Understanding the drawbacks and limitations of Tether.
What is Tether coin? and Why is it considered a scam?
Elementally, as we all know that Tether is one of the pre-eminent cryptocurrency stable coin, whose value is pegged to that of the US dollars. This, in simple words, jots down that 1 USD = 1 USDT. It is also one of the most speculative ones for mixed reasons. Below are some of them.
1. The company backing Tether, Tether Limited, claims to secure the stability of the Tether coins, through the actual USD reserves, but not even a single auditing firm has confirmed the same, recently. Even the supply of the tokens keeps on increasing on a regular basis. Therefore, speculations are always on the higher side of the spectrum, when it comes to the legitimacy of the Tether coin.
2. Many cryptocurrency experts speculate that Tether is a fraud, as it is not considered as a legal tender. This has indirectly rendered the Crypto enthusiast to point at the legal status and transparency of the Blockchain project.
3. According to most of the cybersecurity expert and the cryptocurrency critics, it has been announced that the prices of Bitcoin are manipulated by the USDT or the Tether coin. It is assumed that Tethers are only minted during the Bitcoin price fall, in order to stabilize the cryptocurrency market and is not backed completely by millions of Fiat Reserves. Even the most popular economist, Nouriel Roubini believes the same.
4. Reddit is one of the most popular cryptocurrency discussion forum. On this website, when users wanted to gain opinion regarding the previous experience of any user, for the conversion of the Tether coins into the actual US dollars. A deafening silence was looming over the post, which certain pointed to the opacity of the cryptocurrency coin.
5. According to the company’s website, officially, no guarantee is provided for the redemption or any kind of losses that the users incur. Indirectly, the user is the only responsible person, for all of these actions with respect to the Tether coin.
6. Also, according to the company’s terms of services, the Tether tokens redemption can be rejected without any mention of exclusive reason. This is a major issue with respect to the open legal documents, as they do not care to mention the circumstances in which they would do so.
7. There are also a number of instances which point towards the fraudulent nature of Tether coins. As in January 2018, the Tether coin Blockchain platform withdrew its collaboration with a third party auditing firm from Taiwan.
8. The Tether coin Blockchain platform is also estimated to switch many auditing firms of different countries.
9. Bitfinex is the Cryptocurrency Exchange, which is constantly speculated to be a part of the Tether coin fraud, as many pre-eminent figures from Bitfinex had represented Tether during its initiation. Due to its connections with Bitfinex, it is even rumored that Tether coins are used for margin lending on Bitfinex, in an illegal manner.
10. It is important to know that the Crypto exchanges make profits from the interest, from the lent Tether coins. This is highly ridiculous, as Tether Limited, do not provide a guaranteed for the redemption of Tether coins with the actual Fiat currency.
The positive side of the Tether coin
A myriad of Crypto exchanges like Binance, Bitfinex, Poloniex, etc have incorporated Tether instead of the actual US dollars, as incorporating USD would require many legal procedures to be followed by the exchanges. Therefore, Tether effectively eliminates the legal intervention of the government. Adding on to the upper hand, they even provide higher transaction speeds when compared to that of the Fiat currency. Therefore, it is also used as an alternative to the US dollars.