, of course, is better than nothing, but such a verification is not a full-fledged financial audit that could guarantee the solvency of the issuer Tether.
Others are more transparent and open-minded and ready for independent auditing. If Tether Limited does not reconsider its attitude towards this moment, then it is quite possible that in a short time another steyblecoin will take its “crown” place.