π₯ Tether Wiki - USDT rate, cryptocurrency & more!
When you think about it, there is no such thing as a stable form of money. Even fiat currencies like the US dollar and euro are subject to inflation and dwindling purchasing power, but because these fluctuations are often so small, we still find them usable on a daily basis.
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What is Tether's purpose and how did it come about?
Problems with cryptocurrencies and the market that Tether addresses
In the case of cryptocurrencies, the daily fluctuations are amplified, which makes them impractical for mainstream use. While volatility encourages a cryptocurrency to be used as a speculative asset, it limits its usefulness as a medium of exchange. Cryptocurrencies made it into the mainstream media when they were used as a tool of the dark web by the infamous Silk Road, which was subsequently closed. At the time, it was far from being a retail investment option, but they soon fell in love with the volatility in prices.
Suddenly, bankers and financial institutions around the world had an opinion about cryptocurrencies. Everyone talked about it. Volatility established cryptocurrencies as a potential asset that could one day go mainstream. But volatility can also be a double-edged sword. It can attract investors when there is a surge in prices, as happened in November 2017 when prices shot through the roof.
It can also lead to investor churn, like this year when it lost more than 50 percent from its year-end price of $ 13.000. The negative impact of the drop in prices was felt in the market as well as it affected trading volume and interest in the crypto market.
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That is why tether was introduced
To see a future where cryptocurrencies are used every day, volatility needs to be addressed, and this is where Tether comes in. Tether is a stable coin that was created to be stable enough in its purchasing power, or at most slightly inflationary, to induce the owners to spend money instead of holding the coins. In its simplest form, the tether is a cryptocurrency with a fixed price, measured against a fiat currency, in this case the US dollar.
Stable coins like tether are important for everyday transactions. Without stability, a seller will be skeptical of trading goods and services for fear of losing value due to price volatility - one of the reasons why cryptocurrencies are not yet widely used. Bitcoin, Ethereum and Litecoin have already been used several times for online payment transactions. However, due to the high price volatility, they were not reliable for making daily transfers.
Tether brings a comparative advantage that its predecessors didn't bring to the table - converting fiat currencies into crypto coins in terms of value, making them easier to trade.
When it was launched, it was issued on the Bitcoin blockchain before migrating to the Litecoin blockchain through the Omni-Layer Protocol. As a project of the major cryptocurrency exchanges, Tether ranks 15th in the highest market capitalization (around $ 2 billion).
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What exactly is the cryptocurrency Tether?
Tether is a hybrid crypto-fire "stablecoin" whose value is linked to the value of the US dollar and other fiat. It is a cryptocurrency issued by Tether Limited, which is issued as a token on the blockchain according to the Omni protocol. As a rule of thumb, every omni transaction (including tether) in a bitcoin transaction is recorded with the same transaction hash.
Tether is the world's most popular stablecoin, and it even acts as a replacement for US dollars on popular exchanges like Bitfinex and Poloniex. Since every tether issued is backed by USD funds, a corresponding amount in dollars is held in reserve.
However, the US dollar is not immune to paradigm shifts in the world market and as such is subject to fluctuations.
Importing tether currency is intended to help curb the volatility of cryptocurrencies and enable willing users to use cryptocurrencies as fiat money. The euro is also a tether currency that is pegged to the tether currency due to control by the European Union, which also controls a large part of the world financial market.
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What are the advantages of tether?
After the description with an apt essence, there are some advantages to the introduction of Tether over other cryptocurrencies.
- Easier transportation: Tether makes it easy to transfer real cash to digital cash. Considering the secure payments offered through the use of blockchains. It's also faster to convert to cryptocurrencies than regular fiat. Tether also has the ace up its sleeve when it comes to buying cheap cryptocurrencies when the market subsides.
- Adoption: Many platforms that work with cryptocurrencies have improved their platforms after the introduction of Tether. Platforms that did not initially have the funds to use the US dollar were instead using tether, which allowed them to enter new markets.
- Formidable fuse: The market stability of your crypto investment is guaranteed by using Tether as a backup fund. The amount of tether in circulation is appropriate to the security fund.
How does the coupling of Tether and the US dollar work?
Using a one-to-one ratio, Hong Kong-based Tether Limited holds fiat in reserves that are believed to be equivalent to the tether in circulation. In other words, Tether Limited serves as a trusted third party to the assets. The complexity of conducting both fiat and crypto audits is reduced with a simple implementation that does not compromise the security and transparency of the audits.
