Definition of Tether (USDT)
Tether is a blockchain-based cryptocurrency whose crypto coins in circulation are backed by an equivalent amount of traditional fiat currencies, like the dollar, the euro, or the Japanese yen, which are held in a designated bank account. Tether tokens, the native tokens of the Tether network, trade under the USDT symbol.
Ether was one of the first cryptocurrencies to peg its market value to a fiat currency. Launched in July 2014, Tether, originally called “Realcoin”, valued each token at $1.00 to reduce the friction of moving real currency throughout the cryptocurrency ecosystem. Due to its dollar peg, Tether and other similar cryptocurrencies have been dubbed “stable coins”. Tether is the largest stable coin by market capitalization and its users can redeem tethers for dollars. Originally, Tether launched on Bitcoin’s Omni Layer but continues to expand to other protocols, including Ethereum, Bitcoin Cash, TRON, EOS, and Liquid Network.
How does Tether work?
Tethers exist as digital tokens built on bitcoin (Omni and Liquid Protocol), Ethereum, EOS, Tron, Algorand, SLP, and OMG blockchains. These transport protocols consist of open source software that interfaces with blockchains to allow for the issuance and redemption of cryptocurrency tokens, in our case, “tethers.” Tether Platform currencies are 100% backed by Tether’s reserves. Tethers are redeemable and exchangeable pursuant to Tether Limited’s terms of service. The conversion rate is 1 tether USD₮ equals 1 USD.
The Tether Platform is fully reserved when the sum of all tethers in circulation is less than or equal to the value of our reserves. Through our Transparency page, anyone can view both of these numbers on a daily basis. Tether was originally created to use the Bitcoin network as its transport protocol—specifically, the Omni Layer—to allow transactions of tokenized traditional currency. Since this original version of Tether uses the Bitcoin blockchain it inherits the inherent stability and security of the longest established blockchain network.
Tether on the Ethereum blockchain, as an ERC20 token, is a newer transport layer, which now makes tether available in Ethereum smart contracts or decentralized applications on Ethereum. As a standard ERC20 token it can also be sent to any Ethereum address.
Since Tether is currently available using different transport protocols, when users send tethers to other addresses, they need to carefully check the destination address to confirm they are selecting the correct transport protocol.