Before USDT, before “fully backed” became a tagline, there was BitUSD. It launched in 2014 on BitShares, a project shaped by Dan Larimer, who had a habit of building complex systems with clear internal logic and limited adoption. BitUSD was the first serious attempt to create a dollar-pegged cryptocurrency. No banks were involved, no fiat reserves were held anywhere. The peg came from crypto itself, using BTS tokens locked into smart contracts to simulate a one-dollar value.
It was algorithmic, not in the sense of automation, but in the way it attempted to hold parity without direct fiat support. The system relied on overcollateralization, voluntary interaction, and incentive balancing. The mechanism was sound enough, the code existed, but liquidity was minimal and the broader market was indifferent.
In 2014, crypto users were not looking for something stable. They were looking for leverage, movement, and stories. BitUSD offered a synthetic store of value, but no one wanted to store anything. It had no presence on major exchanges, no integration with centralised tools, no earning potential through staking or yield. It functioned, yet remained unused.
That same year, a project called Realcoin quietly rebranded as Tether. It took a different approach. For every USDT issued, there would be one US dollar held somewhere in a bank account. No complex game theory, no on-chain balancing, just a simple promise. Traders didn’t ask where the dollars were or who audited them. What mattered was that it worked. In 2015, Tether appeared on Bitfinex and began moving across accounts quickly. It settled trades. It felt familiar. It became useful.
BitUSD was a system. Tether was a tool. One required belief in decentralised logic, the other required belief in infrastructure. The market made its choice.
Algorithmic stablecoins, like BitUSD or later UST, attempt to replicate fiat stability through on-chain logic and locked collateral. They do not depend on a central issuer, and they are vulnerable when demand or confidence shifts. Custodial stablecoins, like USDT and USDC, are backed by real assets held by central entities. They are simpler to understand, easier to use, and more compatible with existing exchanges and wallets.
By 2025, Tether still dominated offshore volumes and exchange liquidity, but it was no longer available everywhere. Regulations, particularly in the European Union under MiCA, had already begun to restrict access. Some users could not even open a Red Packet containing USDT, let alone move it into a funding wallet. Tether was not gone, but it was fenced off. BitUSD, on the other hand, had disappeared completely. It was not delisted. It had never been listed.
It did not fail because of a technical flaw. It failed because it never reached the point where users cared. It was too early, too abstract, and too isolated. Being first is only meaningful if someone follows. And in this case, no one did.
