The Impact of Tether on the Global Crypto Ecosystem
Tether (USDT) is innovative in its own way. The impact of this token is beyond imagination. It’s a token without any native blockchain, yet performs an unimaginable role in the industry.
The Rise of Tether And Stablecoins
Before we dive into the impact of Tether on the global crypto ecosystem, let’s review some of the key concepts on the topic.
What Is Stablecoin?
As the name suggests, a stablecoin is a kind of token that has a stable price. Stablecoins are pegged with other assets and these assets control the value of the token. Let’s make an example.
Imagine Tether. The token is pegged with a Dollar. In other words, for each USDT minted, a dollar bill is kept in the Tether’s treasury.
As you see, the dollars in the Tether’s treasury controls the value of the token. If this balance between USDT and stored dollars break apart, the value of the stablecoin is not stable anymore!
The Birth of Tether
Tether was born in 2014 but with a different name: Realcoin! Brock Pierce, Creaig Sellars and Reeve Collins created this token on the Omni blockchain AKA Mastercoin!
Tether Holdings Limited is the owner company of the cryptocurrency and its headquarter is located in Hong Kong. The company itself is founded by Bitfinex founders.
Reeve Collins later announced that the Realcoins is going to be rebranded as Tether and since then, the name sticks!
Legal Actions And Challenges
Underbacked Tether: Tether Holdings Limited, the company behind the USDT token, admitted to having only $61.5 million in cash reserves. This was significantly less than the amount they had previously claimed.
Merging BFX with Tether: In April 2017, Bitfinex announced it would no longer trade BFX tokens. Tether co-founder Phil Potter declared that these tokens would be converted into Tether.
Plummeting Tether Value: Rumors about the relationship between Bitfinex and Tether, as well as questions about both companies’ credibility, caused the value of Tether to drop to $0.91 on April 24, 2017.
Accusations of Unbacked Tokens: An anonymous online profile, “Bitfinex’ed,” accused Bitfinex of creating unbacked Tether tokens in the same month to cover its debts.
Auditing Claims: In May 2017, Bitfinex claimed to have hired the New York accounting and advisory firm Friedman LLP to conduct a comprehensive audit of its balance sheet. The firm confirmed that Tether’s dollar reserves matched the number of Tether tokens in circulation.
Phishing Attack: In September 2017, Bitfinex blocked accounts linked to the “Eth-Coin” phishing scam. This scam involved sending fake emails to obtain users’ personal information.
Revealed Connection: In November 2017, the connection between Tether and Bitfinex was made public. Leaked documents known as the “Paradise Papers” confirmed that Bitfinex and Tether were managed by the same team.
Tether Hack: In the same month, over $30 million worth of USDT tokens were stolen from Tether’s treasury in a hacking incident. Tether later issued a statement saying that direct conversion of Tether tokens to US dollars was no longer possible. This attack forced Tether to perform a hard fork to block the stolen tokens.
These events have had a lasting impact on the reputation of both companies and have contributed to broader discussions about the regulation and oversight of stablecoins and cryptocurrencies.
Rapid Growth And Development
After 2 years of legal actions and regulatory challenges, Tether dominance started to rise. After 2017 each year Tether saw growth. Since 2017 Tether has launched the USDT tokens in multiple blockchains, including Ethereum, Solana, TON and Tron.
In 2020 XAUT token was launched. It’s a gold-backed token which is pegged with gold in the treasury.
The Impact of Tether on the Global Crypto Ecosystem
Facilitating Fiat-to-Crypto Transactions
Boosting Trading Volumes
Hedge During Market Volatility
Mitigating Price Impact of Large Transactions
Borderless Transactions
Financial Inclusion
Providing Lequidity
With the help of USDT, traders and investors can easily provide liquidity for various activities. For example, users can convert their holding into USDT when the market is going to crash. In this way the value of their investing can survive the crash.
At the same time, the token is widely used as a hedging asset. Traders and investors can use the tokens to stay away from the market volatility.
Facilitating Trading
As mentioned above, USDT is on different blockchains. In other words users can easily transfer funds via Tether. Tether offers fast and inexpensive transactions, similar to sending an email.
It’s by far the top application of the tokens. Users use USDT as a means to transfer funds for multiple purposes. Pairs of USDT play a vital role in the market and every trader and investors utilize this utility.
The Future of Tether And Its Impacts
With no doubt, Tether is the #1 stablecoin in the market. As we mentioned earlier, the roles and impacts of the tokens are beyond innovation and are deeply rooted in trader’s behavior.
With these effects in mind, the future of USDT is somehow guaranteed as a market utility tool. Investors and traders can’t ignore the fact that it’s vital for the market to work with USDT. As far as history shows, Tether has gone under tons of pressure and has proved to be a survivor!
