Clearing Up Misconceptions: This Is How Tether Should (and Does) Work

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GameOfCoins
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Clearing Up Misconceptions: This Is How Tether Should (and Does) Work

Sat Jun 16, 2018 7:51 am

There is substantial controversy surrounding Tether, a cryptocurrency that claims to be pegged to the U.S. dollar. According to Tether, each Tether token is backed by one U.S. dollar, held in the full reserve of Tether. But the existence of the U.S. dollars pegging Tether has been called into question. Moreover, worries exist that Bitfinex has been using Tether to the prop up the price of Bitcoin.

Research into Tether shows that misconceptions exist regarding how Tether functions. These misconceptions, in turn, may be contributing in part to the existing controversies. By better understanding how Tether functions, it may be possible to provide some clarity. Analysis of how Tether functions, for example, shows that it is not possible to prop up the price of Bitcoin on Bitfinex through Tether — regardless of whether or not these tokens are backed.


Since Tether is only available as a withdrawal option and cannot be used in trading pairs on Bitfinex, it is, therefore, not possible to prop up the price of bitcoin using Tether tokens on Bitfinex. This conclusion, however, does not disprove the theory that Tether has been used to prop up the price of bitcoin elsewhere. In their previously mentioned paper, Griffin and Shams analyze how Tether tokens are moved to other exchanges and have been used to stabilize the price of bitcoin on these exchanges.


https://bitcoinmagazine.com/articles/cl ... does-work/

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