The stablecoin Tether (USDT) that is pegged to US dollar on a 1:1 ratio, has long been in the centre of crypto world controversy. According to a study released in May, USDT was “explicitly responsible” for the last year’s bitcoin price surge, when it nearly reached the $20,000 landmark. The report claimed that a link between BTC price increase and the release of new USDT tokens was obvious, as it was a “conscious strategy to provide price support“.
Every Tether token is supposedly backed by 1 US dollar, a claim that has been disputed by many but recently confirmed by a US law firm Freeh, Sporkin and Sullivan LLP. However, the company previously fired Friedman LLP, an independent legal firm which was hired to perform an official audit on the company‘s holdings. The accusations against USDT started back in last October when it was revealed that Tether shares a similar ownership to crypto exchange Bitfinex.
Despite all these uncertainties, Joseph Lubin, a co-founder of ethereum and a founder of blockchain tech company ConsenSys doubts these accusations hold any merit. Speaking to Yahoo Finance, the entrepreneur said that, “Based on our analysis, which involves just talking to a bunch of people in the space, we do believe that tethers are backed 1 to 1 by U.S. dollars in bank accounts… With respect to market manipulations, I’m not sure that market manipulations are related to Tether directly, if they do exist.”
However, Lubin went on to add that even though he is optimistic about USDT, he remains cautious about it, as, “It’s still not 100% solid in terms of a story, from my perspective. I expect many other price stable tokens will arise and take its place.“
The stablecoin that Lubin tips to replace Tether is DAI, which according to him, “is going to be a really profound project that will be a more decentralized version [of USDT].”
Similarly to USDT, DAI is pegged to the value of US dollar. The token is developed via the Dai Stablecoin System, which in turn runs on ethereum blockchain. Its value is backed by collateral (ETH), which is locked up using a smart contract.
Tokens can be created by depositing ETH as collateral and getting rewarded with an appropriate number of DAI coins. Therefore, all DAI tokens are backed by at least as much collateral at all times. You can get more information on the project here.
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