Tether (cryptocurrency)
Tether is an asset-backed cryptocurrency stablecoin that is frequently referred to by its currency codes, including USD and USDT. 2014 saw the introduction of it by Tether Limited Inc. The Hong Kong-based corporation iFinex Inc., which also operates the cryptocurrency exchange Bitfinex, is the owner of Tether Limited. Tether Limited has produced the USDT stablecoin across ten protocols and blockchains as of July 2022. Since Tether was initially intended to be worth USD 1, it is referred to as a stablecoin. Tether Limited claims to keep USD 1 in asset reserves for every USD 1 issued, although it has been punished by regulators for failing to do so and for failing to provide audits demonstrating enough asset reserves.
History:
Creation:
In a whitepaper he released in 2012, J.R. Willett discussed the prospect of creating new cryptocurrencies on top of the Bitcoin blockchain. [9] Willett later assisted in putting this concept into practice in the cryptocurrency Mastercoin, which established a Mastercoin Foundation (later renamed the Omni Foundation[11]) to support the use of this brand-new "second layer". [12] The Tether cryptocurrency's technological underpinnings were built on the Mastercoin protocol, one of the founding members of the Mastercoin Foundation. Brock Pierce joined the founding team of Tether. [Reference needed] Craig Sellars, the creator of Tether, was appointed CTO of the Mastercoin Foundation. [Reference needed]
Co-founders Brock Pierce, Reeve Collins, and Craig Sellars revealed the existence of Realcoin, the forerunner to Tether, as a Santa Monica-based firm in July 2014.
[13] The first tokens were released on the Bitcoin blockchain on October 6, 2014. [14] The Omni Layer Protocol was used to do this. [15] Reeve Collins, the CEO of Tether, announced the project's name change to "Tether" on November 20, 2014. [Reference needed] A "Tether+ token" was supported for three different currencies by the firm as it entered private beta: USTether (US+) for US dollars, EuroTether (EU+) for euros, and YenTether (JP+) for Japanese yen. Every Tether+ token is 100% backed by its underlying currency, according to Tether, and may be redeemed whenever desired without being exposed to exchange risk. Without providing further information, the company's website indicates that it was founded in Hong Kong and has offices there.
2015–2016:
The cryptocurrency exchange Bitfinex made it possible to trade Tether on its platform in January 2015. Although the two companies claim to be independent, the Paradise Papers dumps in November 2017 identified Bitfinex employees Philip Potter and Giancarlo Devasini as being in charge of establishing Tether Holdings Limited in the British Virgin Islands in 2014. [17] The CEO of both Bitfinex and Tether, according to a spokeswoman, is Jan Ludovicus van der Velde. [18] [19] Tether Limited, situated in Hong Kong, is a wholly owned subsidiary of Tether Holdings Limited, according to Tether's website. One of the biggest Bitcoin exchanges in the world by volume is Bitfinex. [Reference needed]
For a while, Tether processed transactions in US dollars through banks in Taiwan, which then transmitted the money through the bank Wells Fargo to enable the funds to leave Taiwan. On April 18, 2017, Tether declared that these foreign transfers had been stopped. Tether and Bitfinex both filed a lawsuit against Wells Fargo in the Northern District of California's federal district court. A week later, the complaint was dismissed. [Reference needed]
Tether creates tokens for the Ethereum, EOS, Tron, Algorand, SLP, and -OMG Network blockchains in addition to Bitcoin (Omni and Liquid Protocol).
There are currently five different Tether tokens: the US dollar tether on the Bitcoin Omni layer, the euro tether on the Bitcoin Omni layer, the US dollar tether as an ERC-20 token, the euro tether as an ERC-20 token, and the US dollar tether as a TRC-20 token on the TRON network, which will be added in 2020.
2017–2018:
The number of tethers in circulation increased from roughly $10 million to about $2.8 billion between January 2017 and September 2018. Tether made up roughly 10% of the trading volume of Bitcoin at the beginning of 2018, but by the summer of that year, it had increased to up to 80%. According to research, roughly half of the price surge in Bitcoin in late 2017 was caused by a tether-related price manipulation scheme. Tether worth more than $500 million was released in August 2018.
Due to traders on Bitfinex exchanging tether for Bitcoin, which increased the price of Bitcoin, the tether price quickly dropped to $0.88 on October 15, 2018, reflecting the perceived credit risk.
2019–2022:
Due to traders on Bitfinex exchanging tether for Bitcoin, which increased the price of Bitcoin, the tether price quickly dropped to $0.88 on October 15, 2018, reflecting the perceived credit risk.
