Who is the most dangerous in the encryption market? Tether!
This article comes fromMedium, Original Author: Annabella Lapshina
Odaily Translator |
Odaily Translator |
The stable currency Tether (USDT) is currently one of the main channels for converting fiat currency into cryptocurrency. The New York Supreme Court held a hearing on the New York Attorney General’s Office’s prosecution of Bitfinex and Tether on July 29, which also aroused widespread concern in the community .
About $3.7 billion is currently concentrated in USDT, and although the crypto community has great doubts about its security, the market demand is still high. In contrast, the scale of other stablecoins and USDT are almost incomparable. For example, the market value of Circle and Coinbase’s USD stablecoins is only 400 million US dollars, TrueUSD is 220 million US dollars, Paxos is 176 million US dollars, and Cameron Winklevoss and Tyler Winklevoss The stable currency GUSD issued by the brothers is the most "poor" with only 8.4 million US dollars.
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$5 billion? Air coins?
For the crypto community, the recent accident of Tether's erroneous issuance of 5 billion USDT has raised concerns about its potential risks. On July 14th, Tether issued an astonishing 5 billion USDT tokens on the wave field blockchain, but soon they discovered the problem and immediately destroyed these tokens, claiming that they only wanted to issue 50 million USDT more (problem Probably due to a decimal point error). Afterwards, Tether transferred this batch of USDT tokens to the Poloniex cryptocurrency exchange.
Paolo Ardoino, CTO of Tether (as well as CTO of its associated exchange Bitfinex), explained that Tether initially wanted to migrate from the Omni blockchain to the TRON blockchain because it found a problem with the number of tokens. Misoperation during operation resulted in an additional issuance of 5 billion USDT.
Although this mistake was quickly corrected, the centralization risk of similar encrypted projects will actually pose a threat to the encrypted community, and the additional issuance of stable coins will also cause instability in the cryptocurrency exchange rate, which in turn will cause people to wonder whether Tether will become a currency. Hot debate on price manipulation tools.
If a large number of additional unsecured and unbacked USD stablecoins flow into the market, the impact on the entire encryption market may be fatal.
In this regard, Alpari analyst Maxim Parkhomenko expressed his opinion:
In this case, the Office of the Attorney General of New York disclosed the news that Tether and Bitfinex concealed a deficit of 850 million US dollars, and for the first time exposed evidence of the existence of this stable currency. Since then, people finally understand that USDT only provides 74% and is not pegged to the US dollar one-to-one, and they also understand that the lack of transparent auditing will only continue to exacerbate this bad situation.
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Tether Triggers Bitcoin Price Manipulation
We have to admit one thing: Tether's impact on the entire encryption industry is very obvious. Many industry experts believe that every increase in the price of Bitcoin is closely related to the additional issuance of USDT stablecoins, and this year's "little bull market" is no exception-especially with the additional issuance of "encrypted dollar" Tether and market comparisons The demand for Bitcoin continues to rise.
But Jesse Powell, chief executive of cryptocurrency exchange Kraken, said in an interview that the correlation appears on almost every cryptocurrency exchange that uses regular bank account deposits. Jesse Powell added that Tether is actually like a more transparent "version of transactions," allowing people to clearly know what happened to all exchanges during the rise in Bitcoin prices. For example, he said that when the media reports that the price of Bitcoin is rising, retail investors will immediately rush to the exchange to buy Bitcoin, but at the same time, ordinary deposits opened on the exchange through bank accounts will not actually be displayed on the exchange. In a public blockchain that can be seen by the global world.
Not everyone agrees with Jesse Powell, however. Alpari analyst Maxim Parkhomenko countered:
But what is disturbing is that although everyone knows about the potential threats of Tether, many people are still accustomed to using this stablecoin for encrypted transactions due to its extreme convenience.
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centralization problem
The emergence of other encrypted assets in the market has created competition, which can also solve some problems, such as the issuance of centralized stablecoins.
Nevin Freeman, the representative of Reserve Company, said that the current centralized stablecoins include USDT, USDC and TUSD, etc., and they basically meet the market demand, so we don’t seem to need a decentralized solution in the current environment. However, Nevin Freeman emphasized:
“Decentralized cryptocurrencies will show their importance when the number of centralized stablecoins issued is limited, or banned altogether. In this case, decentralized stablecoins like DAI and Reserve Coins can benefit from this because they all provide a more reliable alternative.”
Simply put, despite the existence of other independently audited stablecoins in the market, as long as traders continue to use Tether instead of real fiat currency, they cannot escape the risk of devaluation caused by additional issuance. In addition, people may encounter another threat: if a government with a large number of active crypto traders suddenly banned USDT, the only option people have at this time is to switch to decentralized stablecoins.
The question is, are you used to using Tether stablecoins, will you immediately use decentralized stablecoins? Or do you have to wait until the day when the problem breaks out before regretting it?
