Controversy, mystery and Tether (USDT) go hand in hand. Many are confused at how this digital currency which explicitly defines itself as not being a currency or store of value has maintained a trading price of $1 for so long. If it's not a currency, then what is it? How does it have such a huge market capitalization yet the price never moves?
The basics Tether is a cryptocurrency that leverage blockchain technology to send, receive and store digital tokens which in the real world are pegged to fiat currencies such as US dollar, the Euro and the Japanese yen. It promises an instant, global and secure transfer of these tokens for only a fraction of the cost of any alternative.
Pegging to fiat currency value Tether's unique model pegs every Tether token to fiat currency held in the Tether (USDT) banking reserves in the ratio 1:1. This means that for every one Tether token is an equivalent value in dollar or euro form held in Tether's account. The banking information is treated in a transparent manner and it's published on a daily basis with the approval of certified and reputable auditors.
When a user deposits a certain amount of fiat currency in the Tether bank accounts, Tether creates an equivalent amount of Tether tokens and credits the user.
The platform Tether was based on the Bitcoin platform when it was developed in 2015. It however announced that it would move to the Litecoin platform in line with its underlying protocol, The Omni Protocol. This is an open source software that integrates with any blockchain to allow for the issuing or redeeming of cryptocurrency tokens.
The currency issued is denoted USDT or EURT and can be used to buy other cryptocurrencies such as Bitcoin once on exchange services such as Bitfinex. It can also be transferred into an Omni Layer enabled wallet. Even though Tether does not charge any fees, some of these wallets do.
Is Tether a scam? This has been the question that is on the lips of many, especially new investors. Many have labeled it an outright scam and with good reasons while others have fallen for the temptation to invest in the currency that promises to map physical assets digitally all while maintaining a constant and stable price.
One of the reasons cited is Tether's lack of openness. It publishes the bank accounts balance as well as the coin counts which they claim are audited, yet no company is ever quoted as the auditing authority. This leaves many feeling like the records displayed ever so often on the company's website may be a false stand.
The second concern for investor is Tether's disclaimer that they are not obliged to redeem their tokens for money. This means that one can have millions of tokens with nowhere to use them. Tether tokens are also not acceptable in as many merchant locations and banking institutions as some of the other currencies such as Ethereum and IOTA. This leaves redeeming the tokens as the only way, though the team behind Tether has promised they are working on making Tether more acceptable by merchants.
Should you invest in Tether? Tether is yet to make a convincing case as to why people should trust it. It's still struggling with investor confidence, especially given the shady way the tokens are created and distributed. It's also not a lucrative investment for the speculative investors who buy a currency based on its prospects of rising in value. Tether is pegged to the value of fiat currencies and thus will remain stable for a long time. For those seeking a non-volatile method of storing your money, Tether is just the place for you.
Its market capitalization is currently at $675 million but with a supply of over 600 million coins.