If you commenced your crypto trading journey recently, you must have followed the mixed reaction toward Tether, a stablecoin that doesn’t lose its value even amid market chaos. This project has been scrutinized by many traders and investors, as it’s been exposed to security issues and other allegations with a top cryptocurrency exchange, Bitfinex. While there are many comments and negative reviews on many platforms, we think you’ll be well-informed after read this beginner’s guide to understanding Tether.
What is Tether?
Tether is a unique cryptocurrency which allows the exchange of USD and EUR (Japanese Yen is still in process). The USDT is a single dollar stored in the Tether account while the EURT is one euro digitally represented by Tether. Tether users carry out transactions using Omni Layer protocol software which guarantees security and easy transactions.
What makes Tether stand out is its transparency and resilience in the face of the criticisms that have gone up to declare the currency as a scam. The main benefits of this token/stablecoinare that investors can transfer national currencies easily and handle bearish markets when other cryptocurrencies are unstable. By using a Proof of Reserves Process, it’s possible to check the the quantity of USDTavailable, and this is represented by TUSD which must be equivalent to the USD in the Tether Limited account.
This token is linked with Ethereum and tethers are stored in bank accounts which are managed by Tether Limited. Tether Limited is responsible for this project,and they insist that all their accounts go through regular professional auditing. While this may sound positive, it’s crucial to note that the platform also uses the blockchain technology to improve how secure transactions are.
More so, Tether can be used to store USD or EUR and exchange other cryptocurrencies. By converting cash into Tether, traders don’t have to move their actual money into their bank accounts. Besides, it is backed by company reserves at a 1:1 ratio where 1USD is the same as 1USDT. Most exchanges such as Bittrex, Polionex, Bitfinex, GoCoin, and Shapeshift all allow the trade of Tether.
What about the Bitfinex vs. Tether Allegations?
In 2017, some news went around identifying the Bitfinex CEO, J.L. van der Velde as the CEO of Tether and Bitfinex. This tweet caused immense loss to Tether including a major hack that cost them $31 Million USD. This loss was discovered on November 19, 2017, thanks to Tether’s transparency policy. The company announced that a known Bitcoin address had hacked their account and cleared out this huge sum.
But the question many people find difficult is, “What has Bitfinex got to do with this?” Since the hack occurred at the time of the tweet,people have insinuated that Bitfinex must have compromised its security with Tether.
How to Use Tether Currencies
You should note the following when trying to purchase other digital currencies with USDT:
- Create your account on Tether.io
- Authenticate with a two-factor authentication
- Follow the verification process
- There are no transaction fees, except on external exchanges
- The currency pair on exchanges is easy to use
- Transfer is done to Omni Layers wallets
- Converting USD to USDT or USDT to USD requires a tiny sum
- Add funds into your provided Bitcoin wallet address
- Send/receive/withdraw funds to your bank account.
Irrespective of the controversies that have trailed Tether, its transparency and security have been improved to protect the platform and its users. Nonetheless, the crypto world is often filled with surprises. So, always take the risk but prepare for the worst (maybe a Mt. Gox. 2.0).