Tether and Investor Protection against Digital Currencies Fluctuations

Tether USDT and Investor Protection against Digital Currency Fluctuations

Tether (USDT) is a cryptocurrency that functions as the digital dollar by which digital currencies are pegged to currencies such as the US dollar, Euro, and Japanese yen.

Since Tether or Digital Dollar is pegged or evaluated in currencies that have real value, they thus protect investors from the fluctuations experienced by digital currencies, such as Bitcoin, Ethereum and others.

Through Tether or Digital Dollar, the value of digital currencies is fixed against those currencies, especially since one Tether is always equivalent to one US dollar.

Tether (Digital Dollar) Coin Class and How it Works

Tether or Digital Dollar belongs to secured digital stablecoins, hence comes the protection against digital currency fluctuations, using the Blockchain network.

Tether is used as a means of exchange and at the same time a way value keeping, rather than as a method of bargain. The Tether or Digital Dollar can be converted into a regular currency such as the Dollar, Euro, or any other FIAT currency.

At the same time, it can be used in some restaurants or institutions that support these currencies.

How to Protect Tether from Digital Currencies Fluctuations?

During unusual circumstances, there is always be fear of fluctuation in currency rates. Hence, any currency could be secured at its high price by investing in a currency such as Tether that is characterized by the price stability.

For example, if the price of a currency is at $ 1,000, it can be exchanged for the Tether currency with the same amount, as the Tether price is equal to one dollar, and this is the first step.

As for the second step, in the event that the price of the first currency falls, then the Tether currency will be exchanged into Dollar, and thus we will have kept the value of the currency we own, at a time when it may be difficult to find a buyer at the time of the declines, and in such case the importance of the Tether and other stable currencies emerges.

What is the Guarantee for Dollar Balance Against Tether?

One of the problems that faced Tether at the beginning of its launch was asking people how they can make sure that there is a dollar balance against the Tether they are buying.

After a while, Tether Limited started publishing its bank account and the available balance of USDT currency against the company’s balance of the US dollar or other currencies, on a daily basis. Consistency between the amount of Tether with the dollar balance will be confirmed periodically.

Advantages of Tether

From the above, we can deduce characteristics of Tether, and its dependency on the blockchain network it gains advantages of other digital currencies such as transparency, decentralization and others.

Likewise, as the company behind the currency issues periodic reports with its account balance, it gains transparency on the other hand. And, supported by the US dollar and other strong currencies, it takes the best of traditional currencies.

In addition to the above, Tether is characterized by a special protocol, which is Omni Layer, which makes it easier to obtain from other currencies that need mining in a way to solve the algorithms in one hand, and on the other hand it is a system characterized by high transparency. The

Omni Layer protocol uses its own blockchain, while at the same time it uses the blockchain of Ethereum, as well as the blockchain of Tron. And having Tether on more than one blockchain network supports its penetration.

Milestones in Tether History

Tether coin was developed in 2014 and was widely accepted by the digital currency community. Then in 2015 it was listed on Bitfinex platform, and at the end of 2017 the coin supply had reached one billion units.

At the beginning of 2019, the market value of the currency reached $ 4.2 billion, after using the Ethereum and Tron networks.

The market value of Tether (USDT), according to Bitcoin.com, reached $ 4.65 billion (at the time of writing). Market value of the Tether coin in the Tron network protocol reached $ 788.39 million, or about 17% of the total supply.

Tether, Binance Platform and Stable Currencies

Jason Choi, Head of Research at The Spartan Group, stated that there is $ 1 billion of Tether being exchanged on the Binance platform.

Su Chu, Chief Executive Officer of Three Arrows Capital, stated there is about $ 2 billion held in cryptocurrency investment funds.

Another $ 2 billion is held in stable currencies, and $ 2 billion is held in trading platforms.

Paulo Arduino, Chief Technology Officer of Bitfinex, said that most Tether currency reserves are held in cash rather than investments.

Tether, or Digital Dollar, and Coin Burn

Coin burn is a common practice in which the token issuer removes some tokens or cryptocurrencies from circulation, which leads to lowering inflation rates and total coin supply.

In the process, Tether creates tokens when depositing funds in its reserves, and then burns such tokens when withdrawing funds.

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Abdulhay Mahmoud 414 Articles
Abdulhay Mahmoud is a creative writer with over 15 years of experience in journalism, translation, and investor relations. He has B.A in English and Literature from a reputable University. He recently became a contributor at Cryptolydian.com to fulfill his thirst in reporting digital coins and blockchain-related news, an interest was built over the years.