What is Tether?
Every Tether that is created and issued into circulation is backed by an actual dollar on a one-to-one ratio. The USD that backs tether one-to-one is held in a Hong Kong bank account by the company Tether Limited. Furthermore, Tethers are completely redeemable/exchangeable at any time for actual USD. If the person prefers, they can also exchange Tether for the equivalent value in Bitcoin.
The implementation of Tether has several advantages over other cryptocurrencies that are backed by fiat currencies:
- Tether can be used in a similar fashion to bitcoin. It is completely peer-to-peer, anonymous, decentralized, as well as cryptographically secure.
- Tether can be used by exchanges, merchants, and wallets as easily as Bitcoin can be integrated into those services or any other cryptocurrency.
- Tether will not face any liquidity problems when users want to redeem their tether. Users are allowed to buy or sell as many tethers as they want. Furthermore, they are able to buy and sell quickly, and with extremely low fees.
- Tethers will not face market risks (i.e. Black Swan events, liquidity problems etc.) because there are 5 separate bank accounts that are maintained in a one-to-one ratio with USD. The value of Tether does not rely on the forces of the market.
- The one-to-one backing of Tether with USD is easier for nontechnical users to comprehend. Other one-to-one cryptocurrencies that use collateralization techniques or derivative strategies as a store of value are significantly more difficult to understand.
Why is Tether useful? Tether is useful to traders and investors in several ways:
- Tether trades in USD value completely anonymously, without the need for any middlemen whatsoever.
- Tether stores USD value by allowing users to securing their own private keys to their Tether wallets.
- Tether avoids the risk of storing actual money on exchanges, and gives traders the advantage of being able to move fiat in and out of exchanges easily.
- Tether allows users to avoid creating a fiat bank account in an effort to store fiat value.
- Anything a person could do with Bitcoin, a person could do with Tether.
- May 27, 2017: Tether surpasses $100 million in marketcap
- September 5, 2017: Tether releases audit ostensibly showing that Tether is backed one-to-one by dollars in a bank account