by Alan on 2021-02-15 filed under Crypto for Beginners
For newcomers to the crypto market the various currencies can be a little mind-boggling. What its uses are, where you can buy it and where did it come from are some of the common questions asked by first-time investors.
In this article we will cover the basics of Tether. Giving you a crash course on what it is, the history and value of the currency as it has moved through the years to the present day, all wrapped up nicely in a comprehensive Tether tutorial.
What is Tether?
Tether is a cryptocurrency in which its coins in circulation are backed by an equivalent amount of standard currencies, like the dollar, pound and euro. Tether crypto goes under the sign USDT. Tether belongs to a type of cryptocurrency called stablecoins that aims to keep cryptocurrency steady, as opposed to the peaks and troughs seen in the prices of other cryptocurrencies like Ethereum.
Tether rests in the category of fiat stablecoins, that means that a currency such as the pound, dollar or euro backs the stablecoin it represents. Other stablecoin categories include crypto-collateralized stablecoins. These use cryptocurrency reserves as collateral, or non-collateralized stablecoins, which aren’t based on collateral. However they work in a way similar to that of a bank in which they store tokens depending on the balance of the economy at the time. Tether exists to build a bridge between standard currencies and cryptocurrencies in a bid to stabilise and reduce potential transaction fees.
A Layman’s History of Tether
Tether was first launched in 2014 following a renaming from Realcoin. The idea for Tether initially came from Bitcoin director Brock Pierce and two others. Realcoin provided the base system for the Tether system prior to them changing the name. The idea behind the coin was that it would match on a 1:1 basis fiat currency with cryptocurrency, all facilitated by the use of blockchain technology.
Tether was designed by utilizing the omni-layer platform, a software based system built on a system identical to that of Bitcoin. For each new token released, the system would allow them to be tracked. This gives access to the community and allows them to keep tabs on how many new “Tethers” were currently out in the system.
How Do I Get Tether?
There are a number of ways in which you can gain access to your own Tether tokens. Below are three of the main ways in which you can get your hands on them.
Sometimes you may be able to use your own skills and services as a way to earn Tether. Tether traders will use their Tether tokens in order to purchase certain products and services so you may be able to find someone willing to trade.
We will start with the most common, centralized markets. These are places in which you can buy stocks, such as Polkadot, Bitcoin, and Ethereum. The advantage of these is that they are widely used by a majority of traders, however, larger companies will charge you a trading fee and will claim some of the profits.
If you are wanting more control on how you trade without the oppressive shadow of the centralized trading platforms, the decentralized markets operate a peer-to-peer trading system. This allows you to stay in control of your funds and currency, with no one but the buyer and seller involved in the transaction.
How Can I Use Tether?
Tether is no different to any other type of cryptocurrency in the fact that it has a broad range of uses when looking to use it. Below are just a few ways in which you can utilize your Tether tokens to best effect, and some of the options new investors could consider.
We will start with the obvious, trading. Trading is definitely one of the more known methods of using cryptocurrency. A word of warning for those who choose to trade in any cryptocurrency, the market for cryptocurrency is highly changeable, with the value rising and falling dramatically in very short bursts.
The vast majority of Tether traders purchase them as an investment. Unlike Bitcoin, there is no limited supply as you get what you put in. However investors will buy stock or crypto when the demand is very low, with a plentiful bounty available on the market the prices will fall dramatically. When the prices are so low some investors see this as their opportunity to invest.
Investing is a long game to play, sometimes with years in between purchasing and selling. Keep an eye on the market and when you see that your stablecoin worth is starting to rise in price, this is the time to consider selling. Think of cryptocurrency as any other type of resource, when there is low demand, the price goes down, when there is high demand, the price goes up.
Professional Services and Shops
Increasingly we are seeing certain professional services now accepting cryptocurrency as payment for their services. Along with professional services, certain establishments such as coffee shops, restaurants, and electronics stores have jumped on the bandwagon. They will now allow you to pay with cryptocurrencies like Tether, Bitcoin and Ether.
Why the Sudden Rise in Popularity?
In 2020 the cryptocurrency on the rise was not Bitcoin or Ethereum, it was in fact Tether. Due to tether being pegged on a 1:1 to the dollar, it has proved important as an investment for businesses looking to diversify their asse portfolios.
This is partly due to the rapidity of movement of cryptocurrencies. Cryptocurrencies can be moved in a matter of seconds along the blockchain. This is in stark contrast to traditional currency which must be transferred through bank transfer, which comes with its own set of issues.
Stablecoin is, well, stable. The currency holds its value considerably better than the traditional dollar and due to the ease of movement has revolutionised the way businesses (and sometimes criminals) move their money around, allowing them to take advantage of prosperous business conditions.
Risks of Buying Tether
Like any form of crypto investment, there are certain risks associated with purchasing any form of cryptocurrency. Tethers primary stumbling block is the fact that we can’t really verify whether the value of each dollar is equivalent to the USD. This has led to come confusion from the crypto community as to how Tether backs it’s claims.
Tether stated in 2019 that they have “reserves” in place to cover all of the Tether tokens on the market, but how can we be sure how many that is? It is something to bear in mind before your next investment that should everyone withdraw their money at the same time, we aren’t sure if Tether could support the mass withdrawal.
Tether is a stablecoin of significant value and reach as of the time of this article being written. The ability to match, in theory, 1:1 value with the USD is an interesting concept.
On the face of it, Tether is a great cryptocurrency to invest in, providing a stable financing option to businesses and individuals as well as working as a solid investment. Only time will tell of the success of this token system, but as of now it is looking like bright skies ahead for Tether.
Disclosure: I/we have no position in Polkadot and no plans to initiate one in the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Big Time Crypto).
Additional disclosure: Disclaimer: I am not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of cryptocurrency. Investors are advised to review all documents and press releases to see if the cryptocurrency fits their own investment qualifications.