Tether Omni was the first successful attempt to remedy this situation. In 2014, Tether Limited introduced a coin whose value was pegged to the US dollar at a rate of 1:1. This was achieved due to the fact that the company secured the value of the coin with its own assets

What is Tether?

25.01.2021

526

6 min

There are more than 3000 digital currencies, but only unique projects that offer users useful and practical solutions achieve success and recognition.

One such coin is Tether Omni, the first stablecoin. This term refers to the binding of digital money to fiat money. Essentially you have the same dollars or euros in hand but in a more convenient format.

Are you interested? Then let's break down everything you need to know about Tether Omni.

What is a Tether Omni in simple terms?

All cryptocurrencies, starting with Bitcoin, have been criticized by bankers, financiers, and investors. The main reason for the attacks is the lack of any attachment to tangible assets.

And even the fact that the dollar does not use the gold standard and, in fact, just like cryptocurrencies, forms value by consensus, could not convince the community that digital money is worth investing in.

.

After 6 months after the start of sales, Tether Omni confidently gained a foothold in the cryptocurrency market and entered the top 10 coins in terms of capitalization and trading volume.

This prompted the developers to further develop the project and introduce many new useful options. So, in addition to the dollar, the euro and the Chinese yuan were added to the stablecoin listing. Moreover, the blockchain, security protocols, and dozens of other parameters that are significant for users were redesigned. But first things first.

How does it work?

By 2014 there was no suitable alternative to the bitcoin blockchain. That's why Tether Limited developers decided not to reinvent the wheel and took a ready-made solution.

On the other hand, for the coin to become popular and to be really used for trading operations, it was necessary to implement the appropriate smart contracts protocol. To do this, the Omni add-on was developed. It made it possible to open peer-to-peer exchanges or, to put it simply, to launch a global, international marketplace for trading Tether Omni.

Features

The main feature of this coin is that it is tied to real money. This means that an increase in demand or decrease in activity in the cryptocurrency market has no effect on the price of Tether Omnia. Depositors are insured against the loss of funds and devaluation of the coin.

The second interesting point concerns the financial security of the coin. The issuance is directly related to the size of the company's capital. When new investors appear, they purchase tokens from Tether Limited. Only after that, the company issues new tokens into circulation.

Such a rigid binding guarantees investors 100% stability of the coin and no swing with the rate. Practice shows that the trading corridor of Tether Omni did not exceed 0,001% for all time.

The third no less interesting feature is that the coin has no history registry. Although the protocol is based on blockchain technology, no real data blocks are created.

Funds are transferred between customer accounts directly. In this regard, the coin does not provide privacy. To open a deposit, passport details and identity verification are required. On the other hand, it prevents the coin from being used for shady schemes and payments for illegal services.

Pros/Cons

Definitely, the strongest point of Tether Omni is the speed of transactions. In fact, you have the opportunity to send a transfer anywhere in the world with a 0% fee. The money will be in the recipient's hands in as little as 10 minutes.

This is very convenient for retailers, small wholesalers, travelers, sailors, and those who earn money abroad. The coin is good for the instant exchange of funds, but you should not consider it as a tool for investment.

Since the exchange rate is fully pegged to fiat, Tether Omni suffers from inflation, a decrease in purchasing power, and other financial downsides inherent in paper money. This makes it impossible to use the asset for hedging or trading.

There is also a certain probability that the company will destroy some of the issued tokens, and take the released funds for itself. The lack of decentralization puts Tether Omni in a confrontation with Bitcoin's White Paper.

The latter circumstance, incidentally, played a crucial role in the rebranding that took place in 2016. In addition to rethinking the overall concept of coin development, the company's management decided to switch to a new blockchain.

What is the difference between Tether Omni and Tether ERC 20? Why should they not be confused?

By 2016, bitcoin transactions had lost their benchmark status due to the emergence of faster blockchains. The market leader was Ethereum. In addition to lightning-fast block processing in 15 seconds, this protocol also offered a multiple client base that used the smart contracts of the Ethereum ecosystem.

So the company's leaders decided to reissue the Tether Omni coin on the ERC 20 protocol. In fact, the decision turned out to be controversial. Old users did not approve of the transition to the new blockchain, but new users of the coin appeared, which eventually brought it to the 7th place in capitalization.

In April 2019, the company decided on another experiment to change the cryptographic protocol and this should be taken into account when dealing with Tether transactions.

What are the risks?

Since different year tokens use non-similar blockchains, it is impossible to make a Tether Omni transfer to a Tether ERC 20 account and vice versa. Therefore, the sender of funds needs to look carefully at the recipient's address before sending money.

The only way to get away from this problem is to sell all your old-style tokens and buy coins on the current blockchain. But in fact, this is not very convenient. Therefore, the Tether of Omni and ERC 20 standards are still being sold on cryptocurrency exchanges.

Where can I buy it?

Any crypto exchange or a private online exchanger will do for this. In the first case, you get more favorable terms for the transaction, but you will have to spend time on registration, studying the functionality and technical features of the platform.

In the case of private exchangers, you will have to pay a small fee, but the funds will come to your account instantly. You can pay for your request with a credit card in a convenient currency.

How do I store it?

To store your currency, you need to download an electronic wallet that supports the Tether Omni standard. The simplest, most convenient, and secure option is Coinomi. This wallet is available as a mobile phone app and offers the most convenient user interface.

Cold wallets, like most other apps, are designed to store Tether ERC 20. Recently, options for storing Tether TRON 20 have been emerging. Given the abundance of Tether protocols, read carefully which blockchain the wallet supports.

Conclusions

Tether Omni leaves a mixed impression. The cryptocurrency goes against the basic tenets of decentralization and rejection of fiat attachment. On the other hand, it is really capable of destroying the system of bank transfers.

It is still too early to draw specific conclusions. In its current state, Tether Omni is suitable for quick international transfers and payment for goods or services. There is no way to use the coin as a “safe haven,” a financial instrument, or an investment asset yet.

Subscribe to Getblock Magazine and stay up to date with the latest news from the world of cryptocurrencies and the digital economy