A few years ago, the world saw a unique cryptocurrency, combining the stability of fiat money and the manufacturability of digital assets. Once upon a time it was foretold a bright future, and today every publication about it is connected with a scandal. Unique technologies and earnings on investors. Huge possibilities and artificial manipulation of the Bitcoin course. The promised transparency and game in favor of Bitfinex. All this is about Tether. What is Tether cryptocurrency? Is it possible to mine this coin and is it worth investing in it? We will discuss in this article!
What is Tether cryptocurrency?
The Tether platform was created as a means for linking fiat money to digital assets. The need for such a connection was talked about for a long time, but it was only possible to realize it in 2015.
The innovation technology is based on a protocol invented by the legendary Jay Wylett, who previously developed the ICO concept. He created a unique Mastercoin protocol, in 2003, that allows you to overlay new layers of the Bitcoin block chain without changing the source code.
The Tether platform was created based on an updated version of the protocol called Omnilayer in 2015. Its developers merged into Tether Limited, released their token and conducted an ICO, during which they quickly raised $ 200 million in investments.
How does the Tether platform work?
The mechanism of the platform is extremely simple. When a certain amount of fiat money enters the system (for example, dollars), it is automatically converted into digital currency. If digital assets need to be changed back to ordinary ones, they are simply “deleted” from the system.
Obviously, such digital coins should be tied to real money. These are not bitcoins or lightcoins, the market value of which is determined by the willingness of users to buy them.
“Cryptodollar”, not supported by the cost of an ordinary dollar, has no own value. Moreover, for the whole scheme to work, the price of a conventional and digital dollar must be parity, that is, correlate as 1-1.
Moreover, in order to conduct such operations, developers need not only to use a unique protocol, but also to cooperate with official banks.
It is impossible to mine the coins, Tether Limited itself generates them – in the amount equivalent to the amount of fiat money in the reserve fund (which is the money of the depositors).
The most popular are Tether’s digital dollars, so the article will focus on them. The first thing we will understand is what they are generally needed for.
Tether cryptocurrency: key features of tokens
However, the possibilities of using Tether tokens are not limited to operations on cryptocurrency exchanges. With their help, you can quickly and profitably transfer money to another user. Transactions in the network take place instantly, and for transfers between wallets registered in the Tether system, the commission is not charged.
Where to buy Tether cryptocurrency and where to store?
The appearance of tokens was announced by the famous Bitfinex cryptocurrency exchange. For the first time tokens appeared on it, and so far the bulk of the USDT trading falls on this exchange. Solid trading is also conducted on Binance, Poloniex and Kraken.
In general, you can buy tokens on almost any cryptocurrency exchange, including EXMO and Yobit, adapted to the Russian-speaking audience.
In addition, tokens are sold in most cryptocurrency exchangers. Compare different courses at different sites on the site aggregator www.bestchange.ru.
Recently www.tether.to increasingly gives an error when loading, so as an alternative, you can use any cryptographic integrated with Tether.
The developers themselves are advised to use a special cryptographic box created for storing cryptocurrencies based on the Omnilayer protocol. You can download it at www.omnilayer.org (look for the “Omni Wallet” tab in the “Get Started” section).
It would seem that everything is fine with Tether Limited. Their tokens have the value and stability of ordinary money, but at the same time practicality and “speed” of cryptocurrency.
The main disadvantages of cryptocurrency Tether
- Parity violation
The parity promised by developers between tokens and common currencies was maintained only until the spring of last year. The value of USDT unexpectedly for many people dropped to 90 cents in April. Since then, the price of the token has dropped to 60-70 cents, then it has grown to 1.3 dollars. At the time of this writing, USDT is trading at $ 1.1.2
- Safety problems
The Tether system was hacked in November 20, 2017, and about 30 million USDT were derived from it. The developers could not return the funds. As well as failed to improve the security of the platform.
- Participation in speculative schemes
For example, in November 8, more than 20 million USDT were issued, and on the same day, Bitfinex passed an order for the purchase of bitcoins in the amount of 13.5 million USDT. As a result, in just one day, the price of Bitcoin increased by more than 300 dollars.
- Unreasonably high emission of tokens
The developers claim that all issued tokens are backed up with fiat money, and special auditors monitor the compliance of the issue and stock reserves.
However, the page reporting on the site is not available. The company released billions of tokens per month in 2017. Many people immediately wondered if these mountains of coins were backed up with real money.
- No warranty
According to the developers, any member of the system can at any time buy tokens or return them back, receiving an equivalent amount of fiat money. However, in practice, only a few people manage to return investments.
Tether and Bitfinex: Latest News
Even more shocking information about Tether Limited came up in November 2017. A group of American journalists conducted an investigation and published a sensational report called “Paradise Papers”. It contains information about the companies that have withdrawn their depositors’ money to offshore.
These materials contain the names of Giancarlo Devazini, Phil Potter, Louis Jean van der Velde and several other businessmen involved in Tether Limited and … the Bitfinex exchange! It turned out that these people manage both companies at once.
The Tether Token first appeared on Bitfinex. The bitcoin pumps on the USDT / BTC pair took place on the same exchange. Moreover, offshore accounts found by journalists lead to the Virgin Islands, the state in which Tether Limited is registered.
Scandalous publications have appeared in many reputable publications. About the joint scam Tether Limited and Bitfinex wrote the New York Times, Fortune and Bloomberg.
Wells Fergo, the largest US bank that collaborated with Tether Limited, broke a partnership with developers and sued them. Bitfinex Exchange got bank sanctions – it was forbidden to conduct operations with fiat money.
However, after this, Tether Limited managed to generate and sell more than a billion dollars on Bitfinex USDT. However, how could such an amount get into the system bypassing bank sanctions?
Most experts believe that the amount of fiat money in the system has not increased, but the developers continue to generate and sell tokens. In other words, Tether tokens are not backed by real money – their creators, as many experts suspect, make coins “out of air”.
Is it worth investing in Tether?
The market capitalization of a coin is determined by the number of coins in circulation and the size of the reserve funds. According to CoinMarketCap, today this figure is 2 billion dollars. Formally, such an amount must be in reserve in order to support the value of the coins issued.
The US Commodity Futures Commission has sent an agenda to Tether Limited and Bitfinex with a request to explain the situation with the USDT. No answer so far. As there are no reports on the status of the reserve fund.
Experts warn that if the charges are confirmed, the exchanges that traded in coins with dummies are waiting for a collapse, which will affect the entire cryptocurrency market.
However, even if the company manages to wash off the charges, it will still not be possible to make money on the cryptocurrency volatility. After all, its price is rigidly tied to the rate of ordinary currencies.