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The technology behind Tether
Tether works with the Omni Protocol, a versatile platform used for a range of digital assets and currencies that are anchored in the Bitcoin blockchain. Every 1 USDT is worth 1 USD, and it can be redeemed for 1 $ fiat currency at any time. That's the idea, but that's not how it works. In the same vein, an eligible customer transferring USD to Kraken's bank account would receive USDT at the rate of $ 1 per tether. Users can also exchange their cryptocurrencies for tether on a trading platform.
After making deposits into Tether Limited's bank accounts in fiat currencies, the company will credit the equivalent in Tether to the user's wallet so that the user can use Tether as they see fit. However, Tether had stopped accepting deposits since April 18, 2017, citing problems with its Taiwanese banks as the reason.
There are questions about Tether, which is described as a secure network and a decentralized system. Looking at its mechanism of operation, it becomes clear that the system depends on the ability and willingness of Tether to maintain the currency peg. Assuming a scenario in which one of the exchanges cannot access the USD reserves that have been allocated to customers willing to sell USDT, the responsibility for this rests with Tether to exchange the exchange with USD within a reasonable time frame to supply. This also makes Tether more of a fully centralized system, which is contrary to what it claims.
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What is tether used for?
The main purpose of Tether is to provide liquidity and a hedge against market volatility. The tokens are tied to a fiat, which means that there should be no loss of value or volatility like other tokens.
This also makes the stablecoin less risky than typical cryptocurrencies. Its importance as an alternative to fiat is a major asset that traders and investors cannot overemphasize. For many investors, Tether offers a way to park their investments when the market is declining, especially in countries where switching from cryptocurrencies to fiat is difficult.
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Price stability
The volatility of cryptocurrencies is a reputation associated with a certain celebrity, and this is where a stablecoin stands out as a "star bride". Those who enjoy this benefit the most are traders of smaller altcoins who do not have an easily accessible liquid market. Trading one volatile currency for another is fraught with a maze of complications and the risks involved. You will appreciate the importance of these complications by playing through this scenario in your head.
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The connection between Tether and Bitfinex explained
There have been allegations in the media regarding the connection between Bitfinex and Tether. Both entities have the same Chief Executive, Chief Financial Officer, Chief Strategy Officer and General Counsel. The recent Paradise Papers leak confirmed Philip Potter and Giancarlo Devasini as the ones behind the saddle, and observers who watched the trend didn't take this as a surprise.
New tether accounts are flowing into Bitfinex for the most part, so it becomes easier to understand why both companies saw their fiat businesses freeze after the U.S. bank and Wells Fargo as banking partners went out.
As a result, Bitfinex is now rejecting US customers as the markets offered by Bitfinex are no longer denominated in USD. Instead, Bitfinex only uses USDT.
In June 2018, two college professors John M. Griffin and Amin Shams (GRIFFIN and SHAMS *) from the University of Texas published a research paper entitled "Is bitcoin Really Un-Tethered" (Is Bitcoin Really Un-Tethered?). In the paper, the professors shed light on the driving forces behind the boom in crypto markets.
The researchers argued that Bitfinex was tethering the market regardless of demand. They criticized this move, which they believe creates an artificial demand for Bitcoin and other cryptocurrencies and drives up prices, which is similar to the inflationary effect of printing more money. If prices fall, they can convert tether into bitcoin, so that the bitcoin price is driven up, sell part of it and replenish the tether reserves.
If prices fall, they have a "put" option to the default setting when Tether is withdrawn, or they can claim to have experienced a "hack" to explain the disappearance of Tether or related dollars.
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Controversies surrounding tether
1. Kraken and Tether - an unusual development
Kraken, the designated marketplace for trading USD-USDT pairs, had an unusual move that raised red flags. According to the report on Bloomberg entitled "Crypto Coin Tether Defies Logic on Kraken's Market, Raising Red Flags," dated June 29, 2018, the tether price did not respond to the market economy of supply and demand. The price of Tether remained unchanged despite the large and small orders to buy or sell the coin on Kraken.
The report's authors conducted an analysis of Kraken's public order book, which includes more than 56.000 trades placed on the digital asset platform between May 1st and June 22nd. The data was also shared with Rosa Abrantes-Metz, professor at New York University and head of the Global Economics Group, and former Federal Reserve Bank auditor Mark Williams. Both economists concluded that something was going on at Kraken, according to the Bloomberg report.
The report highlighted a trade for 13.076.389 tethers, which is unusual given that other orders go out to five decimal places. This particular trade had three decimal places that Abrantes-Metz and Williams suspected could be associated with automated trading programs.
