Tether's (USDT) Market Cap breaks a $250M. A word of caution to all that hold it, and a case for why bitUSD is a superior alternative.

Tether.to (originally called Realcoin) is an Isle of Man and Hong Kong based company that has been around since 2014. It belongs to the same parent company as Bitfinex. Tether tokens (USDT) are backed 1:1 with real USD in Tether's bank account. Or at least this is the case on paper - their fiat bank account is obviously not on a blockchain, so there's not very much we can do other than take their word for it. More recently, the company has also launched EURT tokens that are pegged to the Euro in value, backed by EUR in their fiat bank account.
USDT is traded in substantial volume on Poloniex and Bitfinex. It is also listed on Kraken, Liqui, Cryptopia, C-Cex, and the DEX via OpenLedger's gateway. A month ago, USDT's market cap was only $60M, but in the recent bear market it has ballooned to over a quarter billion dollars as traders flee to perceived safe havens in hopes of preserving their purchasing power.

In this modern age, we have all been effectively conditioned to click "I Accept" without reading when presented with Terms of Service - because ain't nobody got time to read all that. Terms of Service agreements are long, boring, and for the most part unintelligible to anyone that lacks a law degree. The amount of harm that can potentially come from failing to read them is generally quite limited, as most are presented by service providers that are not being trusted with substantial sums of money. Tether no doubt takes advantage with this fact. Buried in the middle of Tether's ToS is the following clause:

PURCHASE AND REDEMPTION OF TETHERS: The Site is an environment for the purchase and redemption of Tethers. Once you have Tethers, you can trade them, keep them, or use them to pay persons that will accept your Tethers. However, Tethers are not money and are not monetary instruments. They are also not stored value or currency.
There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money. We do not guarantee any right of redemption or exchange of Tethers by us for money. There is no guarantee against losses when you buy, trade, sell, or redeem Tethers.

IANAL, but unless I'm completely misreading that, it explicitly states that they have no contractual obligation to redeem Tether tokens for fiat currency. I thought USDT is supposed to be safe because it is backed 1:1 by fiat currency? How is this different from getting the world comfortable with USD as a reserve currency because it is backed by physical gold only to end the Bretton Woods system by removing the underlying backing asset?

This is the clause that immediately follows:

NO CLASS PROCEEDINGS: You and we agree that any party hereto may bring claims against the other only on an individual basis and not as a plaintiff or class member in any purported class or representative action or proceeding. Unless the parties agree otherwise, any adjudicator of any claim—whether judicial or otherwise—may not consolidate or join more than one party’s claims and may not otherwise preside over any form of a consolidated, representative, or class proceeding. Any adjudicator of any claim may award relief, including monetary, injunctive, and declaratory relief, only in favor of the party seeking relief, and only to the extent necessary to provide relief necessitated by that party’s claim(s). Any relief awarded cannot affect other users of the Site or of any Services.

So by accepting their terms of service, you waive your right to participate in class action lawsuits against them, that would presumably result directly from their failure to exchange the tokens they issued for the underlying asset collateralizing them. If Tether goes tits up, claims must be brought on an individual basis, which in all likelihood would take far longer than the statute of limitations for seeking restitution. I like to imagine that one would be hardpressed to find a judge that would view this clause in the agreement as valid and enforce it accordingly, but I would not bet any money on it.

As is the case with most entities interfaced with the legacy financial system, Tether requires extensive KYC verification in order to convert between USDT and USD.

Unlike Tether, bitUSD/bitCNY/HERO and other SmartCoin assets issued by the DEX are permissionless and require no counterparty trust. They are backed with collateral (at a minimum of 1.75x their value) held in a smart contract enforced by an incorruptibly honest robot - the DEX itself. They maintain their pegs to the assets they derive value from by virtue of market forces and without the need for a central authority that enforces the peg. Even in times of great volatility in the price of BitShares (the underlying collateral backing all SmartCoins), the peg has been maintained.

Personally, I refuse to touch Tether with a 10-foot pole unless a substantial arbitrage opportunity presents itself that requires USDT to complete a triangle. I urge any readers that hold USDT to research alternatives and weigh any risks of holding Tether they may have previously been unaware of accordingly. If in the course of your research, you conclude that bitUSD is indeed superior to USDT, I encourage you to contact the exchanges you trade on requesting that they list it.

Edit: If you do not already have a BitShares wallet, you can register one here.