Tether Dominates The Stablecoin Space After Six Years Of Operating

Tether dominates the stablecoin space after six years of its initial operation. Once it was launched, it served as a fix for the crypto community but now it has become a coin that is here forever. How did that happen?

When Tether was launched in 2014, it served a critical need for the community and it was a US dollar-denominated stablecoin that grew to dominate the crypto space. The token found support among the traders that wanted a hedge against volatile crypto assets such as Bitcoin and Ethereum. However, there were many controversies around Tether. The CTO of the platform Paolo ARdoino explained that Tether enjoyed the ‘’first-mover advantage’’ in the space:

 “In 2014, members of the crypto community got together after seeing a big problem in the space. It was far too slow to move between fiat and crypto to make trades on price swings for Bitcoin.”

The largest trading pair at that time was between Bitcoin and the US dollar. However, it took up to five days to complete a traditional bank transaction, the larger spreads started to appear on multiple exchanges. In just a few days, the banks needed time to confirm the transactions and the price of bitcoin changed dramatically. The spread of exchanges refers to the difference between the price that the buyer is willing to pay the highest and the lowest price that the seller will accept for the asset.

The bid prices can be seen as the demand for the asset and the ask prices can be considered as the supply for the asset. When the spread is low, it indicates that the market is liquid. When the spread is higher, the market is illiquid. Once Tether was created, the bitcoin market was illiquid and the spread got bigger. Ardoino decided to offer a digital version of the USD in order to improve the transaction speed and make trading bitcoin even more liquid. They created a token that was equal to the dollar called USDT.

Tether dominates the market as it always has to create new tokens in advance of issuance to limit the number of times that will expose its creation keys to risks. Due to the high volume of the coin, Tether may be one of the most heavily coveted assets for malicious actors. For each USDT coin in circulation, Tether claims that it has an equivalent amount of reserves.