DEFINITION of 'Tether (USDT)'

Tether is a blockchain-based cryptocurrency whose cryptocoins in circulation are backed by an equivalent amount of traditional fiat currencies, like the dollar, the euro or the Japanese yen, which are held in a designated bank account. Tether tokens, the native tokens of the Tether network, trade under the USDT symbol.

BREAKING DOWN 'Tether (USDT)'

Tether belongs to a new breed of cryptocurrencies called stablecoins that aims to keep cryptocurrency valuations stable, as opposed to the wide swings observed in the prices of other popular cryptocurrencies like Bitcoin and Ethereum. That would allow it to be used as a medium of exchange and a mode of storage of value, instead of being used as a medium of speculative investments. (See also, Is Stablecoin the Answer to All Cryptocurrency Problems?)

Tether specifically belongs to the category of fiat collateralized stablecoins, that is – a fiat currency like the US dollar, the euro or the yen, backs each cryptocoin in circulation. Other stablecoin categories include crypto-collateralized stablecoins, which use cryptocurrency reserves as collateral, or non-collateralized stablecoins, which don’t have any collateral but operate in a way similar to that of a reserve bank to maintain the necessary supply of tokens, depending on the economic situation.

Tether was specifically designed to build the necessary bridge between fiat currencies and cryptocurrencies and offer stability, transparency and minimal transaction charges to users. It is pegged against the US dollar and maintains a 1-to-1 ratio with the US dollar in terms of value. However, there is no guarantee provided by Tether Ltd. for any right of redemption or exchange of Tethers for real money – that is, Tethers cannot be exchanged for US dollars. 

Tether was launched as RealCoin in July 2014 and was rebranded as Tether in November by Tether Limited, the company that is responsible for maintaining the reserve amounts of fiat currency. It started trading in February 2015. In November 2017, it was allegedly hacked with $31 million worth of Tether coins stolen, after which a hard fork was performed. In January 2018, it hit another hurdle as the necessary audit to ensure that the real world reserve is maintained never took place. Instead, it announced it was parting ways with the audit firm.

Tether token can be transacted on popular cryptocurrency exchanges that include Binanace, CoinSpot, BitFinex and Kraken. (See also, What Is Kraken?)

RELATED TERMS
  1. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. ...
  2. Fiat Money

    Fiat money is currency that a government has declared to be legal ...
  3. Bancor (BNT)

    Bancor blockchain protocol allows users direct zero/low fee conversion ...
  4. Crypto Token

    Crypto tokens are representation of a particular asset or a utility ...
  5. Coincheck

    Coincheck is a Tokyo-based cryptocurrency exchange and digital ...
  6. Monaco MCO (Cryptocurrency)

    The Monaco cryptocurrency platform offers its own virtual coin, ...
Related Articles
  1. Tech

    Tether Issues $300 Million Worth of New Tokens

    Since the issue, Tether—accused of artificially propping up crypto prices—has seen prices rise.
  2. Tech

    Bitcoin Prices React to Tether Subpoena and South Korea News

    Bitcoin prices tanked after the CFTC issued subpoenas to tether, but were buoyed by news from South Korea.
  3. Tech

    Is Stablecoin the Answer to All Cryptocurrency Problems?

    Stablecoins are non-volatile cryptocurrencies offering price-stability which makes them suitable for use as standard currencies
  4. Tech

    Crypto This Week: Bitcoin Price Plunged Below $8,000

    Bitcoin's price tumbled to its lowest value in months as the cryptocurrency bloodbath continues. Why?
  5. Tech

    Gold and Blockchain: An Unlikely Power Couple

    A cryptocurrency that derives its value from physical gold could provide a hedge against volatility.
  6. Tech

    Bitcoin Mining Market Hacked: $70M Stolen from NiceHash

    The mining platform NiceHash is investigating the theft of 4,736 bitcoins in a brazen hack.
  7. Tech

    Cryptocurrency Market Cap Reaches Record High of $30 Billion

    The market capitalization of all cryptocurrencies continues to grow at an incredible rate.
  8. Tech

    How to Identify the Next Big Cryptocurrency

    As new bitcoin millionaires are minted, investors are looking for the next big thing in cryptocurrencies.
  9. Tech

    Winners Among The Top 10 Most Traded Cryptocurrencies

    The top 10 most-traded cryptocurrencies accounted for as much 96.5% of overall market cap at the beginning of 2017.
  10. Tech

    Which Cryptocurrencies Will Survive A Crash In The Markets?

    There are 1,385 cryptocurrencies on the market today. Some experts say 90% would not survive a crash.
RELATED FAQS
  1. Is fiat money more prone to inflation than commodity money?

    Learn more about commodity and fiat money and some of the differences between them. Find out when the U.S. abolished the ... Read Answer >>
  2. What is the difference between fiat money and legal tender?

    Learn more about fiat currency and legal tender. Find out how these terms are used by economists to describe different types ... Read Answer >>
  3. What is the difference between fiat money and representative money?

    Learn the main differences between fiat money and representative money. Differences include actual physical currency and ... Read Answer >>
  4. What are the advantages of paying with Bitcoin?

    Learn how payments made with Bitcoins offer certain advantages over standard currency, including user anonymity, no taxation ... Read Answer >>
Hot Definitions
  1. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  2. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  3. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  4. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  5. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
  6. Interest Coverage Ratio

    The interest coverage ratio is a debt ratio and profitability ratio used to determine how easily a company can pay interest ...
Trading Center