At the dawn of the cryptocurrency industry, users quickly realized that the main attributes of any digital asset that would actually give it any worth was its volatility. It would be foolish to think anyone actually believed in earnest in the usefulness of tokens and coins in a time when the word on the street was that there was money to be made on cryptocurrencies using pump and dump schemes. The concept was as simple as night and day – raising the hype around a specific token and waiting for its price to rise as demand surged among users believing that the asset was actually achieving usability or was going to yield them profits. Once the price reached a certain threshold, the ones initiating the pump and dump scheme sold off their immense loads of the asset, crashing demand by the sheer power of supply and reaping the rewards while everyone else who did not figure out the scheme lost their investments.
No one actually believed that a cryptocurrency, no matter which, would ever be adopted as a legal payment method around the world. Crypto is not a regulated asset and governments do not like competition, especially when it comes to matters of finance. If an asset is starting to threaten a government’s dominance in the financial sector and is unyielding to monitoring, then such an asset has no right to circulate without that state’s jurisdiction. It has been so throughout human history and basic economic logic dictates that assets must be regulated and monitored in order to be controlled, especially those holding them.
This is right about the time when users who were fed up with rampant volatility started questioning the logic of having assets that constantly shifted in value and could not be relied upon as a means of payment, unlike fiat, which constantly held a predictable price. The result was the development of the concept of the stablecoin – a digital currency that would be pegged to the value of a specific commodity backing it as collateral. The idea was revolutionary and took flight instantly in the form of USDT, or Tether
What Is Tether?
If put bluntly, Tether is a stablecoin that is pegged to the United States Dollar at a 1 to 1 ratio and therefore has a stable value. This means that the asset is not prone to volatility and can be used as a means of payment with a predictable value in the long term. Tether leverages the blockchain and is therefore bound by the same core characteristics as any cryptocurrency. In other words:
- It is fully transparent;
- Its records are immutable;
- It conducts transactions in near instant fashion.
These qualities add to Tether’s appeal as a unit of transacting in the digital space, since it provides it with the best of both worlds – the digital economy and the traditional one. Combined, these characteristics that make Tether run on the Tron TRC 20 network give it the appeal of a cryptocurrency with fiat features.
However, many users questioned whether Tether was actually backed by the amount of reserves the founding team claimed it had. There was reason to believe that an audit conducted on the reserves of Tether was false and the company was inflating the amount of assets issued compared to the backing it actually held in back accounts. These doubts eventually spilled out and undermined Tether’s standing on the cryptocurrency market as a leading force leading to the development of alternatives. One such was USDC, which was heralded by a slew of search queries in search engines “what is USDC?” and many others.
Omni ERC 20 and TRC 20 are just networks that help carry out transactions, but their key differences are just the founding projects – Ethereum and Tron, respectively. TRC 20 is often preferred, since it does not charge such large commissions as Ethereum, which has an element of gas involved. In fact, many stablecoins run on the Ethereum network and are deemed to be favorites. However, the events of Terra/Luna spelled the doom of most stablecoins and related projects in 2022, when billions of dollars were lost and users clamored for an industry-wide audit and proof-of-reserves.
Conclusion
Stability is not a feature that is of any worth on the cryptocurrency market. The key value of the given sector resides in its unpredictability, which allows traders and major investors to earn considerable amounts of money on price swings resulting from manipulative and speculative schemes. Retail investors and average users have little to gain in this regard, as their available amounts of capital are hardly enough to make any serious profits from the volatility of major coins. Gone are the days of the ICO era, when a little-known coin could swing by hundreds of percent a day. The most that can be expected in the modern era is a few percentage points over the span of several months. For major investors, such volatility is sufficient and they are content with the results. As for stablecoins, they are deemed to be the future of digital finance, but only as instruments issued by governments and central banks.
