BitKE got an exclusive chat with Paolo Ardoino, the Chief Technology Officer at Tether, the leading stablecoin in the world.
Paolo assumed the role of CTO for Tether in 2017. As the CTO of Tether, Paolo is responsible for overseeing the development and dissemination of technology for external customers, vendors, and other clients to help improve and increase business.
Paolo has been involved with establishing Tether tokens USDT as the most used and adopted stablecoin.
Here is the Q&A with CTO, Tether:
Q: Tell us briefly about the origin of Tether i.e. why Tether was created
Ardoino: Tether is a company built on firsts – it was the first to introduce the concept of stablecoins in 2014 with a very simple idea: use the blockchain – the same technology that powers Bitcoin – to move currencies in a transparent, efficient, and decentralized way.
Out of all the stablecoins, Tether has the highest trading volume and liquidity. Tether was created to make the crypto economy more efficient by putting dollars on a blockchain and it is being used to disrupt everything from the digital payment space to e-commerce purchases and even facilitate transactions within decentralised finance ecosystems. Currently, Tether is the most used stablecoin in the ecosystem among crypto traders and completes a minimum of $60B and up to $120B in volume per day. It is also being used to facilitate cross-border trade and remittances to emerging markets. Tether provides a stable and efficient way of transmitting value. It is widely used by tens of thousands of traders daily across Africa, Asia, Latin America, and Europe because it makes trading and arbitrage, among other things, more efficient.
Q: What differentiates Tether from other cryptocurrencies, and how is it different from fiat money?
Ardoino: Tether is a stablecoin. Stablecoins are designed to maintain a fixed value over time. The value of a stablecoin is typically pegged to a specific real currency, like the U.S. dollar. This is unlike highly volatile cryptocurrencies such as bitcoin. To date, stablecoins have served as a necessary offramp that has been used by traders to move quickly in and out of positions, and provides a stable unit of account for settling crypto payments. Note that, while the redemption cost of a USDt is always one dollar, and while Tether is the most stable of the stablecoins, the secondary market may price Tether tokens differently than their redemption costs.
Q: How is using Tether different from traditional financial payments?
Ardoino: The traditional financial sector is outdated and the current payment mechanisms are falling short of the mark. They are slow, costly, inefficient and full of friction for businesses. Lots of individuals and businesses, for example, in Africa face lots of problems such as high fees from banks on domestic and international payments, long processing times, limited international reach, lack of fee transparency, payment security and lack of automation.
Tether tokens are currently being used to disrupt everything from the digital payment space to e-commerce purchases to facilitating transactions within decentralized finance. Tether can easily be transferred between exchanges or people, instead of transferring money through banks. It is easy to buy and sell and is available at the place you buy your cryptocurrencies (exchanges). Tether is often used as a way to hold money on exchanges when traders feel the market is extremely volatile.
Stablecoins are also being used to facilitate cross-border trade and remittances to emerging markets. For example, Tether provides a stable and efficient way of transmitting dollars. It is widely used by tens of thousands of traders daily across Asia, Latin America, and Europe simply because it makes trading and arbitrage, among other things, more efficient.
With the introduction of Tether stablecoins, all these major problems have been resolved making businesses more profitable, drastically reducing credit card frauds, streamlining and reducing errors in transactions and making borderless transactions easier, inexpensive and faster.
Q: Who are Tethers customers ?
Ardoino: Tether makes the crypto economy much more efficient by putting dollars on a blockchain. Tether tokens are used across a wide range of ages and occupations. Tether is the product of the minds of bitcoiners that have inclusivity and democratisation of access to finance at their core. It is widely used by tens of thousands of traders daily across Africa, Asia, Latin America, and Europe simply because it makes trading and arbitrage, among other things, more efficient.
Tether is also extremely popular in emerging countries where the population is experiencing devaluation of national currencies.
Due to its unique qualities, stablecoins, and specifically, Tether tokens are capable of solving real problems around the world. USDt provides users with a way to escape some inflating currencies, access financial services, preserve wealth, and efficiently transfer value.
