In the world of cryptocurrency, there are some interesting projects to take note of. Pegged cryptocurrencies are quite appealing to a lot of people. One of the more notorious pegged altcoins goes by the name of USDT. Although this currency is pegged to the US Dollar, its value is not necessarily the same. Moreover, there are some other differences between both currencies people need to take into account.
2. US Dollar
Most cryptocurrency enthusiasts will agree money issued by a bank or government has no intrinsic value whatsoever. Even though consumers feel that US Dollars have actual worth, the currency itself is backed by nothing tangible. There is nothing giving paper money and coins any value other than the promise of the bank and government to honor the depicted value.
That being said, the US Dollar is still seen as the leading currency in the world. Every asset , currency, and cryptocurrency are often denominated in USD value. Bitcoin, for example, is priced in US Dollars first and foremost, before people look at the value in their local currency. That situation will not change anytime soon, nor should it, although the value of one Bitcoin will always be one Bitcoin, regardless of its USD price.
It is important to note the value of the US Dollar is backed by the government of the United States. Whether or not one should ever put any faith in this promise, remains to be seen. However, some cryptocurrencies take it upon themselves to peg their value to the US Dollar, as it makes transacting in cryptocurrency slightly easier for novice users. This is why there are such currencies as USDT.
As mentioned before, USDT is a pegged cryptocurrency. Its value is pegged directly to that of the US Dollar. Tether, the company responsible for issuing USDT in circulation, keeps the US Dollar equivalent of all USDT value in reserves at all times. Otherwise, they could never guarantee the value of one USDT being equal to US$1. Even though this concept makes a lot of sense on paper, things have not been all that easy for Tether and USDT so far.
More specifically, Tether has run into some banking issues a while ago. The company uses a Taiwanese bank to receive and send out USD withdrawals. Unfortunately, that bank raised some issues, resulting in the company being unable to convert USD to USDT and vice versa. This forced users to rely on third-party exchanges to complete this conversion process. At one point there was a 7% fee to do so, resulting in one USDT being worth only US$0.93
However, it appears things have turned in favor of USDT once again. The price per USDT on Kraken is US$1.03 right now. That means users get slightly more USDT for their USD deposits, rendering the “pegging of value” somewhat useless. The people who bought up cheap Tether at US$0. 93 are making good money from exchanging them back into USD at the current rate.
If you liked this article, follow us on Twitter @themerklenews and make sure to subscribe to our newsletter to receive the latest bitcoin, cryptocurrency, and technology news.