Cryptonites asked: As of today, Tether has higher trading volume than Bitcoin. Obviously, may be for multiple reasons, would love to hear your thoughts. I think it is 43 billion dollars that are being traded on Tether as of today. First off why Tether?
Why did you guys create it? What problems do you solve? And, if you don’t mind telling us why is the interest high these days?
Paolo Ardoino: Tether was born to solve one simple problem. It is that the Bitcoin space was not very efficient. So, we talked about exchanges that were short and sometimes looked like real exchanges. It was 2014 and there were few exchanges like Bitfinex, Coinbase, OkEx, and Coinbase. So, the problem is that when there were big price movements, there was huge price discrepancy, even 25% sometimes. And, that is not the type of asset that can go make it straight.
You cannot have funds that are stepping in to a market that is so difficult to arbitrage, because first of all the only way to do arbitrage is to send Bitcoin on one side and send cash on the other side. And, how you send cash is wires. And, wires take 1 to 5 days. And, what about the weekends that was not going to work?
So, this group of guys behind Tether started with the base idea of how we can create the same value of the dollar that has the same settlement speed like Bitcoin. So, we sent Bitcoin from one Exchange and we send Tether on the other exchange. We sent Bitcoin when the exchange is higher and we buy back. We Tether from the other exchange that is lower. Super simple. It is crazy simple. No one thought about it.
These group of guys were like why we don’t try to do it. And, Tether started like that and the first two years was quite hard. And, it was even hard to talk to the exchange about its kind of potential. Everyone was kind of “we did not understand the potential.”
And, Poloniex was the first exchange that added Tether and added Tether pairs and that created the first real arbitrage opportunity between Bitfinex and Poloneix. So, you could start arbitraging, if you assume Bitcoin, Litecoin, and Tether pairs against Bitfinex that had the peg between Tether and Fiat. That was the first time and it was massive where spreads were really, really tied. And, 2017 was the real year where Tether boomed.
Get the latest Crypto & Blockchain News in your inbox.