Kraken fought back with his own blog post entitled "On Tether": Journalists Defy Logic and Raise Red Flags "on July 1, 2018, where he highlighted Bloomberg authors' negligence in" understanding basic market concepts ".
Kraken hit back, arguing that the Bloomberg study failed to understand the apparent stability of the USDT, which due to its pegging does not experience the same volatility as other cryptocurrencies. The exchange also dismantled the idea that its platform was being tampered with by stating that the digital asset platform seeks to "operate a platform that is open and fair to its users".
2. Controversy with Wells Fargo
Following Wells Fargo & Co.'s decision in early 2017 to break away from the role of correspondent bank between US clients and Tether's banks in Taiwan, Bitfinex also announced its decision to discontinue services to US clients due to operating costs. As a result, lawsuits were filed against Wells Fargo by both Bitfinex and Tether, but the lawsuit was withdrawn when it appeared that further controversy might break the seams.
Documents from the Wells-Fargo process revealed the presence of four Taiwanese banks on the Bitfinex / Tether link. However, Bitfinex and Tether spokesman Ronn Torossian refused to identify the company's current banks unless a nondisclosure agreement was signed by reporters interested in knowing them. The offer was then rejected.
Media reports and documents put online indicate that Bitfinex has been linked to the Polish bank Spoldzielczy in Skierniewice, but the authenticity of these documents has never been confirmed as Torossian declined to comment.
Efforts to verify the authenticity of these documents by the bank's chief executive, Wladyslaw Klazynski, came across a brick wall due to the Polish Finance Act, which prohibits individuals from disclosing customer information. Nonetheless, he was quoted as saying that his company was not "financially involved" with any company that trades in Bitcoin.
Additionally, the administrative management and location of Bitfinex and Tether have not been disclosed on their respective websites or in any public document.
The Paradise Papers
These documents, leaked by the International Consortium of Investigative Journalists, identified a Yale University graduate Phil Potter as director of Tether and chief strategy officer at Bitfinex. His work experience began at Morgan Stanley as a derivatives analyst before joining Bear Stearns Cos. moved to where he worked on the technological infrastructure and software design in the private customer services department.
Bitfinex was founded in Hong Kong in 2013, but changed its name to Renrenbee Ltd a year later, according to the Hong Kong Commercial Register. Giancarlo Devasini is listed as director at Renrenbee by the commercial register. Incredibly, he is also identified as the Tether Director in the Paradise Papers, further confirming that the two companies are not separate entities as we all think and are controlled by the same group of people.
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Controversies around decentralization
In November 2017, Tether claimed that $ 30,95 worth of coins had been hacked. The post, which was originally posted on its website, was later deleted after later claiming that it was in the process of recovering the coins to make sure they did not invade the general cryptocurrency market. Tether's claim of decentralization was made at the request of the aforementioned "quarantine" address, which contains the amount in hacked funds and has been frozen by the company.
Tether's encounter with US federal regulators
The US Commodity Futures Trading Commission sent subpoenas on December 6th to the Bitfinex and Tether virtual currency platform after failing to provide the public with conclusive evidence of its involvement.
While Bitfinex is not a US-based company, it does have US-based customers. Tether's legal status has sparked debate, with many critics suggesting that the company could face the sledgehammer of a US-led shutdown, according to Bittrex.
However, there has been no official comment from Tether or the US regulators, and this has shrouded its public activity in more controversy as well.
Competitors to Tether
Gemini dollars
In September, New York State approved an offer by two financial technology companies to issue dollar-pegged cryptocurrencies to enable more regulated and transparent competition in the world of stable coins, of which Tether appears to be dominating.
Cameron and Tyler Winklevoss are the founders of Gemini Trust Co., the digital asset exchange approved by the New York Financial Services Division for the introduction of the Gemini dollar. In the same vein, a blockchain company that supplies financial institutions has been given approval to issue the Paxos standard.
Tyler Winklevoss, who is ready to defuse the cloud of uncertainty that has darkened the use of stable coins, emphasized in his interview that the Gemini dollar will provide more transparency to potential users than other stable coins.
A bank spokeswoman, Kerri Doherty, claimed that while State Street Corp will not act as custodian for digital assets, it will hold the US dollars backing the coins. Winklevoss added that the currency and its dollar reserves would be checked every month by the San Francisco-based company BPM to make sure they match.