With the most significant daily and monthly trading volumes of any cryptocurrency on the market in 2019, Tether overtook Bitcoin in terms of trading volume
Alleged price manipulation:
Academic Research:
According to research by Griffin and Shams, Bitcoin prices rose when Tether created fresh USDs during bear markets. They assumed this represented an effort at market manipulation. The cryptocurrency exchange Bitfinex disputed these conclusions, claiming the scientists had cherry-picked their data and lacked a comprehensive dataset. The Bitfinex criticism was validated when later researchers discovered scant to no evidence that Tether USD minting events affected Bitcoin pricing.] Research from 2022 revealed that the only time Bitcoin values rose was when Whale Alert tweeted to the public that Tether had created USDT, demonstrating the traditional market reaction to breaking news. Academic studies conducted after the Griffin and Shams study did not reach the same conclusion. Regarding the scholarly discussion, the CEO of Tether and Bitfinex stated: "No market or price manipulation has ever taken place on Bitfinex or with Tether. The price of Bitcoin or any other coin/token on Bitfinex cannot be artificially inflated by Tether issuances."
Media Research:
Reporters from Bloomberg News discovered abnormalities on the Kraken cryptocurrency exchange, where, from May 1 to June 22, 2018, smaller market orders had the same impact on Tether's market price as larger market orders. Rosa Abrantes-Metz, a professor at New York University, and Mark Williams, a bank examiner for the Federal Reserve, suggested that the large order sizes were a sign of wash trading by computerized trading systems. The cryptocurrency exchange Kraken responded to these assertions by claiming that Bloomberg News misunderstood the idea of a stablecoin and that because Tether was a stablecoin tethered to the US dollar, market order size had little effect on its market price. The user who placed the unusually specified orders also acknowledged that the order sizes and decimal places were "randomly selected." Academic studies on the stability of stablecoins later confirmed the Kraken cryptocurrency exchange's denial of the Bloomberg News findings.
Legal Research:
U.S. federal prosecutors are looking into whether Tether was used to manipulate the price of Bitcoin, according to a Bloomberg article from November 20.
The tether can be bought with dollars, exchanged for fresh tokens, or redeemed by approved business clients outside of the United States, according to the Tether website. Journalist Jon Evans claims that in the year ending in August 2018, he was unable to locate any publicly verifiable instances of buying newly issued tether or redeeming it.
Security and liquidity:
Tether states that it plans to keep every dollar in reserve so it can accommodate consumer withdrawals when necessary. In 2017, it was unable to accommodate all withdrawal requests. Tether claims to use external audits to make reserve account holdings visible, although it has never provided an audit proving it possessed the claimed reserve. Tether made the announcement that they were no longer in contact with their auditor in January 2018.
In November 2017, around $31 million worth of USDT coins were taken from Tether. Later examination of the Bitcoin distributed ledger revealed a direct relationship between the January 2015 Bitstamp breach and the Tether hack. [Reference needed] The theft prompted Tether to halt trading and announce that it would release new software to implement an urgent "hard fork" that would make all of the tokens that Tether identified as having been taken in the robbery untradable. According to Tether, limited cryptocurrency wallet services have been permitted again as of December 19, and processing of the backlog of outstanding trades has started. [Reference needed]
Bitfinex and Tether (referred to in court documents as B/T) were required to present evidence proving USDT's support by September 19, 2022, as a result of an ongoing case in the New York District Court, the resolution of which is still unresolved.
Questions about dollar reserves:
In 2017, an online skeptic using the handle "Bitfinex'ed" questioned the connection between Bitfinex and Tether, charging Bitfinex with "magic Tethers out of thin air." Independent lawyer Lewis Cohen reportedly stated the document, because of the careful way it was phrased, does not prove that the Tether coins are backed by dollars. In September 2017, Tether published a memorandum from a public accounting firm that Tether Limited claimed showed that tethers were fully backed by US dollars. Additionally, it is unclear from the records if the sums in question are subject to any other obligations. The accounting firm made it quite clear that
This information is not meant to be utilized or relied upon by anybody other than Tether Limited's management and is just there to help them.
Tether has repeatedly said that they would provide audits proving that the amount of tethers in circulation is backed one-to-one by U.S. dollars on deposit, but they have yet to do so. In an attempt to conduct an audit, a report by the legal team Freeh, Sporkin & Sullivan LLP (FSS) was published on their website in June 2018. This report appeared to affirm that the issued tethers were fully backed by dollars. The above confirmation of bank and tether balances, FSS insisted, "should not be construed as the results of an audit and were not conducted by generally accepted auditing standards," and "FSS is not an accounting firm and did not perform the above review and confirmations using Generally Accepted Accounting Principles." Tether's general counsel, Stuart Hoegner, stated "The truth is that getting an audit is impossible. The big four companies abhor that kind of risk. We chose what we believe to be the next best option."
