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What is Tether (USDT) and Is It Safe To Use?

What is USD Tether (USDT)?

Tether is a cryptocurrency coin that claims to have a 1 to 1 ratio with specific fiat currencies, in this case the United States Dollar.  The company behind the digital currency makes claims to have each coin backed up with $1 that is held in their reserves.  Each tether is stored on the blockchain using the Omni Protocol.  This Omni Protocol is an interface with blockchains that allow for ease of issuing tokens along with the redemption of those tokens.

The goal of tether is to convert fiat currency into digital currency for ease of trade on exchanges.  The coin is typically used by traders to move in and out of digital currency positions without having to go through the long process of converting cryptocurrencies to cash.

Is the Tether Cryptocurrency Safe?

 

Speculation about the legitimacy of the cryptocurrency started because of the amount and rate of USDT being created.  The company claims to have a 1 coin to 1 dollar ratio, that would mean that they would have to have a bank or private lender loan them that amount to put into their bank account so that it can be redeamed by an owner of USDT.  Since it is on the blockchain, it is possible to create new tether out of thin air.  As of writing this, the amount of tether coins is 850 Million, which means that they should have $850 million dollars in the bank.  The other area of concern is the rate of capital being raised.  The chart below shows that during Nov 10th, 2017 – Dec 10th, 2017 that $245,000,000 new USDT was issued.  This is a lot of money to raise in such a short time.

USDT, Tether, Chart

Tether USDT Chart 1 month from Nov to Dec 2017

There is speculation about a company a couple years old to raise this type of capital at this rate.  The company’s lack of transparency hasn’t helped their image.  This should be considered a risky store of wealth until there is more transparency into the funding and process of the company.

Related Terms

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