Gemini's connection with State Street, an international bank that dates back to the 18th century, could help fill the institutional gaps that prevail in stable coins. Gemini has also started conversations with Trail of Bits, who are conducting a review of Stable Coins-related smart contracts on the Ethereum network, according to digital security company's chief executive officer Dan Guido.
Unlike Tether, which is allegedly based in the British Virgin Islands, registering Gemini as a New York-based trust company means that it puts its clients' interests above the company's needs. This is what is known as a duty of loyalty. This is a higher standard than that applied to companies that have obtained a BitLicense, the state's cryptocurrency permit created by the New York Treasury.
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Further reviews will follow
According to Chad Cascarilla, chief executive officer of Paxos, several are owned by the Federal Deposit Insurance Corp. insured banks hold US dollars that support the Paxos standard (PAX).
A large accounting firm will review the exchange's stable coins. Chad declined to reveal the names of the banks, but noted that the auditor would be Withum.
anchorUSD
Supported by the Y-Combinator, AnchorUSD is a crypto coin that is baked in a 1: 1 ratio from the US dollar. It keeps all deposits in US-based bank accounts, which is why some users believe it has an advantage over Tether and the rest of the stable coins out there.
AnchorUSD took advantage of Tether after it started building on Stellar. After promising regular audits to potential investors, many believe that the safety of their funds is better assured.
AnchorUSD was preceded by the White Standard (WSD), which was also introduced in the Stellar Network. In August, the White Company announced in collaboration with Fintech Ltd. a partnership that enables deposits and withdrawals in USD, GBP and Euro via stable White Standard Coins.
Fintech's Interstellar Decentralized Exchange (DEX) platform was the first DEX-based Stellar exchange and wallet to begin providing this service two months ago.
The WSD is fully backed by deposits that are audited by the third party every month, offering instant and efficient transactions and easy integration with the existing stellar ecosystem and DEX.
TrueUSD
TrueUSD was launched in January 2018 and markets itself as "a USD-backed stablecoin you can trust". Conceived by Trust Token, many believed that it had learned from Tether's mistakes and did not want to be seen in the same light as its most prominent predecessor.
This should explain why she emphasizes "full guarantees, regular auditing and legal protection". The full KYC is required before TUST can be purchased directly from TrueUSD. Although the price of TUSD could fluctuate slightly, it is unlikely to deviate far from the $ 1 peg.
Is Tether Safe?
Bittrex is expanding its dollar coin stability
Before Tether was shrouded in its latest series of controversies with US federal agencies, several exchanges relied heavily on Tether. Many began to consider a second option, fearing an imminent crackdown on the stable coin.
In March 2018, Bittrex added TrueUSD as the second stable coins, a ploy seen as a hedge against the consequences that could hit Tether. While Tether has been covered with controversy, TrueUSD positions itself as a safe belt. While Tether was started on the omni layer, TrueUSD runs on the Ethereum blockchain. According to the company's official announcement at the time, once users send in their Fiat, the money will be held in an escrow account that they can access and reclaim at any time.
In the first 24 hours after listing, Bittrex traded $ 2,3 million in TUSD, accounting for 56% of the total volume of the dollar-linked coin.
DigiFinex replaces Tether with TrueUSD
After the spate of controversy that has left Tether behind recently, DigiFinex replaced the popular USDT with its main competitor, TrueUSD, in September, a CoinDesk report found. Within the first 24 hours after the replacement, DigiFinex processed a trading volume of nearly $ 131 million.
DigiFinex co-founder Kiana Shek admitted that she was looking for ways to separate from the USDT. However, she claimed that her stance was not in hidden support for other signs. She further elaborated on her decision to find an alternative to bondage and, with Grimm, reflected on the team's decision to follow the regulations of the US Financial Crimes Enforcement Network (FinCEN).
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Long-term forecast for USDT
On Tuesday, October 16, 2018, Tether withdrew USDT 250 million from circulation after Bitfinex initially sent USDT 50 million and USDT 200 million to Tether's Treasury Department. In total, Tether has retired $ 740 million so far in October. $ 100M, $ 200M, $ 200M, $ 50M, $ 50M, $ 10M, $ 80M, $ 50M for a total of $ 740M.
Could these ridiculous withdrawals be indicative of a stable coin arbitrage?
Some analysts believe that Tether will buy USDT in the market for a discount and credit the $ 1 to itself. There is nothing unscrupulous about this, and it can be compared to a public company buying back shares when it feels that their fair price is out of proportion to the value the market attributes to them.
Although the market is littered with "non-tether" arbitrageurs, much of the buyback is still being credited to Tether. At the current discounted price of 3-5% of the traded price, Tether could receive between $ 18 million and $ 30 million net for the repurchase.
