Tether, one of digital currency’s most controversial currencies, has seen a rapid increase of supply since last year, and with the increase came questions from the community.
What is Tether?
According to its official website, Tether is a type of cryptocurrency that has its value ‘tethered’ to fiat currencies, so one tether is equal to one dollar, for example. Claiming to have the best of both worlds – blockchain technology with a value supposedly backed by tangible money that the company has in reserve, the digital currency has been shunned by the fiat banking system for being controversial, sparking speculations ever since.
Rapid supply increase demonstrated
Tether’s supply has recently seen a rapid increase this year, with the numbers going up from $6.9 mln back in November 2016 up to $645 mln as of the time of this writing, with an enormous portion of this growth occurring in the first two weeks of this November. The digital currency’s price is attached to fiat currency, making the result of market capitalization directly affecting the supply of the digital currency. However, because of this, questions are being thrown around here and there, mainly with how the company managed such an expansion in a short period of time.
Transparency page not so transparent
Tether.to has a transparency page which it affirms shows the company’s balance sheet in near real time. In addition, the company also professes that it goes through regular audits much like any other company. However, with no external audit shown to the public, the community was not convinced, and as an answer Tether.to released a memo made by Friedman LLP, which the company hired to create limited findings of the Company’s cash since the 15th of September this year. Still, criticism is still being thrown, with some going as far as to say that Tether produced money out of the blue.
“Willy and Markus” problem coming back?
Willy and Markus were the two bots that allegedly caused the expeditious bull run way back in 2013 by purchasing Bitcoin regularly. This in turn, caused MtGox to push Bitcoin’s price upwards before its subsequent crash. And now some people are concerned fuelled inflation might pick up again.
Purchasing digital currency without any real money results to prices skyrocketing upwards, and people fear this might happen to Tether as well. Although the increase in Tether’s value is still a long away from Bitcoin’s trading volume, any change will directly affect the cryptocurrency system as a whole, leading to people trying to cash out their tethers or looking for other places (like exchanges) to place their assets on.
Transparency and audits
For now, Tether (the company) needs to reassure the community about the stability and robustness of their supposed “transparent” balance sheet if they want to keep their boat afloat. What they can do is hire a reputable agency to do a full audit which can be then shown to the public. In addition, a bit more transparency can also go a long away, mainly with who their bankers are and where they keep their cash balances. The company can also benefit from changing their legal terms and conditions, which a part reads:
“There is no contractual right or other right or legal claim against us to redeem or exchange your Tethers for money.”
One of the things that make customers gravitate towards Tether is the supposed “stability” of its value, as the company claims to have it one tether directly attached to one dollar/euro. The company will surely gain more trust if they uphold that, more especially if their customers comply with their rules and regulations.