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1. The Birth of Tether.
Backed by the accumulated wealth from Bitcoin, entrepreneur Brock Pierce announced the launch of Realcoin in 2014, a new cryptocurrency backed by the US dollar (USD). It was later renamed Tether, now commonly known as Tether USD (USDT). Tether established partnerships with several well-known and large-scale Bitcoin exchanges such as Bitfinex, which officially supported Tether trading the following year. This marked a consensus among markets, acknowledging Tether's ability to anchor its value to the US dollar.
2. Tether is the World's First Stablecoin!
Designed to be pegged to the US dollar at a 1:1 ratio, with units denoted as "USDT," Tether is not subject to fluctuations in the Bitcoin or other cryptocurrency markets. In other words, investors can purchase 1 USDT for 1 US dollar. As of the deadline, according to the official website of Tether, there are currently 66 billion USDT in circulation, equivalent to Tether Limited holding reserves of $66 billion.
3. How does Tether operate?
Since Tether is pegged to the US dollar at a 1:1 ratio and is backed by 100% reserves provided by Tether Limited, each time 1 US dollar is exchanged for 1 USDT, the company holds this 1 US dollar as a reserve. Conversely, when 1 US dollar is redeemed, the company destroys 1 USDT, ensuring that the total supply of Tether remains consistent with the total issuance of US dollars. It's akin to Tether providing a tokenized form of the US dollar in the cryptocurrency world, similar to exchanging cash for tokens at an arcade.
4. What can Tether be used for? Why not just use US dollars?
As mentioned earlier, due to the stability of Tether, investors can use it as a "safe haven." They can temporarily convert their Bitcoin holdings into Tether to avoid market volatility, making it a tool for risk avoidance. They can then buy back into their investments at opportune times to profit from price differences. Additionally, converting Bitcoin directly to fiat currency can be expensive, but by first converting to Tether, investors can save on transaction fees when converting to fiat currency.
It is worth mentioning that Tether can not only be obtained through exchanges, mining, and other means but can also be held long-term to earn interest, similar to a bank savings account. For example, Binance Exchange offers an annualized yield of 10% on Tether held in the savings section. This is why it is attracting more and more investors.
5. Tether has sparked controversy.
Since the issuance of Tether, Tether Limited has often been questioned by governments, academic institutions, and others about its operations. The most significant point of contention is the "lack of transparency and lack of regulation by financial institutions" in USDT financial data. If everyone were to exchange Tether for US dollars simultaneously, and the company did not have enough USD reserves to meet market demand, the consensus on stablecoins could collapse. Despite this, Tether remains the most widely accepted stablecoin in the market, and most users still have a high level of trust in it. |
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Post time 16-2-2024 06:45:29