Our customers continue to place their trust and confidence in Tether, as exhibited through our growth. In doing so, they are telling us and the market that our disclosures are sufficient to make well-informed decisions.
Q: Tell us about the use cases of Tether
Ardoino: Tether tokens are currently being used to disrupt everything from the digital payment space to e-commerce purchases to facilitating transactions within decentralised finance. They are also being used to facilitate cross-border trade and remittances to emerging markets. USDt tokens issued are currently greater than $70B and Tether provides a stable and efficient way of transmitting dollars.
Traders choose Tether because it is the largest, most innovative, and most liquid stablecoin. Tether is useful, which is why Tether tokens have become increasingly more popular as the cryptocurrency industry continues to grow. Therefore, Tether is a product meant to offer a safe harbour for the unbanked.
In Africa, for example, crypto volatility will start to subside as more institutions use crypto and blockchain for real-world, non-speculative use cases (tied to regular business cycles) like payments, real estate, equities, gaming, and more instead of the retail use cases that comprise much of crypto volume today. Institutional adoption will behave as a catalyst for crypto to become a mainstream asset and push to broader adoption by investors and retail users.
Q: What is your opinion on algorithmic stablecoins?
Ardoino: Unlike collateralized stablecoins where each coin is fully backed by collateral, algorithmic stablecoins attempt to maintain their value via various market operations that have frequently been broken down dramatically. Terra was an algorithmic stablecoin that at the end of the day was not fully collateralized. It has a number of mechanisms designed to achieve stability, but ultimately those failed. Compared to Tether, USDT which is always fully backed by reserves, algorithmic stablecoins are highly vulnerable to market volatility. While the USDT situation means nothing for the centralized stablecoin market, being that they are entirely different types of assets, it did highlight a weakness in the market and the need for education among traders.
In the aftermath of Terra/Luna’s dramatic collapse, stablecoins have fallen under a new wave of scrutiny from investors, and critics. However, it is important to distinguish Terra – and its unique algorithmic approach – from the more straightforward, asset-backed stablecoins, including Tether. Terra and USD₮ utilize completely different designs, mechanisms, and collateral.
Q: How would you handle a mass liquidation of Tethers?
Ardoino: First of all, Tether is the most transparent stablecoin. It was the first to disclose the composition of its reserves. Second, it holds a strong, conservative, and liquid portfolio with an emphasis on safeguarding those reserves. Most importantly, it has never refused redemption to a customer—not once. This stress-testing of Tether is not hypothetical. In March 2020, bitcoin dropped by half in a couple of days. Just two months ago we had one of the worst days in bitcoin’s history, with prices falling by 30% in a few days in May. During those events, the Tether peg remained solid, all redemptions were honoured, and even the price on exchanges remained stable. Tether has been stress-tested multiple times and passed with flying colours.
In May of 2022, Tether successfully processed $7bln of USD₮ redemptions for verified individuals. Every redemption request submitted was redeemed in full. In fact, the size of USD₮ redemptions over the previous months, rivals the size of the largest banking withdrawals in history. This unrecord is held by requests for $16.7 billion in withdrawals over 10 days from Washington Mutual. This represented redemption requests for 11% of the bank’s assets, less than the amount Tether processed with ease. Unlike Washington Mutual, which was shut down and seized by regulators, USD₮ has maintained a stable value and highly liquid markets. This year alone, Tether was also able to fulfill 12% of its outstanding liabilities within a week. No bank in the world could process the withdrawal of 12% of its outstanding liabilities within a week.
Tether leads the industry in both transparency and security, never wavering and providing a safe haven for all.
Q: What is Tether Gold and how does it work?
Ardoino: XAUt is a digital token, backed by physical gold. From ancient civilizations, humans have used gold as money and a store of value. Since then, and especially in times when the overall macro market has been in distress, gold has been used as a hedge. For those looking for a digital stablecoin that is not subject to fiat inflation, Tether offers Tether Gold (XAUT), a product for those wanting a stablecoin that is based on a commodity that is scarce and expensive to mine. Gold has historically been an excellent hedge against inflation because its price tends to rise when the cost-of-living increases. In this unprecedented time in which central banks print more money than ever,Gold is a great choice to store your wealth because of its scarcity.
