Tether is a cryptocurrency that facilitates the conversion of fiat currencies into digital currencies, with the value of Tether pegged or tethered to the price the U.S Dollar. The idea was to create a cryptocurrency with a similar value to the US Dollar.
Every Tether in circulation is backed by a fiat currency that is held in Tether’s reserve account in order to ensure a 1:1 equivalent. For example, 1 Tether (USD) will always be equivalent to 1 U.S Dollar.
Tether was created to provide a link between fiat currencies and cryptocurrencies, with the tethering principal ensuring that the actual value of Tether in fiat currency terms is stable.
There are no physical Tethers, just balances of Tether that are recorded on Tether’s decentralized blockchain.
Tether was originally launched in July 2014 as RealCoin before being renamed to Tether in November 2014. Tether started trading in February 2015.
Co-Founders of RealCoin were Brook Pierce, Craig Sellers, and Reeve Collins.
There are no restrictions to the number of Tethers that can be in circulation at any given time and the number is driven by demand, the only requirement being that each Tether is tethered to a fiat currency held in Tether’s Reserve account.
Behind Tether lies a multi-layer network, where:
- The first layer is the Bitcoin blockchain that is referred to as the Tether transactional layer.
- The second layer is the Omni protocol that is responsible for:
- Creating and destroying fiat currency pegged Tethers.
- Track and report the circulation of Tethers.
- Enable users to transact and store Tethers.
- The third layer is Tether Limited, the business entity that is responsible for:
- Accepting fiat deposits and issuing corresponding Tethers.
- Sending fiat withdrawals and revoking corresponding Tethers.
Some distinct differences and characteristics of Tether include:
- There are no physical Tethers, only virtual.
- The number of Tether in circulation is subject to demand and are not finite.
- All Tether transactions are recorded on the Tether blockchain and all fiat currency equivalents are held in a Reserve account.
- Tether Ltd gives no guarantee for the right of redemption or exchange of Tethers for fiat currency.