Tether shakes volatility stigma

Tether shakes volatility stigma

November 25, 2014 | +Mala Mukunda

Breaking Bitcoins volatility

Bitcoin as a payment system is steadily gaining acceptance, many communities have started Bitcoin boulevards, people are buying cars online and in some cases purchasing tickets to high-profile fashion shows. Yet skeptics still argue that the price volatility of bitcoins far outweigh its advantages. Many in the digital currency space nervously monitor price fluctuations and merchants hesitate to accept and hold bitcoins should its value drop below the value of their inventory.

Tether, a startup with operations based in Hong Kong and the Isle of Man, seeks to address currency stability issues by issuing government backed fiat currencies as standardized digital tokens. These digital tokens can be moved over the blockchain taking advantage of its low cost, security and transparency.

The blockchain is a publicly viewable distributed ledger that is continuously secured and verified by users on the network. Because of its accuracy and verifiability it is expected to be the preferred choice for executing smart contracts, registering life events or providing notary services in the coming years. The blockchain is the spine on which these applications are designed.

Tether offers price stability of fiat-money with block chain efficiency
Tether uses the blockchain as the foundation to transfer fiat currency as digital tokens safely and instantly. Tether+ tokens issued by Tether can be bought with regular currencies from banks as USTether (US+), EuroTether (EU+) or YenTether (JP+) for a small fee. Each Tether+ token is backed 100 percent by the currency it is bought with and is held as a dollar, euro or yen in a bank account. It can be redeemed anytime without being vulnerable to currency exchange risks. The customer can also opt to hold and transfer value as bitcoins without redeeming them back to regular currencies. Tether and bitcoin transfers are free between Tether wallets and a bitcoin mining fee is charged for transfer to a non-Tether wallet.

Tether uses the blockchain to move value from one end to the other via the Mastercoin protocol. The Mastercoin protocol uses the existing Bitcoin protocol as a base on top of which currency layers to enable complex financial functions like decentralized exchanges and smart property rules can be implemented.

The Tether platform will be subjected to regular auditing and promises full transparency. A real-time balance sheet of the platform’s reserves can be accessed, offering a window to the transactions and outstanding Tether+ in circulation.

Tether could be tool to disrupt remittances
A significant aspect of moving value through the Bitcoin network is the reduction in fees charged by fx exchange services. This can impact the global remittances market, which according to the World Bank is expected to cross $414 billion this year and projected to cross the half-trillion mark by 2016. As of now, immigrants pay almost 5% of the transfer amounts (10% in several African countries) to wire transfer companies. As Tether expands to include more currencies around the world, tokens such as USTether (US+), EuroTether (EU+) or YenTether (JP+) can be exchanged for one-to-one value in the recipient’s country without having to pay high currency exchange fees.

Much like every emerging technology, the Bitcoin protocol and its applications so far have been a source of intrigue and curiosity to many citizens. The prospect of including any currency into the fold of benefits offered by the Bitcoin blockchain is the first step towards allaying the general fear and negativity surrounding the crypto ecosystem. As people appreciate the ease of digital transactions using fiat-money, they will show more willingness to move away from legacy systems and towards bitcoin.

“While the blockchain shows great promise to more efficiently connect the world to banking, individuals are very hesitant to use bitcoin until we effectively end the volatility concern,” said Reeve Collins, co-founder and CEO of Tether. “This is a critical step for mass adoption of this technology, and Tether is bridging the gap by bringing familiar currencies to the blockchain.”

While tying up with banks and financial institutions to issue the tokens, and following strict KYC procedures to verify customers hardly fall in line with crypto anarchy parlance, decentralizing and digitizing widely used currencies to take advantage of the many virtues of blockchain comes as a valuable and necessary tool for moving money in the digital age.

Tether is actively seeking banks, digital currency exchanges, wallet builders, and related companies in the Bitcoin ecosystem to join its global network.

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