Tether Review and Rating – Svjatoslav (Svet) Sedov – Medium
We all very well familiar with this “digital token backed by fiat currency (which) provides individuals and organizations with a robust and decentralized method of exchanging value while using a familiar accounting unit.” In a past two years Tether has became a big business, one of the underlying pillars of DLT infrastructure, which time to time threatens to undermine its stability. That’s why I intend to rank it on the “Entrepreneurship”: Solution-Validity-Equity-Team sub-scale.
Tether is, basically, a token issued on top of Bitcoin (now also Ethereum) chain(s). So called, “Omni Layer protocol” allows to create and to destroy unlimited number of USDTs. To keep the value of USDT stable “each tether issued into circulation (is) backed in a one to one ratio with the equivalent amount of corresponding fiat currency held in reserves by Hong Kong based Tether Limited.”
This “Solution” or business model, reminiscent of old, centralized, gold reserves based banking system, looks very sketchy. It 100% relies on a financial stability of one organization, which accounts remain hidden from public scrutiny. That’s the major Tether weakness. Additionally, it requires an almost unlimited access to a fresh liquidity in order to back up newly minted USDTs. At the same time this model is relatively simple and it works. Result: “b — “.
Legal “Validity” of Tether has never been publicly audited. Moreover, we do not really know Tether organizational structure, its legal representations in other countries (if any) as well as its regulatory status there. All that is an another important risk factor for Tether. However, this company’s legality in USA or in Hong Kong has not been questioned yet. Result: “b”
The real state of Tether’s finance (“Equity”) is not known. However, there’s still no obvious reasons to suspect that it’s not going to be able to stay in business in the nearest future. At the same time there have already been a number of serious public incidents when an existence / sufficiency of Tether fiat reserves has been challenged by various parties. Result: “c++”
Tether “Team” is another reason for publics’ concern about this company. Its management team does not have any previous credentials in blockchain or in other related industries. Tether’s CFO is a doctor of medicine. Tether CEO serves at the same time as a chief executive officer of Bitfinex, which creates an obvious conflict of interests. Information about their development or middle management teams is absent. There’s no known public communication line (like Twitter) to their representatives at all. At the same time there’s no known incidents of conflicts within the team or top managers desertions. Additionally, all this time they have managed to keep this company afloat despite all adversities. Result: “b-”
“Entrepreneurship”: Solution-Validity-Equity-Team sub-rating: b — bc++b-