Blockchains 101: Tether USDT

3 min readDec 20, 2020

The very first & controversial stablecoin

Introduction

Tether (USDT) is a cryptocurrency token issued by Tether Limited (a BVI company associated with the crypto Exchange Bitfinex) and which is supposedly backed 1:1 with a USD reserve. This backing reserve allows to maintain a near-stable price for USDT of about $1.

The first USDT tokens were issued on 6 October 2014.

Description

Tether USDT tokens work on a mint and burn mechanism: Every time the company behind Tether receives one USD on their bank account, one USDT is minted (created), and every time they receive back on USDT, it is burned (destroyed) and USD wired back to customer’s Bank account.

The USDT token was initially built and issued on the Omni protocol (on top of the Bitcoin blockchain) with later an ERC20 version (Ethereum) as well as a TRC20 one (On top of the TRON Blockchain).

This link provide the distribution of USDT across these different chains.

…

History

On January 2012, J.R. Willett published a whitepaper describing the possibility of building new currencies on top of the Bitcoin Network. He implemented his idea in the first cryptocurrency token built on Bitcoin called MasterCoin, associated with a MasterCoin Foundation (later recalled Omni Foundation).

In July 2014, Brock Pierce, Reeve Collins, and Craig Sellars announced the first implementation of Tether called “RealCoin” and built on the Omni protocol (Renamed Tether in November). The first tokens were issued on October 6 2014.

The Cryptocurrency Exchange Bitfinex first listed Tether in January 2015.

Tether really took off between January 2017 and September 2018 (ICO year) passing from $10M to $2.8B in outstanding supply (Market Capitalization).

Controversy

There are allegations of a potential association between Tether and the cryptocurrency Exchange Bitfinex, implying some impartiality issues and potential price manipulations in the price of Bitcoin during 2017.

In October 2018, the price of USDT dropped to $0.88 over allegation that Bitfinex has been using Tether Founds to cover losses following its 2016 Hack.

On April 2019, Tether Limited’s Lawyer claimed that each Tether were only backed by $0.74, leading to further audits and investigations.