Tether is a cryptocurrency that is not volatile and pegged to the US dollar
- Stablecoins are cryptocurrencies indexed to an existing fiat currency, such as the US dollar.
- They aim to mitigate the volatility that normally accompanies other cryptocurrencies like Bitcoin or Ethereum.
- Among stablecoins, Tether is considered the most popular among them all with a market cap of over $ 60 billion.
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While other stablecoins have entered the market, Tether is considered the most popular to date, with a market cap of over $ 60 billion. It requires a custodian to regulate the currency and then reserve a certain amount of collateral as collateral.
Tether’s origin story
Originally called ‘RealCoin’, the ability to create a stablecoin was first offered in 2012. The idea was that 1 Tether or USDT would be worth $ 1. So, 100 USDT would equal $ 100 and so on.
The first tokens were finally issued two years later by co-founders Brock Pierce, Reeve Collins and Craig Sellers. And, in 2015, the Hong Kong-based cryptocurrency exchange, Bitfinex, was the first to host the cryptocurrency on its platform. Today, it is used by Binance, WazirX, Huobi, and many other exchanges to provide liquidity and hedge against market volatility.
However, it has had its fair share of controversy since then.
Tether’s shady past
In 2017, it was revealed that Tether and Bitfinex share the same management and corporate team. It proved that the two companies were closer than they wanted to publicly admit, and Bitfinex played a vital role in encouraging its adoption by floating it on the stock exchange.
Critics have regularly pointed out that it could be a scam as there is no real guarantee to back the cryptocurrency. The company tried to provide loans to its subsidiaries as collateral, but transparency and audits were severely limited.
In 2019, iFinex, the parent company of Tether Ltd., was accused of trying to cover a loss of $ 850 million by taking about $ 700 million from Tether’s cash reserves and using it to pay back investors. . The company said the money was held for backup purposes and was not seized.
How are stable coins different from others
Cryptocurrencies like Ether and Bitcoin operate on the free market principle, which means their value is purely driven by supply and demand. While this makes them a great opportunity to make a quick buck, it also makes them very unreliable.
A “currency”, in the traditional sense of the term, must be stable so that people can rely on it for day-to-day transactions. Fiat currencies, like the dollar or the rupee, are controlled and regulated by central banks to control inflation, debt, and other external factors.
Bitcoin, Ethereum, and other coins cannot offer this stability, making it a less favorable option for those looking to park money temporarily.
Stablecoins, on the other hand, are cryptocurrencies indexed to an existing fiat currency, such as the US dollar.
Stable coins can be said to have a fixed value because their daily fluctuation is negligible. Stablecoins can be pegged to anything, including gold and silver. In addition to Tether (USDT), TrueUSD (TUSD), MakerDAO (DAI), and Paxos Standard (PAX) are some of the most widely used stablecoins.
Despite a few inconsistencies, Tether has stood the test of time and continues to deliver what it claims – a simple and stable coin ideal for parking money with minimal risk.
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