Understanding Tether (USDT)
What is Tether?
Tether (Also known by its symbol as USDT) has grown to be the third-biggest digital currency in the world in terms of market value. This digital currency has developed speculations (and even worries )among economists some of these finance professionals consider the increasing market value of tether to be quite risky to the stability of the financial market.
Tether is very different from Bitcoin and several other virtual currencies. Unlike most other cryptocurrencies, the tether is a stablecoin that is tied to real-world assets. In April 2021, bitcoin experienced a surge in its market value, shooting up from around $30,000 to $65,000. Its current value is now almost half of its-time highs. Tether is quite different from Bitcoin in that, the value is relatively stable. Besides this, it was designed to be pegged to the dollar.
Tether (USDT) price is always around $1. However, this is not always so. Tether’s value can fluctuate once in a while as well. Change in the price of tether has led to the loss of money by investors.
Who is The Owner of Tether?
iFinex Inc., a Hong Kong incorporated holding firm that established Bitfinex a cryptocurrency exchange owns Tether.
Sadly, at this juncture, little is known concerning the holding company and the stakes it has in various companies.
Jean-Louis Van Der Velde (CEO) and Giancarlo Devansi (CFO) the exact individuals that are behind Tether are leading the company itself.
What Method Does Tether Use to Earn Money?
Tether generates money from different payments by giving loans to other organizations. It also makes money from investments.
Let us examine its sources of revenue here:
1. Tether Generates Revenue Through loans:
Tether generates revenue from issuing loans to different enterprises and organizations that will in turn pay with interest.
For instance, in October 2021, Tether issued a loan of $1 billion to cryptocurrency lender Celsius Network. Alex Mashinsky the Chief Executive Officer of the company confirmed after some days that the network would pay five to six percent interest annually. In essence, Tether would make between $50 million to $60 million annually from that only that particular loan they issued out.
In September 2021, tether received much criticism after reports showed that it had likewise given loans of billions of dollars to big Chinese companies, which financial-market funds usually avoid because of the high risk involved.
Usually perceived as the biggest risk to Tether is issuing loans to businesses that may not be able to repay. If at any time, several tether holders choose to withdraw their money, then Tether has to hold the important reserves to fulfill those demands.
If a considerable number of people owing do not pay on time, then Tether will not be able to fulfill those withdrawal demands.
2. Tether Generates Revenue Through Fees
A stream of revenue for the company is requesting fees on withdrawal, verification, and also deposits.
Tether charges every customer that plans to verify their account $150. Their accounts must be verified for them to be able to withdraw and deposit money with Tether.
Tether charged withdrawal and deposits fee apart from its fee for verification. Customers can just directly trade with Tether if they deposit at least $100,000.
Tether requests for payment of 0.1 percent for deposits. A payment structure looks like this is a withdrawal fee. But, Tether always applies a withdrawal fee of at least $1,000.
This implies that even when a user cashes out $200,000 (same as a $200 few theoretically), it is required of him to pay $1,000.
Unlike financial organizations and banks, Tether does request any payment to send money from one account to another for instance.
Rather, Tether applies the payment to the exchanges like FTX or Coinbase, which it functions alongside. More so, customers are required to pay for gas on the blockchain that they exchange on.
3. Tether Generates Revenue Through Investments:
Also, tether makes a minimal portion of its income from investing in other companies and taking part in their development.
For example, in January 2021, Tether put $1 million into a studio specialized in the development of the blockchain game. The name of the company is Exordium. The investment provided Tether with a pro-rata right to 20 percent of the revenue generated by Exordium.
A strategy that most exchanges like Coinbase or Binance often use is investing in the cryptocurrency ecosystem.
Tether generates profit from those investments either by selling its shares beyond the prices they were bought or by being involved in the company's revenues.
Similar to its loan initiatives, however, this can be a potential risk for the firm and its customers. If several of Tether's investments do not yield, Tether can not be able to grant withdrawal demands, which could lead to its tokens not having value anymore.