The crypto space has never been able to escape critics’ lenses. Be it Bitcoin or other altcoins- they all attract spotlights- though mostly projecting grey beams. The recent obsession has been with the touted “stable-coin”- Tether. Time to evaluate its real USD value…
Note : -
If you’re aware of the Tether facts, please skip directly to the last 2 subheadings; else sit up and take notice.
Tether- As inflated by Tether Ltd
Tether/ USDT is a blockchain based cryptocurrency which is allegedly pegged to the US dollar or Euro in a one-to-one ratio ( i.e. 1USDT = 1USD); claims to maintain a 100% backup for each and every USDT or EURT issued by Tether Ltd (or its partner in crime- Bitfinex) in their reserves (somewhere). Hence it is oftentimes referred to as “crypto-dollar”.
Owned and operated by iFinex Inc with a registered office in British Virgin Islands and is head quartered at Hong Kong (again somewhere).
The crypto currency is built upon the Omni Layer Protocol- which enables features such as smart contracts, user currencies and decentralized peer-to-peer exchanges.
The ironed out functioning of the redeeming process is elaborated in its whitepapers as below:
Currently, the total assets of Tether in terms of USD stand at $2,638,665,722.36 while it is €50,001,800.00 in terms of Euro (as per its Transparency papers), with a market cap of around $2.6 billion- which is ironically about 0.012% of US National Debt.
Bitfinex ~ Tether- Mischievously Inseparable
“Tether and Bitfinex have both, since day one, maintained strong, open relationships with banks, financial institutions, regulators, government agencies, and law enforcement. We are not alone here; this is standard practice for any globally compliant financial platform with millions of users around the world.”
...Reads a statement from Tether’s latest announcement titled as “Transparency update- FSS Report”
Bitfinex is the largest crypto currency exchange in the world established in 2012 and nestled in Switzerland (somewhere). The team consists of Phil Potter as the CSO, Giancarlo Devasini as CFO and a mysterious identity named as JL van der Velde as its CEO. The company is also posing as a candidate for Block Producer for the EOS.IO blockchain network.
Although, Tether and Bitfinex have constantly denied any sort of interoperability, the leaked documents referred to as Paradise Papers discloses strong proofs of the establishment of Tether Ltd by Bitfinex operators- Potter and Devasini- with the help of an offshore law firm Appleby in late 2014.
Hackers have been the on and off visitors of Bitfinex exchange; as per Wiki history the first hack occurred in May 2015, when 1500 bitcoins were stolen out of customer wallets, followed by yet another one in August 2016,which reported a theft of $72 million of bitcoins (0.75% of all BTC then in circulation).
On Dec 6 2017, the U.S. Commodity Futures Trading Commission sent subpoenas (summons) to Bitfinex and Tether.
Apparently, the legal terms of Tether holds a solution to that as well- “Residents of certain U.S. states are not permitted to be customers of Tether; are not permitted to cause Tethers to be issued or redeemed; and, are not permitted to hold Tether Tokens.”
Tether, Bitfinex and the Audit trail
Tether and Bitfinex both do not hold a proud reputation with regards to the auditing process. Both firms have deliberately failed to provide any reliable audit till date.
As on September 2017, Tether handed out its auditing task to one of the largest auditing firms- Friedman LLP. During the same month the auditing firm published a preliminary report stating that Tether holds a sum of $442.9 million cash on reserve which though currently matches the outstanding issuance of USDT but may be subject to caveats.
The recent news reports the dissolution of the ties between Tether and Friedman LLP and hence the ‘tethered-to-dollar’ crypto has engaged Freeh, Sporkin & Sullivan LLP (FSS) Law firm for performing the auditing task afresh.
The entire report can be read here.
An almost similar story looms around Bitfinex as Friedman LLP drops the name of the controversial exchange from its clients’ listing.
Bitfinex’s Tether Trap
If you happen to find yourself coining at the Bitfinex exchange platform, no matter which crypto coin do you invest in, at the time of withdrawal Bitfinex will credit your wallet with its fake currency called- USDT. Naïve users tend to fall for it believing that it is the actual USD but later learn that these are rather Tether Tokens. Sort of airdrops in disguise.
The airdrops come with an inaudible disclaimer- ‘The hence issued Tether Tokens may act as any of the two types- ERC20 Tokens or Omni Layer based tokens’.
Nothing to panic, as you are time and again buoyed up by Tether that at any given time USDT can be cashed out on a one-to-one basis. And while you exasperatedly search for an exchange which does exactly the same, you find that there’s none. And now it’s time you have the panic attack.
So, ultimately you land up exchanging your Tether Tokens for some other crytpo, not to mention the transactions fees that you end up paying forcibly.
And that’s when you realize that you have entered the ‘had-I-realized-this-scam-earlier’ squad!
Still ‘tethered’ to Tether?
What is it that makes Tether looks Let’s try to digest this one by one…
First, maybe Tether Ltd has misconceptions regarding Nakamoto’s decentralized vision, for something like Tether which has its operations, operators and blockchains- all under covers- it pains to call Tether a ‘decentralized’ platform.
Second, if one closely observes the price chart of Tether since its launch, it looks like this:
Source: Coinmarketcap
Since the first half of 2017 there have been miniscule fluctuations (0.01 – 0.09 USD) in the price. Presuming that someday we might be given answers, let’s think:
- Why are the fluctuations even eking out when Tether stands firm on its ‘1USDT = 1USD’ projection?
- Who is being benefitted out of these fluctuations provided that token holders receive exactly 1 USD in exchange of 1 Tether token?
Third, as we withdraw Tethers from exchanges like Bitfinex, Poloniex and Binance to any other USDT wallets such as- MyEtherWallet, Omni Wallet or Tether wallet, the exchanges charge a $25 fee per transaction (the initial being $2). All the three exchanges accelerated this move at exactly the same time.
Some speculate this fee as the Omni Layer protocol effect. So, is Omni charging a fee for a transfer to its own wallet? Or is it just a way exchanges have their share from the pie?