Unlike fiat paper currency, coins or other assets, gold has maintained its value throughout the ages. People see gold as a way to pass on and preserve their wealth from one generation to the next.Gold has historically been an excellent hedge against inflation because its price tends to rise when the cost-of-living increases. In this unprecedented time in which central banks print more money than ever,Gold is a great choice to store your wealth because of its scarcity.
Tether Gold (XAUt) is a token that provides you ownership of real physical gold. By putting gold on a Blockchain, we unlock a variety of characteristics that typically only crypto assets possess.
As such, Tether Gold allows holders to self-custody their gold-backed crypto. It is the leading asset that provides the security of a digital XAUt is a digital token, backed by physical gold.asset and the safety of being pegged to physical Gold. XAU₮, which is available as an ERC-20 token on the Ethereum blockchain and as a TRC-20 token on the Tron blockchain, can be transferred to any on-chain address from the purchasers’ Tether wallet.
Transporting your XAUt tokens is as easy as taking your other crypto-assets with you, whenever you need to. XAUt tokens however, can be traded 24/7, 365 days a year from anywhere in the world on exchanges that list XAUt Tokens. All physical gold that backs XAUt tokens can be tracked on our website. At any point in time, you can verify your gold allocation in our vaults. It’s difficult to split up your physical gold bars. However XAUt tokens are divisible into increments as small as 0.000001 fine troy ounce of gold and also easily redeemable.
Tether Gold (XAU₮) is the only product among the competition that offers zero custody fees and has direct control over the physical gold storage, safely held in a Switzerland vault, adopting best-in-class security and anti-threat measures.
Q: What would you say is Tether’s major weakness or challenge?
Ardoino: An algorithmic stablecoin loses its peg when there is not enough liquidity, real liquidity sustaining a drop in the market like we have seen cascading liquidations in the past days. With Tether backed by assets of US Treasuries, it’s a different thing. The worst-case scenario is that they shrink but do not shrink in strength.
And even if it shrinks, we have reserves in Tether that are increasing more than 100% the backing of the stablecoin. Therefore, if Tether shrinks to $70B, the reserves are there so inherently that they are composing even a more significant part proportionally of the backing of the stable coin.
On the blockchain, the level of transactions is dwarfing all the stablecoins. So, that is, you know, the different types of use cases, what actually makes Tether resilient as well. So you have a stablecoin created for one single purpose that is not going to yield the people more wealth. It is actually a tool, it’s a dollar on a blockchain it’s simple as that.
Q: Where do you see Tether as an African-adopted Stablecoin?
Ardoino: Tether, as a stablecoin, is presented as an excellent opportunity to interact with the crypto ecosystem. It is a resource for the unbanked, an instrument to evolve the payment system, and a leader in driving the general adoption of a new financial revolution. For those looking for a digital stablecoin that is not subject to fiat inflation, Tether offers Tether Gold (XAUT), a product for those wanting a stablecoin that is based on a commodity that is scarce and expensive to mine.
When it comes to investments, institutions need to follow a higher set of standards. These standards will lead them to adopt crypto into portfolios only as they get comfortable understanding the risks and as regulations, market integrity, and transparency continue to evolve.
Q: How is Tether navigating regulation in Africa
Ardoino: Tether is a pioneer in this industry, which is all very new. Rules, regulations, and laws are being made by the day. It is a leader in transparency and getting information to the community and its stakeholders, and demonstrating full backing, and it wants to preserve that position. Tether is not just keeping up with new rules, but helping shape them and helping law enforcement and regulators globally. The company is committed to being a positive force in this space and its actions speak to that.
Q: What are Tether’s plans or strategies to penetrate the African Market?
Ardoino: Tether tokens are used across a wide range of ages and occupations. Tether is the product of the minds of bitcoiners that have inclusivity and democratisation of access to finance at their core. Therefore, Tether is a product meant to offer a safe harbour for the unbanked.
Look out for an exclusive BitKE video interview with CTO, Tether.