Stable coin issuer Tether recently announced that it had destroyed around 500 million coins (USDT). While frying money seems like a very weird and silly thing (who doesn’t want to be richer?), The currency issuer stated that it has “redeemed a significant amount of USDT from the circulating supply of tokens”.
Tether has been the subject of controversy and differing opinions over the past few months. As one of the most important stable coins in the cryptocurrency arena, Tether differs from payment coins like Bitcoin and Ether in the sense that it is tied to a fiat currency – in this case the US dollar – to ensure it doesn’t suffer from volatility, which is seen with other forms of crypto. While Bitcoin, Ether, Litecoin, and other assets are susceptible to wild price fluctuations, Tether’s alleged connection to the USD prevents that.
Unfortunately, a few dark clouds have drawn up over the horizon in the last few days. Investors were spooked a few months ago when University of Texas finance professor John Griffin claimed that Tether was constantly being used to manipulate the price of Bitcoin during the currency’s mega-run in 2017.
Pushing the Bitcoin envelope
At the time, Bitcoin peaked at nearly $ 20,000, but according to the Griffins report, this was simply because a select few bought Bitcoin stocks with tether when the price fell even slightly, increasing its value and allegedly to the USD was bound.
However, this report has not convinced everyone at all levels. Personalities like Joseph Lubin – the co-founder of Ethereum – denied these claims, believing that Tether had little or nothing to do with Bitcoin’s sudden rise over the past year, though another major horror emerged earlier this month than the price of the currency – supposedly so stable – fell drastically after it was reported that around 3,000 units of tether were sold on an exchange.
Many wondered how a sale had the potential to hurt the price of one of the crypto arena ‘s “finely tuned” stable currencies, and investors ultimately wondered how solid Tether was.
We destroy money – what about it?
Representatives of the mint released a statement regarding the recent destruction of the coins, stating:
“In accordance with this, Tether will destroy 500 million USDT from the Tether Treasury wallet and leave the remaining USDT (approximately 466 million) in the wallet as a preparatory measure for future USDT expenditures.”
They also claim that destroying the coins – although not normally common in the crypto industry – is in line with the regulations first described in Tether’s official white paper. It goes on to say that in order to maintain the ratio of 1: 1 (one USD per TUSD), Tether will “send fiat withdrawals and revoke the corresponding Tethers” if necessary.
What’s the point and how does it work?
The process begins when a user deposits fiat currency into Tether Limited’s bank account. From there, Tether Ltd. the user’s individual tether account good. The coins come into circulation and the amount deposited into the Limited account is usually given to the user. The user then interacts with the tethers by transmitting, exchanging or storing them.
Finally, the user deposits Tethers with Tether Ltd., which are then converted into Fiat. The respective tethers are ultimately destroyed while the fiat funds are transferred to the user’s bank account. It’s a long and complicated process; Even so, Tether insists that it is the best and most secure way to ensure coins don’t fall into the wrong hands.
The whitepaper reads:
“The main concept is that Tether Ltd. is the only party that can circulate (create) or remove (destroy) Tethers. This is the main process by which the solvency of the system is maintained. “