Tether has three remarkable characteristics.
- I just finished reading an interview of the CEO of the stablecoin called Tether, whose symbol is USDT. And I was impressed by three things;
Their size, The simplicity of their business model and Their focus on transparency.
First, their size.
The stable coin Tether, symbol USDT, is pegged to the US Dollar. Which means one Tether has a value of one US Dollar. The Tether Market Value of all existing Tether is 97 Billion US Dollars. That’s Billion with a B, 1000 times larger than a million.
Second, the simplicity of the Business Model.
- One dollar buys you one Tether, and one Tether can be redeemed for one US Dollar. When you buy Tether it allows you to preserve the value of your money in US Dollars. Around the world currencies are being devalued daily and at astonishingly high rates. People are reduced to po return by these hyper inflationary pressures. But the US Follsr is the world’s reserve currency, and all currencies are devalued against it daily. Which means they all are reduced in dollar value daily.
For example 80 Turkish Lira might buy 1 dollar on Monday. But on Friday 80 Turkish Lira might buy only 0.75 US Dollars. So your 80 Lira has been devalued against the US Dollar by 25 percent. All goods are valued in US Dollars so you can buy 25 percent less food on Friday if you save your money in Lira. But if you convert your Lira to US Dollars you can still buy a dollars worth of food on Friday.
While this example may be unimpressive to Americans who get paid in Dollars, all over the world dollar devaluation of currencies make it difficult, if not impossible for people to feed their families and provide clothing, shoes and shelter.
Now add to this complexity of buying US Dollars at a currency exchange, which is not possible for millions of people without access to banks and currency exchanges. Tether is as close as their phone. Tether makes currency exchange as simple as signing in and creating an account. People convert their paychecks to Tether in seconds. Now the purchasing power of their wages is preserved. They
Next the free market takes over and people accept Lira and Tether as a US Dollar proxy. If something is priced in US Dollars it can be purchased 1:1 with Tether.
Meanwhile since people use Tether as a store of value and Medium of Exchange, Tether buys short term US Treasury bonds with yields as low as 2 percent. This means Tether always has money for redemptions and Tether makes about one billion US Dollars per quarter in interest payments on these Treasuries. Tether does pay any interest to Tether holders because that would make them a security. And paying yield is complicated. Plus the main customer of Tether doesn’t buy it as an investment. They buy it to survive.
The Tether business model is simple because they know who their customer is what’s important to their customer. Tether focuses on making it simple for their customers to use Tether.
Third and last: Transparency.
- Life is full of ironies and cryptocurrency is also. But one of the biggest ironies about Tether is that Cryptocurrency Demi-Gods like Sam Bankman-Freid of FTX, Do Kwon of Terra Luna or Alex Maginski of Celsius frequently whispered that Tether was corrupt, and Tethers customers were at risk for losing all their money because Tether was making risky investments and using customers funds to buy real estate and lavish gifts for the owners of Tether.
- The irony is that they whispered that these practices would lead to Tethers downfall. And then it revealed that most of them were actually doing what they accused Tether of doing ! And it led to their downfall.
- While Tether is still here and growing.
- Ironically, these projects ended and their customers lost most of their money. While Tether kept growing and serving its customers.
- Its business model is simple. And the CEO says they stuck to it. They take dollars in, they buy US Treasuries and they redeem Dollars for Tether when the customer needs them. They have been audited and published an Attestation from a third party accountant firm that they have US Treaduries to back up Tether. In fact they have 105 Billion Dollars worth of assets because they reinvest their profits.
Summary
USDT or Tether is a simple business providing a simple service to a large customer base around the world, but largely in Asia , South America and the Middle East.
They proved these countries citizens with a easy way to preserve the value of their hard earned wages in a dollar equivalent, which not only acts as a store of value, but as a medium of exchange, but is easy to access from their mobile phone.
They earn investment income using the safest investment on earth: short term US Treasury Bonds which are extremely liquid.
This liquidity allowed them to pay 20 Billion dollars in redemptions following the collapse of Terra Luna and the panic that followed for two months.
Since then more then 20 billion dollars has flowed back into Tether, as the amount of deposits grew to 97 Billion Dollars. This make's it the 20th largest holders of US Treasuries, right behind the Central Bank of Germany.
Tether has been audited by a third party and published an Attestation that they are fully collateralluzed with US Treasuries. Tether may be the best success story of the cryptocurrency industry, focused on simplicity, transparency, honesty and customer service as a pathway to success.