The current drop in prices suggests that the market considers holding Tether too risky, so they are asking for a 3-4% discount off the price to hold. Tether, on the other hand, is forced to continue to buy back USDT and redeem it for US dollars.
Tether's announced net worth plummeted nearly 25 percent in two months. In August 2018, the USD-pegged tether had a current valuation of $ 2,8 billion, but everything has collapsed since then, and it's valued at just $ 2 billion.
A significant portion of the decline was attributed to the plunge in USDT price, which fell below the $ 1,00 mark in assets purported to support every coin in circulation. The slip had shuddered the market, which relies so heavily on the fact that the exchanges trade fetters worth billions of dollars every day.
On Monday, October 15, 2018, the global average price for Tether was only $ 0,92, but then improved to $ 0,98. The thinly traded USDT / USD market on offer for Kraken slumped to a low of $ 0,85 before falling back to $ 0,95.
The future holds more uncertainty for Tether
There was so much ado about Tether after it was summoned in December 2017. The speculation led to uncertainty on several platforms trading the tether and investors hesitated as a result. Despite the odds seen in recent months, Tether appeared to have weathered the storm with the streets still to be crossed.
Subpoenaing companies that have made their presence felt in the US business community is a common practice conducted by regulators. A subpoena designed to compel testimony is not evidence of an imminent closure, nor does it imply that regulators cannot exercise any prerogative in sanctioning US dollar transfers.
Even when the odds are weighed against potential assault, Tether remains shrouded in a number of legal measures that could destroy its continuity in the near future. The company remains an unregulated exchange, and the way it operates underscores an important reason why cryptic currency exchange is separate from the conventional banking system.
Well-orchestrated attempts to save face also included the harsh splitting of stolen funds totaling 30 million shackles that were blacklisted. There are still a large number of exchanges that use the token to give traders the opportunity to take a cash position before starting a trade. The over-reliance on this token poses an excellent threat to the entire crypto market as the market continues to grow in importance.
Hence, its long-term feasibility remains a matter of self-examination. The resulting system, implemented with the help of Tether, is fraught with flaws and serious consequences. The traditional transparent cryptocurrencies like Bitcoin and Ethereum are converted into private SQL balance sheets that require the customer's mutual trust. Even with such a system, the existing incentive for fraud can lure the exchange.
Exchanges can choose to tamper with balance sheets at will and it is awkward to secure their crypto holdings. The theft or confiscation of their crypto holdings is an unpleasant history for them, and the affected customers had to bear the brunt of the burden.
If one follows this line of reasoning, Tether may stand as a metaphor for a weak system. If centralized exchanges have their fair share of the vulnerability, Tether has a more complicated vulnerability with ramifications that will affect the exchanges even if they maintain a well-streamlined operation. Suffice it to say that the system as a whole and the actors within the system must learn from past mistakes and cope better with the weaknesses of centralization and the lack of transparency in it.
If centralized, opaque exchanges like Poloniex, Bitfinex, and Coinbase are prone to data loss, fraud, and hacks, and customers lose their funds without recourse, then what makes a system like Tether immune?
We often tend to develop amnesia about the past, and if some prefer to watch things go by on their own, then there are those who will keep digging the past for posterity's sake. The experiment with self-issued currency without any government approval is not a new gamble for those who can remember the "Liberty Reserve" madness.
The centralized digital currency based in Costa Rica had the claim to be "the oldest, safest and most popular payment processor serving millions of people around the world". By the time the US Attorney's Office closed their website on charges of money laundering and providing unlicensed financial services, it already had over a million active users. Many of them carried the brunt when prosecutors took action in 2013.
Much like the path taken by Tether, the operations of the Liberty Reserves became centralized, and this was the center of gravity that brought them down like the proverbial "Humpty-Dumpty". Satoshi Nakamoto, the founder of Bitcoin, took his cues from the mistakes that occurred three years before the creation of today's most popular cryptocurrency.
Our conclusion: The crypto currency Tether
Many would have bet Tether wouldn't survive the fourth quarter of the year, but now the time has come. Regardless, it is easy for US regulators if they choose to act on alleged money laundering cases in any event. This is an indictment that can be brought against any financial company regardless of the level of guilt. Tether's reliance on a formal arrangement with banks is an even bigger mystery that will create a lot of controversy if you dig deeper.
In conclusion, the overwhelming threats are well beyond any strength that has popularized them since their inception. Like it or not, USDT is vital to the cryptocurrency market.