USDT / Tether is a cryptocurrency that uses the bitcoin blockchain to conduct financial transactions and is pegged to fiat currencies such as the US dollar, euro and Japanese yen. For each currency, there is a token identical to its index, but with the "T" suffix: USDT, EURT, JPYT. The tokens are issued by Tether Limited, assuring that each of them is backed by a real reserve in the accounts - one million tokens in circulation are strictly equal to one million units of fiat currency in the company's accounts.
The Tether cryptocurrency itself is built on the basis of the open source Omni Layer protocol, which interacts with the blockchain and provides the issuance and redemption of bitcoin-based cryptocurrency tokens. Users can transfer the issued tokens, buy any other cryptocurrency for them, or simply store them in any wallet that supports Omni Layer. It is worth noting that tokens are issued only in the amount the equivalent of which was credited to the company's account. Accordingly, the token disappears from circulation in exactly the same way.
Tether uses an alternative to the Proof of Solvency method - Proof of Reserves. The process is trivial: the amount of tokens is verified on the bitcoin blockchain using publicly available tools, and the corresponding amount of dollar reserves is confirmed by bank accounts and periodic audits. The company regularly publishes the amount of funds on a separate website, and Taiwanese and American audit firms often conduct relevant checks.
Tether Limited announced a parity between USD and USDT - one token should be equal in value to one dollar. This trend was observed until April 2017, but soon USDT fell in price to $ 0.91, and later rose to $ 1.1. The rate jumps continue to this day, but it was not possible to achieve permanent parity in price. One of the possible reasons may be a fake peg to fiat currencies - many analysts argue that the amount of USDT issued so far is simply not backed up by a USD equivalent.