Longcaller

Tether

Tether is a cryptocurrency backed by fiat money.

Cryptocurrencies offer a trustless way to store and transfer money. However, they are very volatile.

Fiat money, like dollar or euro, require third parties, like banks, to store and transfer them. On the other hand, they are quite stable in terms of purchasing power.

Tether combines cryptocurrencies’ trustless exchange with fiat’s stability, by introducing a coin that is backed 1:1 by fiat money.

Tether works on the Omni Layer. Omni Layer is an open-source protocol that allows anyone to issue and trade tokens on Bitcoin blockchain. That way, the tether can be issued, transferred, and burned, and all these actions will be written on bitcoin blockchain.

Currently, there are dollar and euro on the tether. Other currencies may be added in future.

Tether Limited is a company that holds fiat money and issues tether tokens. When an individual or organization wants to buy tether, they can deposit money to Tether Limited and receive the tokens at 1:1 ratio. For example, if a person wants to buy 10 tokens, he needs to deposit $10 to the Tether Limited. Tether Limited then issues 10 new tokens and transfers them to that person. If someone wants to sell his tokens, Tether Limited will give him the money and burn the equivalent amount of tokens. That way, Tether Limited will keep the parity between circulating tethers and fiat money in deposit.

Users can transfer tether between each other. As all transactions are stored in the blockchain, a transfer of tether is as trustless and secure as a bitcoin transfer.

To guarantee that Tether Limited maintains 1:1 ratio of tokens and fiat, it proposes Proof of Reserves framework. The idea is to be possible for anyone to check that there are at least as much fiat money owned by Tether Limited as there are tether tokens. As tokens are issued on the public blockchain, anyone can find out the total amount of tether in circulation. As for fiat money, Tether Limited stores money in multiple banks and promises to release bank account balance with an audit by third parties.

Timeline

  • September 5, 2017: Release of monthly bank account audits made by TOPSUN CPAs & Co. tether.to
  • September 11, 2017: Collaboration with Ethfinex to issue tether as an ERC20 token on Ethereum. tether.to
  • September 30, 2017: Release of internal analysis of tether bank account by Friedman LLP. tether.to
  • November 19, 2017: Attacker stole about 30 million dollars in tether tokens from Tether Limited hot wallet. Tether Limited made the hard fork to ban the trade of stolen tokens and announced that they will not exchange these tokens for fiat money. tether.to
  • December 21, 2017: Tether Limited adds a feature to freeze accounts of tether holder to protect from future attacks. tether.to
  • January 5, 2018: Release of USDT and EURT tokens on Ethereum. tether.to
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