Tether (USDT): A Big New Threat Is Coming
The use of Tether (USDT) on the cryptocurrency market is facing imminent expulsion as the new USDX looms. As far as stable coins go, USDT has been the benchmark, with the crypto-coin that is pegged against the US dollar playing a big role in cryptocurrency trading.
The highly anticipated arrival of USDX protocol in April this year is going to push USDT, and it may be the signal towards the end of Tether. As much as Tether has helped make the buying of cryptocurrency through fiat possible, its very nature has widely been criticized. Critics believe that Tether is a disaster waiting to happen.
Tether isn’t open enough
Tether operates under a kind of regulatory risk. The company has failed to undertake an audit, choosing opaqueness that only serves to raise more suspicions. And this kind of opaque operation is said to be due to Tether’s relationship with financial institutions.
The biggest claim revolves around its relationship with cryptocurrency Exchange site Bitfinex. What leads to these sentiments is the revelation that Tether Limited that owns Bitfinex also owns Tether, raising questions about conflict of interest.
Especially scrutinized is the fact that Tether (USDT) may be a front to help Bitfinex offer on-margin trading.
But that isn’t all. Tether and Bitfinex have been separately accused of using the exchange and their position to influence prices of Bitcoin as well as USDT.
It has been noted that Bitcoin prices and USDT tend to follow a similar trajectory. This drives the demand for USDT and thus providing Tether Limited with an undue advantage.
As we speak, Tether (USDT) remains the most integrated form of digital-to- fiat currency exchange provision in the market. You can easily buy and sell or utilize tether at cryptocurrency exchanges like Bitfinex, GoCoin, and Shapeshift.
Tether claims that every USDT is backed by a real US dollar in the ratio of 1:1. This assertion has been questioned, with critics wondering if that is possible.
There are 2,157,030,844 USDT in circulation, and many wonder if there is that much in terms of US dollars. Perhaps this explains why Tether has moved to reassure the industry that all the USDT in circulation is backed by a US dollar in their custody.
The reason Tether is said to be stable is because it helps you to easily convert your fiat cash of whatever denomination into a form of digital money. It is these digital forms of money that you can use to buy bitcoin on a site that doesn’t accept cash.
USDX protocol offers Stablecoin 3.0
The USDX protocol is billed as a decentralized Stablecoin platform that will bring third-generation capabilities to the blockchain. USDX seeks to eliminate the inconsistencies of generation 2.0 Stablecoins like Tether.
USDX will be collateral-free, removing counterparty risks by enabling an immutable monetary ecosystem that would crucially be decentralized. Tether is highly centralized, something that goes against the principles of a decentralized blockchain.
When it launches in April, USDX protocol will provide an enabling ecosystem from which new Stablecoins will be created. This will happen in a trustless environment where intermediaries won’t be able to play any role.
To mitigate Tether’s lack of transparency, the USDX protocol will utilize smart contracts. As a result, USDX is expected to have a robust security platform that will provide for cryptocurrency trading in a trustless manner.
The USDX protocol is able to adjust all variables that might affect cryptocurrency value when measured against stablecoins. To ensure that the system is stable, the USDX platform utilizes three mechanisms in its protocol.
There is the “Variable Block Reward” that will work alongside the “Mining Lock” to allow the contraction or expansion of the current circulation supply. The third one, “Variable Transaction Fee” will help ensure the system is working at optimal velocity.
In short, the USDX will be a better proposition to institutions and cryptocurrency exchanges. At the very least, a majority of the top exchanges would prefer to have a stablecoin that provides what USDX offers. And that could spell an end to Tether.
For Tether (USDT) and Bitfinex, the best way forward is to open up and hope that authorities don’t find any fishy deals tethered in the dark.