Tether is a cryptocurrency that was created in 2014 by Brock Pierce, Reeve Collins, and Craig Sellars. It is a stablecoin that is pegged to the US dollar. This means that the value of Tether is always equivalent to the value of one US dollar. Tether was created as a solution to the volatility of other cryptocurrencies such as Bitcoin, which can fluctuate wildly in value. Tether aims to provide the stability of fiat currency with the convenience and security of a cryptocurrency. In this article, we will take a closer look at Tether, its history, how it works, and its controversies.
History of Tether:
Tether was launched in 2014 by a company called Tether Limited. Initially, it was created as a way to facilitate fiat currency transfers between exchanges. Tether Limited envisioned Tether as a way to reduce the friction and costs associated with moving fiat currencies between different exchanges and wallets.
In its early days, Tether was largely ignored by the broader cryptocurrency community. However, as the cryptocurrency market grew, Tether's stability and convenience became more attractive to investors. In 2017, Tether's market cap crossed the $1 billion mark, and it became one of the most popular cryptocurrencies in the market.
In 2018, Tether faced its first major controversy when it was accused of artificially inflating the price of Bitcoin during the 2017 bull run. Critics alleged that Tether was being used to manipulate the price of Bitcoin by issuing new Tethers without backing them with an equivalent amount of USD.
Despite these controversies, Tether's popularity continued to grow. In 2020, Tether's market cap surpassed $10 billion, making it one of the largest cryptocurrencies in the market.
How Tether Works:
Tether is a stablecoin that is pegged to the US dollar. This means that the value of one Tether is always equivalent to the value of one US dollar. Tether achieves this stability by backing each Tether token with an equivalent amount of USD held in reserves.
When a user wants to buy Tether, they can do so by depositing USD into Tether's bank account. Once the deposit is verified, Tether Limited issues the user an equivalent amount of Tether tokens. These tokens can then be used to make purchases or transferred to other users.
Similarly, when a user wants to sell their Tether tokens, they can do so by redeeming them for USD. Tether Limited will then transfer the equivalent amount of USD to the user's bank account.
Tether uses a blockchain to record all transactions made using its tokens. This means that all Tether transactions are transparent and can be audited by anyone with access to the blockchain.
Controversies Surrounding Tether:
Despite its popularity, Tether has faced several controversies over the years. One of the most significant controversies is whether Tether has enough USD reserves to back all of the Tether tokens in circulation.
Critics allege that Tether has been issuing new Tether tokens without backing them with an equivalent amount of USD. This would mean that Tether is essentially creating new money out of thin air, which could lead to inflation and devalue the US dollar.
Tether has repeatedly denied these allegations and claims that it has enough USD reserves to back all of the Tether tokens in circulation. However, Tether has never conducted a full audit to prove that it has enough reserves. Instead, it has released occasional attestation reports from its banks to show that it has enough USD reserves. These reports have been criticized for lacking transparency and not providing enough detail to prove that Tether has enough reserves.
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