The crypto industry has grown by leaps and bounds since the start of 2020, and this is true not just for crypto tokens such as Bitcoin, Ethereum and Dogecoin, but also other related commodities and assets that have been created during this time. One of the most interesting ones from all of these is stablecoins. Stablecoins are very similar to cryptocurrencies, being created on blockchain networks as well, but the difference is that their value is pegged to another commodity or asset. This helps add stability, which is vital given how volatile cryptocurrencies are. Most stablecoins are pegged to the US dollar, and the biggest and most popular of these is undoubtedly Tether.
Tether essentially shares its value with the dollar – 1 USDT equals $1, and investors can redeem the fiat value of their investments at any time via Tether Unlimited. Tether came into existence through the Realcoin project, which entered the market via a white paper in 2014. This caused a lot of attention and excitement in the market, due to its radical and revolutionary technical aspects, as well as the identity of its co-founders – Brock Pierce, Reeve Collins and Craig Sellars. The Realcoin name did not last too long though, and in November 2014, the project was renamed to Tether. They introduced three stablecoins to the market – USTether, which was pegged to the US dollar on a 1:1 basis, YenTether, which was similarly pegged to the Japanese Yen, and a third coin that was pegged to Euros.
The first exchange to introduce Tether was Bitfinex in January 2015. The excitement around Tether quickly saw a lot of trading activity increase on the exchange, and Bitfinex became the leading exchange in terms of Tether trading in the world. However, there were concerns around the relationship between Tether and Bitfinex, and in 2017, it was revealed after an investigation that both entities had the same CEO, CFO, general counsel and chief strategy officer, while the founder of Tether, Philip Potter, also handled operations at Bitfinex. The bull run in the crypto market of 2017 was also largely due to the influx of USDT into the market.
Thus, this led people to question the legitimacy of Tether, as well as whether the likes of Bitcoin and other cryptocurrencies could survive and thrive without stablecoins propping up the market. There were a lot of investigations by regulators, including by the US Commodity and Futures Trading Commission. All this negative publicity and attention did affect Tether and the wider stablecoin sector, but the industry has now recovered to be a lot more robust and secure.
In March 2019, the structure of the token was changed, so that USDT was now backed not only by the US dollar but also by loans to affiliate companies in the form of commercial paper. As of May 2021, more than 65% of Tether is backed by commercial paper. Another unique feature about this token is that it operates on the Omni blockchain, which is an extremely versatile platform. Tether continues to be popular today, as seen by its recent minting of new tokens, which took its market cap to over $60 billion, a rise of over 580% in just 12 months. There is a lot of institutional and corporate demand for the token, which is the reason behind this wave of newly minted tokens hitting the market, with more than 6 billion new USDT tokens being minted in just the last month. One of the biggest advantages of a stablecoin such as Tether is that it provides an exit strategy for investors in the crypto market, which is extremely useful during periods of market volatility. It is also easy for users to convert USDT into any crypto token, thereby reducing friction in the market, while it has also made it simple to send money anywhere in the world. Tether has become one of the largest crypto tokens in the world, and it is certainly the largest stablecoin, and given the developments in the crypto industry this month, there is no doubt that its importance will only continue to grow over the next few weeks and months.