Before we dive into Tether, you must first understand what a Stable Coin is.
Stable Coin: A type of cryptocurrency that is tethered to a stable asset.
While stable coin is a global currency, just like any other cryptocurrency it is not tied to a central bank. However, it has low volatility unlike cryptocurrency.
Tether is the most popular stable coin in the world right now. 100% backed by fiat currency assets, Tether’s conversion rate is 1 USDT = $1 USD.
Why do people like Tether?
The advantage of Tether is very apparent. Even people who are wary of cryptocurrency for various reasons can safely invest in Tether. It is well-integrated and established.
However, it misses the essence of cryptocurrency in that is centralized. Tether has been the center of way too many controversies. Tether has refused all audits.
No clarity on reserves
There is no clarity on the reserves that Tether has and an independent audit was canceled by Tether which has left too many doubts in people’s minds. Juan M. Villaverde has remarked that “Tether is the only cryptocurrency with trading volume that regularly exceeds market cap which means the entire Tether supply changes hands regularly, sometimes more than once a day. Tether is, therefore, one of the main sources of liquidity in the cryptomarkets. Liquidity is essential to keep prices stable and enable seamless trading. If this source of liquidity suddenly evaporates, the consequences could be big.”
Recently Tether accidentally created $5 billion worth of its USDT and destroyed them again. This happened when the company was helping cryptocurrency exchange Poloniex conduct a chain swap.
Also, only 318 addresses control 80% of Tether. They are being dubbed as Tether Mafia
Tether was launched on the Tron blockchain. Justin Sun, CEO and founder of the Tron foundation sent out a tweet declaring a reward of 20 million $USDT for 100 days.
Tron’s USP is the OMNI-USDT pairing. This makes the transfer of assets via smart contracts free, fast and transparent.
Tether is migrating to more blockchains and crypto experts are speaking out against it. Always shrouded in controversy, it is shaking one of the core pillars of cryptocurrency – transparency and decentralization.
There are a very few exchanges that allow you to convert USDT to BTC or offer BTC to USDT exchange right now but if you want to err on the side of caution, as a user, you should potentially convert your Tether to BTC and move on.
There are plenty of other stablecoins that you can look at – Havven, Marker Dao and Basecoin.
For ICOs, it may be another story. Since they are volatile, ICOs rely on Tether for stability and given the gigantic market share Tether has, it will be years before it can be replaced.