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What is Tether (USDT)?

BitForex Editor
Dec 29, 2020

With cryptocurrency being the "New Gold", we've had several digital currencies emerged in the financial market space. Aside from the crypto-leading currency, Bitcoin, there are a few other promising coins investors should look into. Of course, the increasing demand and volatility of the market make investors thread with care when committing with their capital. This brings you to why you'd care so much to learn about Tether (USDT). Let's bring you up to speed with this one; shall we?

Definition Of Tether (USDT)

Ever heard of stablecoins? Let's take a quick dive on that so you'd get a clearer picture of why everyone's talking about Tether. Unlike a few cryptocurrencies, stablecoins have their market value linked with other external commodities. Simply put, their value can be traced to substantial commodities in other financial markets. The stability of stable coins against the increased volatility of other cryptocurrencies makes them stand out in the market.

With that brief explanation, Tether is the largest known stablecoin in the blockchain world. Due to its stability amongst other benefits, USDT is a major cryptocurrency with several investor strategies. Today, it'd be impossible to predict the crypto financial market without referring to Tether. Of course, this hasn't been so since the stablecoin has encountered major financially derailing controversies in the past. As a stablecoin, Tether is now known for providing stable liquidity against the unstable volatility of the crypto market.

The History Of Tether

Tether stablecoin began with the Realcoin Project which crawled its way into the crypto financial market with its white paper. In 2014, the Realcoin project whitepaper created lasting turmoil in the blockchain community for multiple reasons. One of which unveiling its revolutionary technical strategies was a major part of. However, the fact that a cryptocurrency at that early stage of acceptance had its value linked with commodities set confusion in motion.

To every investor who had major positions with other highly volatile digital currencies, they panicked for the safety of their investments. Tether's white paper featured reputable analysts in the market like Reeve Collins, Brock Pierce, and Craig Sellars. This meant that the subsidiary of the Realcoin Project promises to deliver something good. As expected, the Realcoin name only lasted a few years since the controversy at the time contradicted everything 'Real' about the currency.

Sometime in the late part of 2014, the Santa Monica cryptocurrency startup decided the name Realcoin wasn't as befitting anymore. After the name's been changed to Tether, the stablecoin moved into the market using the three-pronged approach. The USTether was one of the three entry strategies used during the transition of Real coin. Tester featured the US dollar, the second stablecoin focused on Euros, while the last coin concentrated on the Japanese Yen.

How Does Tether (USDT) Work?

Linking the price and stability of a cryptocurrency to that of a real-world asset wasn't possible before USDT. Pegging Tether to the value of a real-world asset is an extremely difficult task to achieve. At first, the Tether cooperation in Hong Kong publicly took responsibility for the issuing of ASDT issued to potential investors. For every ASDT that was issued, the cooperation vouched to echo change an equivalent amount in USD stored at the reserve.

As the issuing of Tether progressed greatly into billions, the scrutiny of the claims become intense. Since ASDT is being issued on a large scale, the need for proper scrutiny and accountability of every dollar kept in the reserve was needed. In early 2019, the Hong Kong-based cooperation changed the initiative by including loans to leading affiliate companies. Even with these major changes in its operations, USDT plays the front-row in stablecoins across the world.

The Omni Blockchain Protocol

Tether is a unique stablecoin that's completely functional on the Omni Blockchain Protocol. Many believe the reason behind its stability is linked to the protocol. Nevertheless, Omni is majorly a unique Blockchain platform popularly known for its distinctive Bitcoin anchoring functionalities. As we speak, Omni as USDT's Blockchain protocol runs its services to several firms.

The first few Tether transactions on the Omni platform featured a dual-recording approach that was unique in the Blockchain network. All Omni-centered transactions were run on the Omni system and often recorded and shared using a similar transaction hash as Bitcoin deals. Omni assets now run alongside pegs on several blockchain networks. It's difficult not to notice the Omni layer of Litecoin everyone keeps talking about today. The several variations of the Tether currency confirm the sustainability of the crypto market.

Why is Tether Important?

Now to the reasons why anyone should consider investing in Tether;

Exit Strategy: Since the volatility of the crypto market has always been an issue, investing in a currency with an exit strategy is your best option. When the turbulence begins in the market, you'd be left with selling off your holdings or exchanging them for fiat. Or stay in the market and ensure fee losses. With Tether, investors have the third and rare option of converting their investments to avoid volatility.

Reduce Friction: With Tether being a blockchain asset, it's extremely easy for investors to convert Bitcoin directly into Tether for storing or transactions. This process is as easy as converting Bitcoin for Ethereum today which can be done in microseconds. With this conversion, you have now presented a frictionless way of staying in the crypto market while avoiding volatility.

Accounting: The level of accountability during payments for transactions with Tether is another reason why it's important. Payments with other cryptocurrencies often require that the estimate be done against the USD without records to show for it. However, stablecoins generally eliminate these defects to help individuals make transactions with Tether converted in their fiat currencies.

Conclusion

Like their names, stablecoins are about the less volatile cryptocurrencies in the financial market. They protect the investments of many from the constant instability of the crypto market due to several factors. Tether among the stablecoins is popular for its link with substantial commodities in the financial market. In the end, investors love to be certain their cryptocurrency investments have some real-world backing.

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