Updated: Jan 7, 2019
In early 2017, Tether Limited took the industry by storm, claiming to offer a sort of “haven”, more formally known as a stable asset, for investors jumping in and out of the volatile world of digital currencies. Their method is simple; for every Tether (USDT) on the market, a US dollar (USD) is held in reserve that backs it and for every US dollar (USD) that leaves reserve, a Tether (USDT) is removed from circulation, ensuring a constant 1:1 US dollar (USD) peg. The idea is innovative and a definite solution for volatility.
Tether (USDT) is used more than any other comparable stable asset due in part to its mass integration throughout 2017 with the worlds leading digital asset exchanges including Bitfinex, Poloniex, Bittrex, and Binance. The pitch was an easy sell to exchanges: Place the responsibility of accounting for fiat holdings in the hands of Tether rather than the exchange itself and then offer the same currency pairs for Tether that had been previously offered for US Dollars. This means that if you wish to trade Bitcoin for US dollars (USD) on most major exchanges, chances are you’ll be credited with Tether (USDT) instead of US dollars (USD).
Sounds great, right? In theory, it does but Tether Limited, has not welcomed any official third party audit to attest for a true $1 valuation for every Tether (USDT) in circulating supply. This has inherently weakened the perceived value and stability of the asset, seeing price fluctuation as much as 10% from $1, and subsequently defacing the value of trust instilled in exchanges to oversee and secure investor funds.
Between the constant manipulation Tether Limited has over its own supply and the strong lack of transparency for accountability, many investors have kept their stack away from such shady dealings. Fortunately, major players within the space, like TrustToken, and fiduciary exchanges like Gemini Trust Company, saw these issues and aimed to provide a more legitimate version of the asset. Enter True USD (TUSD) and Gemini Dollar (GUSD). Both digital assets are built on the Ethereum protocol, are exchange independent, require proper identity screening before use and represent a true 1-for-1 USD collateralization through public audits performed by various third parties. The attestations for Gemini can be found here and for TrustToken, here.
These alternative stable assets seem to solve every problem that Tether ever faced but could not beat its time to market during the 2017 price surge and its versatility in sheer number of currency trading pairs its offered in. Aside from being listed on its native platform and second largest fiduciary exchange behind Coinbase, the Gemini Exchange, the Gemini Dollar is listed on only one other major exchange, HitBTC, and offers trading pairs only in Bitcoin, Ethereum and Litecoin. The case is similar for True USD as it is also only offers trading pairs for the same three digital currencies, however, it is listed on quite a few major exchanges including Bittrex, Binance and HitBTC. Many hope that as the industry matures, the versatility and practicality of such alternative stable assets will surpass that of Tether’s (USDT) so as to become the leader in asset-backed digital currencies. After all, the first solution to any problem isn't always the best solution.