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Tether (USDT) is a  stablecoin  linked to the US dollar. According to its website, “100% is supported by Tether’s reserves”. Tether was launched as RealCoin  in July 2014 and renamed Tether in November 2014. It began trading in February 2015. Tether was originally based on Bitcoin blockchain and now supports Omni and Liquid protocols of Bitcoin, as well as Ethereum, Tron, EOS, Algorand, Solana, OMG Network and Bitcoin Cash blockchain.

As of May 2022, Tether was the third largest cryptocurrency after Bitcoin  and Ethereum, and also the largest stablecoin, with a market value of nearly $83 billion. In April 2022, Tether’s USDT  accounted for two-thirds of exchanges other than Bitcoin by value.

Analysis of Tether

Tether is a stablecoin, which refers to a new cryptocurrency supported by legal currencies such as US dollar, euro or yen. It belongs to a new cryptocurrency developed to maintain stable value, which is fundamentally lacking in Bitcoin or Ethereum. This feature allows stablecoin such as Tether to be used as a medium of exchange, which is closer to the idea behind traditional currencies rather than a means of speculative investment.

What’s more, Tether is a kind of stablecoin, and each token is supported by traditional currencies – these are often called secured stable coins. In contrast, there are crypto-collateralized stablecoins that use crypto as the reserve currency, and relying on algorithms to automatically adjust the supply of stablecoin without using any collateral, so as to maintain its linked non mortgage stablecoins, which eliminates the demand for collateral.

Although classified as cryptocurrency, Tether has one fundamental difference – it was created by a company rather than a network. Tether Ltd. is a part of Tether holding. It is the operating force behind Tether and provides it with monetary reserves. iFinex  Inc., the parent company of Tether Ltd., is also the operator of Bitfinex, which is one of the largest exchanges in the cryptocurrency world. All this must be taken into account when considering Tether as a potential investment, because the currency is not run by a network that is considered impeccable, but by people who are prone to mistakes.

Technical Basis of Tether

Tether Limited is a Hong Kong based company responsible for maintaining sufficient legal tender reserves to support all Tether tokens in circulation, which also makes it a trusted third party in this case. The idea is also to create a digital currency, one dollar equals one dollar, which can be exchanged at any time, but the reality seems to be different. Tether shows fluctuations over a long time span.

In fact, Bitfinex and Tether are managed by the same management team. Bitfinex itself is responsible for storing and extracting Tether tokens as long as they are issued. All Tether coins listed on Bitfinex are directly owned by the exchange, which also leads to the suggestion that the currency is managed by a few people whose decisions have a significant impact on the USDT. This raises a question: whether a company can manipulate the market has an impact on both Tether and Bitcoin, which is one of the foundations behind the value of Tether.

Tether is based on Omni protocol. Like all other cryptocurrencies, it runs on blockchain technology. The Omni protocol itself is open source software that allows you to create your own tokens by using the blockchain interface (in this case, Tether). According to the idea of the platform, each newly released coin can be tracked by the peer-to-peer network, which allows the community to pay attention to how many tokens are added to the circulation.

However, the fact that Tether belongs to a company cannot be fully verified, nor does it leave room for all users to reveal the whole picture. It is reported that the company has not conducted an audit since March 2017. This also leaves room for people to reflect on the situation behind the scenes.

Why is Tether so Controversial Now?

As a pioneer in the field of cryptocurrency and the largest stablecoin so far, Tether also sparked a debate about the legality of its working method.All this began with the involvement of the New York Attorney General’s Office (NYAG) in investigating Bitfinex’s $850 million losses, which were allegedly detained or misplaced by payment processor crypto capital. In this process, nyag publicly accused Bitfinex of concealing funds and applied for an injunction in April.

What happened next was that the court said that both Tether Co., Ltd. and Bitfinex had the responsibility to cooperate to arrange a credit line so that Bitfinex could borrow more than $700 million from Tether’s reserves. This could lead to another $200 million loan, but supreme court judge Joel M. Cohen imposed an injunction to freeze all further loans.

Although iFinex filed a notice with the court to terminate the case because the New York State Government lacked jurisdiction over the matter, it was known that the request was rejected on August 19. Its impact is considerable – the New York state government will continue to investigate the matter, and both parties have 90 days to prepare the necessary documents for the ongoing process. The final outcome of the court’s decision remains to be seen.

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