Tether (USDT) | Rating: 8/10 | Outlook: Stable
Tether is perhaps the best known stablecoin currently on the market. It is also the stablecoin with the largest market cap. Given that this is a stablecoin, the goal of Tether is to maintain a 1:1 peg with the US dollar.
Tether is supposed to be 100% backed by US dollars in a back account. This means that Tether holders can redeem their Tether USDT for dollars. Once this is done, the Tether is burned and taken out of circulation. Technically, Tether makes use of the Omni protocol which was developed specifically for the stablecoin.
Tether was issued by the Bitfinex exchange and is used by a number of exchanges as the stablecoin of choice. There have been a number of questions that have arisen about Tether and whether it was indeed fully backed by cash in a bank account. This speculation led to a break in the value of the peg in late 2017. However, they have recently released their audit which shows the amount of cash that they supposedly have in reserves.
While Tether has proven that they have reserves, there are still questions that surround its potential impact on inflating the price of Bitcoin. There are also concerns around the safety of the coin given that it was hacked of $31m of USDT back in 2017.
Perhaps the added transparency is as a result of the additional competition that Tether now has to deal with. These include the likes of other fiat backed stablecoins such as GUSD, USDC, PAX and decentralised alternatives in the way of DAI.
USDT is traded on numerous different exchanges and has the most liquidity of all stablecoins. It has also been able to keep the peg quite effectively in recent months. While volatility is less of a risk with the likes of Tether, the swirling questions around its opaque operations will always be lingering.