How Does the Stablecoin USDT Work? Tether CEO Ardoino Discusses How the Digital Dollar is Changing the Global Financial Landscape.
Stablecoin issuer Tether’s CEO Paolo Ardoino shared his journey with Tether and the goals and challenges for the next decade during an interview on December 27. Ardoino also explained in an accessible manner how stablecoins impact the global economy, particularly in emerging markets.
### The Birth and Vision of Tether
Tether was founded in 2014 with the original intention of combining blockchain technology with the world’s largest reserve currency, the US Dollar (USD), to create a new type of digital currency. Ardoino stated that Tether functions like a blockchain version of PayPal, allowing for fast, convenient, and secure cross-border transactions through blockchain technology. Users deposit fiat currency into Tether’s bank accounts, which then invests these funds in low-risk assets such as short-term U.S. Treasury securities, issuing stablecoins (USDT) equivalent to the value of the USD. Users can trade and pay with USDT, and convert it back to fiat currency when needed. Ardoino mentioned that USDT has become the digital currency choice for around 400 million people globally, with 35 million new digital wallets created each quarter.
### A Breakthrough Year and Subsequent Challenges
Ardoino noted that 2017 was a breakthrough year for Tether. With the rise of the ICO craze, many cryptocurrency exchanges began using USDT as a digital dollar, facilitating transactions. Initially, many banks were not friendly towards cryptocurrency exchanges, but there was still high market demand for trading various cryptocurrencies priced in USD. In this context, USDT addressed that need. Despite Tether becoming the market’s preferred choice, Ardoino indicated that many competitors started to emerge after 2017. From 2019 to 2021, Tether faced scrutiny and attacks from the New York Attorney General and market speculators. However, Ardoino stated that Tether proved the robustness of its asset reserves and successfully withstood several market stress tests.
### USDT as a Lifeline in High-Inflation Countries
Ardoino emphasized that while demand for digital dollars like USDT is low in stable financial systems like the U.S. and Europe, it serves as a lifeline for countries with high inflation and inadequate financial systems, such as Turkey and Argentina, where local currency depreciation rates can reach 80%-98%. In such cases, USDT provides financial stability for the younger generation and many families in these countries. Ardoino added that approximately 3 billion people globally lack access to traditional financial services, often excluded from the banking system due to low income and high fees. Thus, USDT offers a way to access and save without relying on traditional financial systems, making it particularly suitable for emerging markets in Africa, South America, and Asia.
### A Future of Decentralization: Tether’s New Goals
Ardoino stated that Tether is actively investing in Bitcoin mining and AI, believing that securing the Bitcoin network relies on mining decentralization to effectively reduce risks. Regarding AI, Ardoino expressed that the current development model is overly centralized, with most data and computing power monopolized by a few tech giants. Thus, the future of AI must transition towards more privacy-protecting and decentralized development models. He revealed that Tether currently holds 82,000 Bitcoins and 44 tons of gold, and has developed a peer-to-peer communication protocol called Whole Punch, aimed at creating serverless real-time communication and streaming technologies. He further added that Tether not only holds traditional and cryptocurrency assets as a financial backbone but also continues to innovate at a technological level. “In the future, we will be more committed to promoting decentralization and technological innovation, providing a wider range of secure financial services for global users,” Ardoino confidently stated.
### Risk Warning
Cryptocurrency investments carry a high level of risk, and their prices may fluctuate significantly, resulting in the potential loss of your entire principal. Please assess risks carefully.
