Tethers is a fiat pegged digital currency. All Tethers are first issued as tokens on the Bitcoin blockchain through the Omni Layer protocol. Each issued and circulated Tethers is pegged to one US dollar. The corresponding total amount of US dollars is stored in Hong Kong Tether Limited (i.e., one Tether coin is one US dollar).

When the bear market comes, investors hope to convert digital currency into fiat currency. However, many digital currencies do not have direct channels to exchange with fiat currency. They need to be converted into mainstream cryptocurrencies such as Bitcoin first, and then into fiat currency. During a bear market, trading in bitcoin was also slow, so there was a risk of success. Under such a process, investors need to pay a high cost to obtain fiat currency. Stablecoin is born based on this background, to solve the pain points of exchange for investors, to provide the convenience of converting legal currency.

Since the birth of Bitcoin, the cryptocurrency market has developed rapidly and is huge. First, the number of digital currencies keeps growing. Since January 2009, when the first cryptocurrency bitcoin was launched, by the end of 2018, there were more than 2,000 cryptocurrencies in the world. Second, the total market value of digital currencies has grown substantially. Before May 2017, the market value of digital currencies was small, but since then it has grown rapidly, peaking at nearly $800 billion in January 2018. Since then, the total value of digital currencies has declined, but it still tops $100 billion. At present, the need for staboin is booming with the explosion of the whole crypto market!

The core requirement of USDT is to build a currency stability mechanism based on fiat mortgage, which takes 100% fiat deposit as issuing reserve to ensure that stable token and anchored fiat currency can be redeemed at parity at any time. Take USDT as an example, which is essentially a depositary receipt of a non-financial institution. Tether promises to convert 1USDT into $1 at any time, or reverse it.

The USDT is issued and distributed in the following steps: First, users deposit dollars into Tether's bank account; Second, Tether creates Tether accounts for users and places digital currency corresponding to the dollars they deposit in the accounts. Third, users can trade USDT through exchanges or over-the-counter markets. Fourth, the user returns the USDT to Tether to redeem the fiat currency. Five, Tether destroys the USDT and returns the dollars to the user's bank account.

USDT is also widely used by major exchanges as the medium of exchange between local currency and other digital currencies. Therefore, many people who speculate on coins like to hoard USDT, because as the equivalent exchange of digital currency, it can be flexibly used in major exchanges.

The USDT anchors the DOLLAR and maintains a 1:1 exchange ratio. That is, for every USDT Tether issues, it must add a dollar of reserves to its account. In 2014, Tether ISSUED the first stablecoin (Tether USD, USDT for short), which is also the largest stablecoin at present. After USDT, stablecoins backed by digital assets and algorithmic stablecoins were issued one after another. At present, there are more than 20 stablecoins in the market, and many stablecoins are ready to be issued. These stablecoins are issued by different companies with different issuing mechanisms, collateral and circulation processes, but they are all designed to maintain a relatively stable value and bridge the gap between fiat coins and other digital currencies.

1. USDT does not have its own public chain, but uses bitcoin OP_RETURN to store USDT transaction information in bitcoin transactions. 3. USDT wallet address is equivalent to bitcoin address 4. USDT transfer actually Bitcoin transfer (understand why the price of a USDT is about 7 yuan when the exchange rate between RMB and US dollar is 6.3)

USDT is issued and traded using the Omni (formerly Mastercoin) protocol, which is a 2.0 currency based on the Bitcoin blockchain. Parameters such as transaction confirmation of USDT are consistent with bitcoin. Users can wire DOLLARS via SWIFT to a bank account provided by Tether or exchange them for USDT. Redeem dollars when operating online. Users can also exchange Bitcoin for USDT. Tether strictly guarantees 1:1 reserves, or $1 for every USDT token issued in a bank account. Users search for funds in Tether to secure funds.

Stability! Teda may be more reliable than most digital currencies

Stablecoin USDT status is being challenged, USDC has become its biggest competitor

The demand for stablecoins is long-term and will continue to grow as the influence of digital currencies increases. In the narrow sense, asset-backed currency has real demand. Compared with the direct use of fiat currency, stable currency has the convenience of exchange, use, preservation and circulation. Credit is the core issue, in the short term will still be in the accounts, custody and other aspects of credit promotion. If fundamental issues are not addressed, it will be difficult for a single stabler to grow indefinitely. In the long run, with the intervention of traditional large banks and government departments, stablecoin will be truly stable.

It has great potential in the future, but we should also guard against the occurrence of risks.

Tether's portfolio of Commercial Paper is too risky; The decline of cryptocurrency will inevitably lead to a run on Tether and even risk transfer to the real economy;

An analysis of the USDT shows that the stablecoin was designed with good intentions. However, due to the lack of supervision, companies often fail to fulfill their commitments in the white paper in practice, which also leads to various problems. Each stablecoin in the market has its own market share. Every stable currency wants to be the market leader, so that it can have more say and gain more benefits. The USDT is also criticized for its transparency, and it is unclear whether it has enough dollars to support it. Other stablesoins also want to be better USDT, but when the market size of USDT is reached, it is expected that they will adopt the same operation method as USDT. For now, the issue of transparency will remain with the future USDT unless the banks' dollar reserve records are made available. As for the future market structure of staboins, in addition to players in the digital currency industry, there will be more sovereign currencies joining in. China's central bank's digital currency DCEP, which has been hot in the market recently, has started internal testing and is expected to be put into circulation this year. Libra 2.0 white paper has been released as a stablecoin target to provide financial services to billions of people. More than a dozen other countries have also launched their own central banks' digital currency schemes. I think USDT will continue to have a high market share in the short term. The market will always correct as it develops, and if there is a better stablecoin that can solve the current problems of USDT, the market will accept it. Of course, we are looking forward to the emergence of stable coins that users can feel comfortable using.

Bitcoin is owned and used by: (1) investment assets that are worried about the depreciation of their trading assets and are not settled in DOLLARS; (2) those who have been fighting in the digital currency market for a long time; (3) Those who are short bitcoin and are not willing to hold it for the next period of time. If you're one of those people, go ahead and own the USDT.