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Tether / US Dollar Chart, USDT/USD ()
Tether is a crypto project designed for protection against the high volatility of cryptocurrencies. It offers individuals and companies three types of stablecoins — USDT, EURT, CNHT — as an alternative to fiat currencies. Tokens issued by Tether can be used to save some part of assets during a temporary turmoil in the market. Most crypto exchanges specifically use USDT as a substitute for a US dollar when they lack a licence for operations with fiat money but are willing to simplify settlements between users.
Tether startup history
The startup was established in April 2014 by cryptocurrency pioneer Brock Pierce, software engineer Craig Sellars, and entrepreneur Reeve Collins. It was presented to the public as Realcoin in July. Before that, Mr Pierce and Mr Sellars helped to create the Mastercoin project, which was lately renamed Omni. In October 2014, the Realcoin team issued first tokens via the Omni protocol. In November, company’s CEO Reeve Collins announced its renaming as Tether Limited with registration in Hong Kong.
In January 2015, the Bitfinex exchange was the first to list USDT. Then, it turned out that exchange’s owners (shareholders of iFinex Inc.) acquired the startup from its founders. On the British Virgin Islands, they registered Tether Holdings Limited, which became a parent company to Tether Limited. In charge of Bitfinex and Tether from then on are people with the same positions in both companies: Jean-Louis van der Velde as CEO and Giancarlo Devasini as CFO.
Craig Sellars had been CTO before May 2016 but then became an external adviser for Tether. Up till December 2015, he was also CTO of Omni Foundation. He is still a member of the Foundation. After the company was sold, Reeve Collins took up media technology, and Brock Pierce became a venture investor and a philanthropist.
Tether cryptocurrency features
Tether stablecoins are issued not on its own blockchain (the project does not have it) but based on third-party blockchain platforms. So technically, it is not a ‘stable coin’ but a token with a stable price. In 2014–2017, the Omni Layer protocol was used. It is a wrapper around Bitcoin. That is, tokens USDT and EURT were issued via Omni Layer but registered in the Bitcoin blockchain.
Since January 2018, the company decided to issue tokens USDT and EURT based on the Ethereum blockchain using ERC-20. Currently, USDT on Omni Layer is issued from time to time but EURT based on Omni Layer became obsolete. In April 2019, developers created a new stablecoin — CNHT (also based on ERC-20) but it was launched for the free market only in September. They did not stop there and for the sake of experiment or participants of other networks created smart contracts with USDT tokens in:
- the TRON blockchain — in April 2019;
- the EOS blockchain — in May 2019;
- the Liquid Network overlay network — in July 2019;
- the Algorand blockchain — in February 2020.
USDT tokens issued on different blockchains are incompatible. So it is possible to send them only to the addresses of the corresponding networks and only through wallets with support for the corresponding blockchain.
The USDT rate is pegged to the US dollar, while EURT and CNHT rates are pegged to euro and yuan respectively. The company tries to maintain parity so one token is equal to one fiat unit. However, due to market volatility, which is stronger than company capabilities, deviations sometimes occur.
On our Tether chart, you can see all the token extrema. For example, for 2018–2020, USDT reached a low of $0.9666 (on 14 November 2018) and a high of $1.05 (on 12 March 2020).
The backing of the USDT stablecoin
USDT price stability is achieved due to the fact that all issued tokens are backed with reserves stored in Tether Limited accounts. The backing is not only the corresponding fiat currencies (US dollar, euro, yuan) but also cash equivalents, other company assets, and even receivables for loans provided to partners.
The last point is very worrying for the crypto community because Tether issued 700 million unsecured USDT in December 2018 and lent it to the Bitfinex exchange. The exchange at that time covered users’ losses of 850 million US dollars frozen in Panamanian provider Crypto Capital Corp. Of the 700 million debt, Bitfinex gave back 100 million in July 2019 and another 100 million in February 2020. The remaining debt — 500 million US dollars — Tether considers part of the reserve that backs all the tokens circulating in the market.
The crypto community is also concerned about the lack of fresh evidence of an independent audit. The first audit with public results was conducted in September 2017 by Friedman LLP, an audit firm. It confirmed the availability of backing:
|Availability of fiat funds in reserve||Currency||Amount|
|Bank account 1||USD||60,919,810|
|Bank account 2||USD||382,064,782|
|Availability of issued tokens||Cryptocurrency||Amount|
|Created via smart contracts||USDT||444,951,600|
|Unauthorised and held by Tether Treasure||USDT||−2,469,840|
|Total issued for circulation:||USDT||442,481,760|
The second audit took place in June 2018. It was conducted by Freeh Sporkin & Sullivan, LLP (a law firm) — not accountants, of course, but at least some independent auditors. The results were inaccurate: representatives of the firm only stated that on 1 June, Tether had 2.55 billion US dollars in their accounts, and USDT at that time was issued in the amount of 2.54 billion tokens.
Since then, no audits have been conducted. Concerns intensified after statements made by Tether representatives in 2019:
- in March, they stated that now they consider as security for tokens not only the availability of fiat dollars, but also loans issued to affiliated companies;
- in April, they stated that tokens are backed with fiat dollars only by 74%.
On a separate page on the website, Tether publishes ‘transparent’ indicators: the total value of the company’s assets, the quantity of tokens issued, the difference between them. However, no one knows for sure whether Tether really has these assets and what share in them is dollars in bank accounts.