Tether (USDT) is the largest stablecoin by market capitalization. In May 2023, the coin’s market valuation surpassed its previous all-time high of $83.29 billion. It now stands at $83.5 billion. With a market dominance of 7.4%, USDT is the third-biggest crypto asset by market cap.
Stablecoins are designed to shield crypto users from high price volatility experienced in the market. These crypto assets are pegged to a particular fiat currency to ensure they are stable throughout. Besides USDT, other popular stablecoins include BUSD and USDC.
Who Created USDT?
USDT is a product of Hong Kong-based company Tether Limited. The firm launched the stablecoin in July 2014 as Realcoin before rebranding it to its current name a few months later. Notably, most of Tether Limited’s management team members are actively involved in running crypto exchange Bitfinex. They include its CEO, general counsel, and Chief Strategy Officer.
What Can You Do With USDT?
Almost all popular crypto exchanges support USDT. That’s because it minimizes crypto users’ exposure to market volatility, as mentioned earlier. Furthermore, crypto exchanges use USDT to hold their funds since finding a banking partner willing to allow a crypto company to open an account with them is a big challenge.
A Brief History of USDT
- Tether Limited launched Realcoin, a stablecoin backed by USD, in July 2014.
- The company rebranded Realcoin to USDT in November of that year.
- Two months later, USDT got listed by trading platform Bitfinex.
- In December 2017, USDT’s token supply reached one billion.
- Three years later, USDT’s market capitalization crossed $10 billion.
- In May 2021, USDT’s market cap increased further to $60.3 billion and finally to $83.5 billion in May 2023.
What Makes USDT Special?
Stable: USDT’s issuer Tether Limited claims it has enough cash reserves to ensure its stablecoin does not depeg. So this means holders are assured of stability in a highly volatile crypto market.
Widely Accepted – As stated earlier, the majority of crypto exchanges allow users to deposit USDT. Therefore, you can transfer it to various platforms whenever you want.
Familiar: Since USDT is backed by USD, the most popular fiat currency, it becomes easy for people to monitor its value.
How’s USDT Produced?
USDT is not mined like other cryptocurrencies. Instead, its issuer produces new tokens depending on the funds deposited into reserves. For example, if the company deposits $10 million, then 10 million USDT tokens are added to the circulating supply. This ensures that each USDT in the market is backed. The newly generated tokens are usually issued via Bitfinex.
How Does USDT Work?
The first USDT tokens to be issued were based on the Omin layer, a protocol built atop Bitcoin. However, Tether Limited has since expanded its stablecoin to other blockchains, including Litecoin and Ethereum.
Tether Limited’s Controversy
USDT’s issuer has come under scrutiny in recent years, with many critics arguing that its stablecoin is not fully collateralized, as it claims. Academics Amin Shams and John Griffin, in particular, alleged in 2021 that new USDT tokens were issued that year without Tether Limited adjusting the stablecoin’s reserves.
At the time, Sam Bankman-Fried, the former boss of crypto exchange FTX, took to Twitter to defend USDT’s issuer, saying that he had been able to redeem millions of USDT for USD since 2017. So he believes that every USDT in circulation is fully backed by the United States dollar.
Tether Limited Regulatory Battles
In 2021, New York Attorney General Letitia James leveled charges against Tether Limited and Bitfinex on allegations that the two companies were run by unlicensed individuals. James also accused Tether of lying about USDT’s reverses and obscuring the actual risk that holders faced. To settle their charges, Tether paid $18 million in penalty fees, while Bitfinex agreed to cease operations in New York.
USDT’s Future
Despite being surrounded by controversies, USDT has proven its usefulness in the crypto market. How long it will exist depends on investors’ confidence in Tether Limited. The stablecoin could lose its popularity if critics prove their claims.
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