The World's Most Used Cryptocurrency Isn't Bitcoin?

This article comes fromBloomberg Medium, original author: Olga Kharif

Odaily Translator |

This article comes from

, original author: Olga Kharif

Odaily Translator |

What is the most widely used cryptocurrency in the world? If you think that it is Bitcoin, which accounts for nearly 70% of the market value, then the answer may be wrong.

In addition, Tether's monthly transaction volume is also about 18% higher than that of Bitcoin, so it is not an exaggeration to say that it is the most important cryptocurrency in the entire cryptocurrency ecosystem. Tether is also one of the main reasons regulators are cautious about the cryptocurrency industry, with the U.S. Securities and Exchange Commission (SEC) halting approval of cryptocurrency exchange-traded funds (ETFs) precisely because of concerns about market manipulation.

Lex Sokolin, head of global fintech engagement at blockchain technology development firm ConsenSys, said:

"Without Tether, we'd be losing about $1 billion or more per day, depending on the data source of course, but some underlying trading patterns in the market may be fading away."

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Tether is currently the most widely used stablecoin in the world

Stablecoins are special tokens that are usually pegged to a fiat currency or have a certain amount of reserves in order to avoid price fluctuations and are one of the easiest ways to enter the cryptocurrency market for most active traders around the world one. Lex Sokolin cited countries that ban cryptocurrency trading as an example. He explained that traders in these countries can pay cash through OTC trading platforms to get Tether, and then use Tether to exchange Bitcoin and other cryptocurrencies. The whole process There won't be too many problems.

Jeremy Allaire, CEO of Circle, which issues another stablecoin, USD Coin, said:

"For many people in the Asian market, they like the concept of offshore that Tether offers, which is beyond the reach of the US government. Stablecoins are a function, not a problem."

Previously, Tether was sued by the New York State Attorney General's Office due to alleged misuse of reserves. At the same time, the company seems to have many problems in KYC compliance process, token issuance and redemption.

Thaddeus Dryja, a researcher at the Massachusetts Institute of Technology, said that many people don't even know they are using Tether, and most cryptocurrency exchanges still don't have legitimate bank accounts because traditional financial institutions worry that they won't be able to adequately screen criminals and money launderers. Hold USD on behalf of clients, only to choose Tether as an alternative. Thaddeus Dryja explains:

“I don’t think people really trust Tether, it’s just that investors don’t realize they’re using this stablecoin when they use Tether, they think Tether has actual dollars in a bank account somewhere, that’s all. Some exchanges actually Deliberate 'mislabeling' gives customers the wrong impression that they are holding USD instead of Tether."

The management and governance of Tether is like a "black box". Bitcoin is completely decentralized and does not belong to any entity, but Tether is actually issued by a private company based in Hong Kong. The owner of the company also owns the Bitfinex cryptocurrency exchange. . So far, Tether has not disclosed the exact mechanism of supply increase and decrease, and since they have not been independently audited, how much token supply is covered by fiat reserves is also a matter of widespread concern. Previously, Tether had stated that it had 100% reserves, but in April this year it changed its mind and said that 74% of Tether was anchored to cash and short-term securities. As soon as this news came out, it immediately attracted the attention of the New York Attorney General's Office and became part of their investigation. The New York Attorney General accused the companies behind Tether of allegedly covering up information to make up for a $850 million shortfall in their funding.

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Convenience vs. Risk

John Griffin, a professor of finance at the University of Texas at Austin, revealed that half of the surge in Bitcoin prices in 2017 was the result of Tether manipulating the market. Bloomberg also reported in 2018 that the U.S. Department of Justice was investigating Tether’s role in market manipulation.

John Griffin added:

“Centralized control defeats the whole purpose of blockchain and decentralized cryptocurrencies. To avoid the centralization problem, stablecoins transfer trust to some large high-tech companies, although the idea is very good in theory. Yes, but in practice, there are not small risks, and it is easy to cause misuse and other problems inherent in legal tender.”

On the other hand, since Tether is the key to the growth of cryptocurrency exchanges, many exchanges will bail out when necessary. Dan Raykhman, formerly head of transaction technology at Galaxy Digital, who is now developing a platform for issuing digital assets, said:

“Many crypto exchanges are secretly backing Tether to help it stay afloat.”