Founded in early 2015, Tether is objectively a far less volatile “investment” relative to other cryptocurrencies. The Purpose of Tether is to “[convert] cash into digital currency”. Tether is a “pegged” token, which means that each Tether token is equivalent to the unit of currency that it is tied to on a 1-to-1 ratio–for example, 1 USD₮ is always equal to US$1.
Tristan D’Agosta, CEO and Founder of the Poloniex Exchange, said that ““Tether’s growing adoption and careful attention to legal compliance have made it the leader in solutions for fiat on the blockchain.” Tether can be used as a means-of-payment in online businesses in applications, as an easy way to invest in other cryptocurrencies, and as a secure way for crypto traders to store their money in crypto format without losing its value.
Because of the nature of its value, Tether is, in many ways, better suited to a variety of uses than other coins with more volatile token values. Tether can act as a user-friendly bridge between the world of cryptocurrency and other financial services, including payment processors, ATMs, and even banks. Tether’s conversion fees are extremely low, and the Tether network charges no commissions for sending or receiving transactions.
Tether Value, Market Cap and Volume
Tether is not a cryptocurrency that should be thought of as an investment in the same way that other cryptocurrencies, like Bitcoin. The dollar-value of coins like Bitcoin is highly volatile, and changes over time. Bitcoins that cost US$0.01 at the very beginning of their lives now cost over US$10,000. Tether is always 1-to-1, which makes it suited to a variety of practical purposes, but it shouldn’t be viewed as an investment that anyone expects to get a return from.
Even though Tether is less volatile than other cryptocurrencies, it shouldn’t necessarily be thought of a “safer” way to invest or store money. Tether’s legal policy essentially says that Tether has no legal responsibility to guarantee that users will have access to their funds, and Tether has no liability if anything happens to the funds (even if it’s Tether’s fault).
However, Tether is a reputable entity that has been deemed trustworthy by a number of leaders in the cryptocurrency industry. Tether currently offers tokens “pegged” to three currencies: the USD, the Euro, and the Yen. It plans to expand its range in the future.
How Does Tether Work?
Each “Tether Dollar” is backed up by an actual dollar in a “real world” bank. The Tether Proof of Reserves system allows users to check the amount of USDT in circulation (omnichest.info). The amount of physical USDs held in reserves is proved by regular audits and public publishing of information regarding the Tether bank account. To view the bank balance, visit the Tether website’s “Transparency” page.
Buying and Storing Tether
The easiest way to buy and store is through Tether’s website, Tether.to. On the website, you can create an account. There are two kinds of accounts–one for individuals and one for corporations. Using your account to deposit and withdraw cash, however, does require that you verify your identity–a deterrent for users who wish to remain anonymous.
Tether is widely used, and is therefore available for purchase on all of the world’s major exchanges (and many of its minor ones, too). You can purchase USDT at Omni, Bitfinex, Poloniex, ShapeShift, Ambisafe, GOCoin, HolyTransaction, expresscoin, RChange, CCEx, Kraken, Bittrex, Liqui, Cryptopia, MegaChange, and HitBTC.
Tether can be stored on the Tether online platform or in any Omni Layer-enabled wallet, one example of which can be found at omnilayer.org.
Tether for Businesses and Developers
Tether has been designed to be easily integrated into pre-existing online business and applications as a means-of-payment. Tether allows the businesses and applications to easily change their conventional transactional systems to blockchain-based networks. Tether can be integrated using an API interface, and the Tether team offers “full infrastructure support” to its adoptees.
History of Tether
Due to some technical issues on the part of the Taiwanese bank that Tether uses to store its “real world” backing, there was a point in its history when a single USDT was actually worth US$0.93. Currently, a single USDT is trading at $1.01. Users who bought up the cheaper Tether dollars were able to sell them for a decent profit.
On Tether’s “Legal” page, the following is published:
“There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.” ~ tether.to/legal
What this means is that Tether is not legally obligated to allow you to redeem USDT for USD once you convert USD to USDT. This raises a serious red flag for many members of the cryptocurrency community, as it should. The legal page also includes an extensive Limitation of Liability and Release clause that essentially says that the Tether company is never responsible for what happens to your USDT, even if it is technically their fault.
By nature, Tether is a very centralized platform. Unlike Bitcoin, Ethereum, or most other cryptocurrencies, which are “trustless”, Tether requires its users to put their faith in the company to be good stewards of their money. While Tether has proved itself to be reliable, the level to which Tether is centralized may be enough to send some potential users running.
That being said, Tether is a network and company with a reputation to uphold. Additionally, many other cryptocurrency “all-stars” have publicly supported its use. Essentially, it has been adopted for widespread use for a reason. Tether has proven itself to be trustworthy, at least up until this point. Tether also takes a number of steps to be as transparent as it possibly can.