Tether (USDT) is a stable coin pegged to the value of one US dollar and it is expected to maintain that peg no matter what.
It is a fiat collateral that has maintained it peg since 2015.
Though it is not really accepted as a payment method, it is used as cryptocurrency exchanges.
This coin allows traders to exchange volatile cryptocurrencies for stable cryptocurrencies for the purpose of curbing the risk of these volatile coins.
For example if I own Bitcoin and I want avoid the risk of Bitcoin price fall, I can easily exchange my Bitcoin for Tether (USDT) and maintain the dollar value and if in the future, I want to get back to track and still own my Bitcoin, I will just exchange my USDT back to BTC.
This USDT serves as a utility coin for traders in the natural exchange and most traders love using USDT because of it secured ability to maintain its market price after conversion, or its ability to get in and out cryptocurrency positions without its market price getting affected, which what us known as liquidity.
This Tether can be found on several different cryptocurrency blockchains such as Bitcoin platform, Ethereum platform, Tron platform etc.
The tether omni version works in a three-layer stack which are
The bitcoin blockchain which works as the ledger for transactions and runs a consensus algorithms. This bitcoin blockchain is the third layer.
The second layer is the omni which is used to track and report the tokens in circulation. It also enables user send and store these tokens in an unanimous manner.
The first layer is the Tether limited and it is the business entity that controls and authorizes fiat deposits and withdrawals from the Tether reserve.
What that means is that when a user deposit fiat currency into the Tether Limited reserve by selling fiat to buy USDT, the Tether Limited generates and issue out the equivalent amount of dollar tokens to the user that can be transfered, stored and traded. So if a user deposits $50, he'll receive 50 Tether tokens.
These tokens are destroyed and removed from circulation when the user redeems the token for fiat currency.
The Bitcoin Secured blockchain and its network effect helped Tether to gain popularity over other stable coins operating on different blockchains.
In November 2017, Tether was hacked and it resulted in the loss of about 31million USDT and that made them increase their security.
Since then till date, there hasn't been any case of hacking again in the system.
Like every other stable coin, even though it is not 100% secured but it is to some extent reliable.
Thanks Prof. @yohan2on for looking through my work.