Tether is a special type of cryptocurrency often referred to as ‘stablecoin.’ It is billed as one of the most stable cryptocurrencies on its ability to shrug volatility as its value is pegged to fiat currencies such as the U.S Dollar, Euro, and Japanese Yen.
Despite having a peg to normal fiat currencies, Tether operates like any other cryptocurrency as a native token of the Tether network. The cryptocurrency trades under the USDT symbol. Tether came into being as an alternative to addressing the extreme levels of volatility synonymous with cryptocurrencies, making it difficult to determine their true value.
Unlike other cryptocurrencies that experience wild swings in the market, the stablecoin enjoys a relative stable value owing to its peg to the stable fiat currencies such as the dollar or the Euro. Likewise, it is often used as a medium of storing value or exchanging value in the cryptocurrency space.
Tether roots date back to 2014, whereby it started as a whitepaper under the Realcoin project. Its co-founders include Brock Pierce, Reeve Collins, and Craig Seller. The Realcoin name did not last for long as the developers opted to change the project name to Tether as focus shifted to developing cryptocurrency pegged to fiat currencies.
The first stablecoin as part of the new project was USDTether, representing a stablecoin pegged to the U.S dollar on a ratio of 1:1. The Second stablecoin under the Tether Umbrella was pegged on Euros with the third pegged on Yen as YenTether.
Tether popularity started skyrocketing in 2015 as crypto exchange Bitfinex added its support. The exchange is currently rated as the leading exchange when it comes to Tether trading as a flagship stablecoin.
How USDT Works
In its White paper, Hong Kong-based Tether Limited reiterated that for every Tether coin issued to the market, the company held an equivalent amount in the U.S dollar in reserve. This is where the stablecoin gets its 1:1 U.S dollar peg ratio.
However, there have been concerns as to whether the same is true. As USDT issuance got into billions, there was lots of skepticism as to whether Hong Kong Limited had the same amount of money in reserve. The company retracted the statement by stating that the amount kept in reserve also included loans to affiliate companies.
Why Is Tether Important
Tether stands out given the additional flexibility it offers investors looking to venture into the cryptocurrency space. The cryptocurrency acts as a dollar replacement, given its 1:1 dollar peg.
Shunning Market Volatility
Tether is one of the best cryptocurrency for shunning extreme levels of volatility in the crypto market. Its peg to the U.S dollar accords it a level of stability that is close to none in the sector. Likewise, it becomes much easier to estimate the value of the altcoin in addition to acting as a reliable storage of value.
USDT popularity has continued to grow, given its ability to revolutionize international transactions using blockchain. The stablecoin enables the transfer of funds to anywhere in the world without the need to pay extra transference fees.