What is Tether?
The Tether, whose ticker is USDT, is a digital token issued on various blockchains and backed by the U.S. dollar (USD) thanks to the guarantee of the company Tether Limited. Created in 2014 under the name Realcoin, it is the first stable coin of its kind. The Tether is always traded close to $1.
Note that Tether Ltd. also offers other products such as Tether Gold (XAUT), Tether EUR (EURT), or Tether CNH (CNHT), but the USDT remains their main product.
Tether USD is 100% collateralized by dollar reserves in the bank account of Tether Ltd. Each USDT corresponds (in theory) to one existing US dollar. The company is thus able to provide USDT to those who wish to obtain them in exchange for dollars and is also entitled to donate dollars in exchange for USDT.
This balance is therefore based on trust in the company. In order to maximize this trust, Tether Ltd. provides information on the management of USDT in a transparent manner on their website. In addition, the company conducts regular audits to show that it has the equivalent amount in dollars.
Originally issued on Bitcoin’s Omni layer, the outstanding amount of Tether USD is now distributed among several blockchains (September 2020):
The interest of the Tether USD (and stablecoins) is double.
Its first interest is to allow cryptocurrency exchange platforms to have access to the US dollar, without having to manage real dollars. Since the regulations for transferring and keeping fiat currency are drastic, this is a huge advantage for trading platforms managing only cryptocurrencies.
The second interest of the Tether USD is to offer users a way to hedge against the volatility of the cryptos market. Without actually having to resell their coins, they avoid the corresponding tax charges: for example, in France, the government charges you 30% of the capital gains made on fiat exchanges.