Checking the security and transparency of Tether’s support
What is Tether digital currency and what is its use?
Security Tether, known by the symbol USDT, is a highly popular stablecoin in the cryptocurrency market. Security Tether is backed by real assets such as fiat currencies (such as dollars) or precious metals, ensuring its value remains stable and less volatile compared to other digital currencies. Developed with the goal of providing a secure digital asset whose price remains roughly constant regardless of market conditions, USDT to Dirham conversions are facilitated on platforms like Dubai CryptoCurrency Exchange Madvex. Security Tether is used by traders to maintain stable liquidity and hedge against losses due to extreme price fluctuations. Dai, Tera, and Dollar Pex are among Security Tether’s main competitors in the stablecoin market.
What are the benefits of Tether?
Developed in 2014, Tether has several advantages that make it one of the most popular stablecoins on the market. The following are the advantages of Tether:
Stability and trust:
Most users consider Tether to be a stable and reliable cryptocurrency, and this coin has been traded at a value of $1 per unit since its inception.
Preservation of capital value:
Buying USDT tokens helps you preserve the value of your capital despite the extreme volatility of digital currencies.
With the support of dollar reserves:
The creator of Tether claims that this digital currency is fully backed by dollar reserves.
Top ranking in the market:
Tether ranks third in terms of market capitalization.
wide usage:
Tether is used in a wide range of cases, including buying goods, paying loans and subscribing services.
What are the disadvantages of Tether?
Despite many advantages, Tether also has disadvantages that should be mentioned:
Lack of transparency:
Tether has not made much effort to transparently explain its performance to the public. This has raised concerns about Tether’s security.
Accusations of money laundering and market manipulation:
There have been allegations of Tether being used to manipulate the price of Bitcoin or engaging in criminal money laundering activities.
Concentration of reserves in limited wallets:
A large amount of Tether coins are stored in only 104 wallets, which can affect the USDT rate.
Not fully supported by fiat reserves:
The Tether site initially claimed that each Tether token was backed by one US dollar in its reserves, but this was later reduced to 74%.
How does Tether work?
Before we talk about the security of Tether, it is better to answer the question of how Tether works. When a user stores fiat currency in Tether and sells the fiat currency to buy USDT, the corresponding digital amount is issued by Tether as a token. USDT can then be sent, stored or exchanged. If the user sells 100 dollars to buy Tether, he will receive 100 tokens according to the ratio of 1:1 Tether to USD. When users convert tokens into fiat currency, Tether coins are destroyed and out of circulation.
Like most cryptocurrencies, Tether runs on the blockchain platform. Tether tokens are supported on various blockchains such as Omni, Liquid, Ethereum and Tron. This makes Tether easily transferable between different users and has high liquidity.
How is Tether security guaranteed?
Tether doesn’t have its own blockchain and works on platforms like Bitcoin, Ethereum, Tron, Algorand, and IAS. The security of Tether is handled by the hash algorithms of these networks. These networks use Proof of Stake (PoS) and Proof of Work (PoW) consensus algorithms to keep things secure. So, the safety of Tether also depends on how secure these blockchains are. If you’re looking to convert USDT to Dirham, platforms like Dubai CryptoCurrency Exchange Madvex can help you out easily.
What things threaten the security of Tether digital currency?
The Tether site claimed in 2019 that this stablecoin is backed by fiat currencies and cash equivalents (and sometimes other assets from affiliated entities). But for now, the site simply states that all Tether tokens are pegged 1:1 to their respective fiat currency and are 100% backed by Tether reserves.
Adam Carlton, CEO of the Pink Panda wallet, believes that in Tether’s history, there hasn’t been much transparency about the coin’s backing. He has stated that such a background is legally dubious and to date it has not been clearly established what is the source of its real reserves. As a result, it is believed that these reserves are essentially from an unknown source of commercial paper.
Other cryptocurrency experts believe that cryptocurrency users and traders have accepted that Tether is not “fully” supported in the cryptocurrency market and that Tether’s security is at risk. James Putra, the company’s vice president of product strategy, stated that markets are primarily focused on ease of use. It is quite clear that Tether is not backed by the dollar.
3 of the most important reasons to question the security of Tether:
1. Only 2.9% of Tether is backed by cash reserves
As mentioned, the price of Tether depends on the dollar, and the company sponsoring Tether has announced that each Tether coin is connected to one US dollar. The problem is that if all the investors decide to withdraw their money, there is no guarantee that the company will have enough cash to pay because only 2.9% of the total US dollar supply is in cash. . The company behind Tether initially claimed that each USDT is backed by one US dollar in its reserves, but the reality is more complicated: Tether is backed by a combination of:
- Cash and equivalents
- Guaranteed loans
- Corporate bonds
- Other investments
2. Teter has had problems with the New York Attorney General
New York authorities have enacted some of the strictest regulations for operating in the cryptocurrency market, and their courts have been the most active in prosecuting crypto-related crimes. In February, after a 22-month investigation, New York’s attorney general charged Tether’s parent company (iFinex) with illegally concealing losses. Letitia James stated that Tether’s claims that the cryptocurrency is always backed by the US dollar are false. iFinex was forced to pay a fine of $18.5 million and is no longer allowed to operate in New York. It must also provide quarterly reports on its reserves. The company denies any wrongdoing and insists on Tether’s high security.
3. The failure of Tether will affect the entire crypto industry
The Federal Reserve is generally concerned about stablecoins, and in the meantime, it puts more emphasis on the security of Tether. At the end of June, the head of the Federal Reserve identified Tether as a potential challenge to financial stability. He told Yahoo Finance that if you look at the Tether and Asiblecoin portfolios, you’ll see that they’re basically a money market fund, but with more risk.
Effective factors in security
What is Tether?
As mentioned, Tether works on the blockchain platform and users can track transaction information by having Tether’s tracking code or transaction hash. The security of Tether is provided by the hash algorithms of these networks. These networks secure themselves using Proof of Stake (PoS) and Proof of Work (PoW) consensus algorithms. Therefore, the security of Tether also depends on the security of these blockchains.
Is it safe to buy Tether?
Technologically, buying Tether is completely safe. Tether is a centralized token developed on Ethereum’s decentralized blockchain and backed by US dollar reserves. But it should be noted that Tether Ltd may go bankrupt or the dollars deposited with them may be lost. The US dollar may also depreciate and affect your purchasing power.
Legality of Tether
In Iran, there are no special laws for the use of digital currencies, so using Tether and other digital currencies is not considered a crime. However, you should be aware of Tether-related investment schemes that may be scams or Ponzi schemes.
Result
Tether is one of the most popular stablecoins in the digital currency market and has many advantages. But there are concerns about its transparency, security and storage support. Therefore, before investing in Tether, it is better to do your research and use Madvex exchange to buy and sell digital currencies to ensure the security of your transactions.
