Tether 101: what is it and how does it work?
Tether was founded in 2014 by American entrepreneurs Brock Pierce, Reeve Collins and Craig Sellars and is also called “stablecoin”, i.e. a Cryptocurrency that was designed to reduce price volatility by linking it to those of fiat currencies (in this case the US dollar).
It can circulate on different blockchains (ETH, TRX, SOL, MATIC, BSC) but the most popular is the ERC20 token, built on the Ethereum network through a protocol called “Omni Protocol”. This protocol consists of an open source software that interfaces with the Blockchain to allow the issue and redemption of tokens, in our case the USDT Tether. Tether Platform currencies are 100% backed by Tether reserves.
The conversion rate is: 1 USDT = 1 USD.
The Tether platform is fully reserved when the sum of all outstanding Tether is less than or equal to the value of our reserves. Tether was originally created to use the Bitcoin network as a transport protocol (“Omni Layer”) and then was introduced on the Ethereum Blockchain too, as an ERC20 token, with a new transport layer that makes Tether available in Ethereum smart contracts or decentralized applications on top of Ethereum. In 2019 Tether partnered with TRON to introduce USDT to the TRX network.
The idea of Tether was to create a stable cryptocurrency that could be used like digital dollars. Tether converts cash into digital currency, to peg or “tether” the value of the currency to the price of national currencies such as the US dollar.
Tether partnered in November 2018 with Deltec, a bank and financial services provider in the Bahamas. The acceptance of Tether Limited as a client of Deltec has come after careful review. In particular, an analysis of the compliance processes, policies and procedures was carried out; a complete scrutiny of shareholders, final beneficiaries, officers and assessments of Tether’s treasury management policies.
Concerns have been raised several times about Tether’s reserves, especially after last year’s TerraUSD depeg. In September 2022 an American judge ordered Tether to produce all the documentation necessary to demonstrate that all USDTs put into circulation have adequate reserves. Tether has provided all the required documentation and in any case has demonstrated the solidity of its stablecoin on several occasions. The CTO of Tether Paolo Ardoino wrote on Twitter again today.
Tether is listed on all major exchanges, ranking on Coinmarketcap as the third most capitalized Cryptocurrency with a market cap of $68 billion.
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