This year a lot of tokens were issued after the initial coin offerings. Some of which gained a lot of popularity due to their innovation in the blockchain ecosystem and also due to their utility. A token that gained a lot of popularity recently is Tether. Tether is a token backed by the US dollars from a user’s bank account.
The idea of behind it is very simple. A user/investor that holds USD in a bank account can issue tokens according to their account balance. The value of 1 Tether is $1, and it was created on the Bitcoin blockchain with the Omni protocol similar to Ethereum’s ERC-20. The similarities come from the creator of Ethereum, Vitalik Buterin who worked on the Omni project when it was called Mastercoin.
USDTether was created firstly to facilitate the transfer of national currencies and to give the users an alternative to Bitcoin and wallet audits which “are currently unreliable”, according to CryptoCompare.
“USDT provides an alternative to Proof of Solvency methods by introducing a Proof of Reserves Process.” CryptoCompare
Having an affiliation with Bitfinex, one of the world’s biggest liquid cryptocurrency exchanges, in the past months the relationship between them started to shake due to the banking agreements in the United States.
While the Governments worldwide are trying to create a regulatory framework which will protect the ecosystem from malicious users, Tether raises a strong question. What will happen if it will be used for illegal activities? With the recent accusations involving North Korea’s misusage of bitcoin, the Governments are trying to move quickly and find solutions to block out any possibilities for the cryptocurrencies to be misused.
The legitimacy of Tether is still under discussion but one thing is for certain, if the regulators decide to remove Tether’s access to the US dollar it will disappear.