Pros and Cons of the Tether

By Prashant Jha

Tether is a unique cryptocurrency in many senses, launched in 2015; the tether aims to represent a digital cryptographic value equivalent to Fiat currency, US Dollar to be exact. Tether token at the core is very much a cryptocurrency, with features such as the decentralized form of data storage and processing.

However, what makes it distinct in comparison to mainstream cryptocurrencies such as Bitcoin and Ethereum is it centralized emission and the rate which is always kept at an equivalent to one dollar.

In this article, we will look at some of the major Pros and cons related to this unique form of cryptocurrency.

You May Also Read: A Beginner’s Guide To Stablecoins

Pros Of Tether

  1. The USDT can be used to transfer money over the decentralized network at a cheaper and faster rate. Since the token has been created in a way that it always holds an equivalent value of 1 US dollar, it can be used to transfer money to anyone across the network. The token still retains all the features of a mainstream cryptocurrency If a user makes use of the private wallet compatible on the blockchain network, the transaction fee is zero. However, in case of any third party wallet, there will be charges as set by the third party wallet system. A user still needs to pay a small amount over fiat deposition, usually 1 USD. The advantage of sharing money over the USDT network is that people won’t suffer any loss of fund due to market capitation as the value of USDT is fixed.
  2. The primary advantage of using USDT on the tether network is the reselling option a user gets on the platform itself. You can withdraw your USDT in fiat currency as well. However, withdrawal in the fiat currency would incur charges over bank transfer. As soon as you convert your USDT in fiat, the exchange deletes the token thus the change in fiat value won’t be a responsibility of the network. The stable value stays as long as you are on the platform.
  3. USDT also help other crypto platforms to enhance their platform as due to legal bindings they cannot use fiat on the platform. This issue is where USDT comes in as a savior since the token holds an equivalent value of USD. 
  4. USDT is a boon for new entrants in the crypto world. They can make their platform compatible with the tether. In this way, the new startups can exchange their fiat funds for USDT and keep it as a backup fund. The stability factor of the token would mean that their investment never goes into the loss. Currently, these type of backup funds makes up to $450 Million, which can be compared to the total amount of USDT in circulation. 
  5. The token is also said to be very easy to integrate other cryptocurrencies through a specific program. There are many such use case programs available, such as bitcoin wallet integration with the tether.

Cons of Tether

  1. The primary advantage that crypto holds over traditional fiat currencies is the anonymity feature. However, USDT does not provide the same. To make purchases of USDT, one needs to provide various documents confirming the identity of the buyer before opening an account. However, the newly formed EXMO exchange provide the option to remain anonymous and does not require any specific identity confirmation.
  2. The value of US Dollars is not fixed, so the whole aura of 1 USD does not remain true in all senses. However, the point to be noted here is that the volatility level has never exceeded 2-3%, but still, it is not zero. 
  3. There is no provision for public mining of tether, the company holds the sole rights of doing the same. The reason behind it still not entirely clear, but it is quite understandable as it’s not easy to maintain the fixed value against USD unless it is controlled solely by the company.

You May Also Read: Best Altcoins To Invest In 2018

Final thoughts

The main idea of a stable coin in itself is a big step towards a safe blockchain ecosystem. Currently, many new entrants who cannot afford the capital or volatile market buy these tether as a reserve and then use it later as the price is stable to the dollar. However there is no provision to mine the token which might not be a great idea, but to keep the tether valued at $1, it is the necessary step.

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Prashant Jha

As a content writer Prashant believes in presenting complex topics in simple laymen terms. He is a tech enthusiast and an avid reader.

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