Tether has been hanging over the crypto market like a dark cloud for years. Pessimists can always go back to a what-if story: ‘What if Tether falls, then the entire crypto market collapses.’ Whether that’s true remains to be seen in the future, but the pessimists do have a point that Tether is controversial.
Is Tether decentralized?
USDT is Tether’s stablecoin and as with almost all cryptos (except for bitcoin), you can question the degree of decentralization. Although the word does not appear in the whitepaper van Satoshi Nakamoto, decentralization has become one of the key features of crypto.
As we just wrote, with many cryptos you can question the degree of decentralization, and this is especially true for Tether. The stablecoin company has announced that they have frozen three addresses with a total of $160 million in USDT.
Three addresses
Tether offers their USDT on various blockchains. The three blocked addresses are on the Ethereum blockchain and they have been frozen this week. According to Tether, this is because of “a law enforcement request.” Tether has blacklisted more than 560 addresses since November 2017, but this will be the first time in 2022.
The message states:
“By freezing addresses, Tether has been able to help recover money stolen or compromised by hackers.”
Are there alternatives?
This is somewhat at odds with what the crypto market expects from decentralization, and how much power a company should have over the network and the market. Fortunately, lovers of stablecoins and decentralization have alternatives. Here is a brief overview of the largest stablecoins:
- USDT: From Tether and is seen as a centrally controlled stablecoin.
- USDC: from Circle, which is heavily regulated and ostensibly safer than USDT.
- UST: TerraUSD is a decentralized stablecoin on the Terra blockchain, value is kept at $1 by algorithm.
- Dai: The price of DAI is pegged to the US dollar and backed by a mix of other cryptocurrencies. Every time a new DAI is created, cryptos are locked into smart contracts.
Tether under magnifying glass
It is difficult for companies to find a balance between growth and decentralization. Tether is the largest stablecoin company in the world, and has no intention of giving up that position. They have a market cap of $78 billion, and are closely watched by regulators. There are doubts as to whether Tether has enough collateral to issue all of these stablecoins.
Analyst company Chainalysis released a report early this year on crypto-crime in 2021. They conclude that this has doubled compared to 2020. These kinds of messages almost guarantee that there will be many more ‘law enforcement requests’.
In the intro of this article, we already wrote that pessimists describe Tether as the possible fall of the crypto market. The Financieel Dagblad even calls Tether the possible Lehman Brothers of the crypto market. On January 4, the Financieel Dagblad published a report about the search for the CEO of Tether. This turns out to be an Arnhemmer.
What a story!
In search of the mysterious Dutchman behind the controversial cryptocurrency Tether. https://t.co/qvvgXZorBx #FD #Crypto— Perry Feenstra (@PerryFeenstra) January 4, 2022
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