An overview of the origins and development of USDT (Tether), combining key time nodes, technical mechanisms, and market impact to systematically understand the 'background' of this leading stablecoin:

I. Background of emergence (2014)

1. Founding team and original intention

USDT was founded in 2014 by Brock Pierce, Reeve Collins, and Craig Sellars, originally named Realcoin, with the aim of providing a stable value medium pegged 1:1 to the U.S. dollar for the highly volatile cryptocurrency market.

- Core demand: At that time, the price of cryptocurrencies like Bitcoin was highly volatile, and traders urgently needed a safe-haven asset for settlement and temporary capital parking.

2. Official naming and subject affiliation

- Renamed Tether (USDT) in November 2014, issued by Tether Limited registered in the British Virgin Islands.

- The company is part of the same group as the cryptocurrency exchange Bitfinex (iFinex Inc.), sharing a core management team and forming a close collaborative relationship.

II. Technical foundation and issuance mechanism

1. Underlying protocol

- Initially issued based on the Bitcoin blockchain's Omni Layer protocol, using the Bitcoin network to create and transfer tokens.

- Expanded to Ethereum (ERC-20 standard) starting in 2017, later supporting over 10 public chains including Tron (TRC-20) and Solana, enhancing transaction speed and cost efficiency.

2. Value anchoring model

- 1:1 U.S. dollar reserve commitment: For every 1 USDT issued, Tether must deposit 1 U.S. dollar as a reserve in the bank.

- Operating process:

→ Users deposit U.S. dollars into Tether's designated bank account;

→ Tether mints an equal amount of USDT on-chain;

→ Users can redeem U.S. dollars at any time, and Tether destroys the corresponding USDT.

III. Key nodes in the development process

- 2015: Bitfinex exchange was the first to integrate USDT, becoming its early circulation core scenario.

- 2017: The Bitcoin bull market drove a surge in demand for USDT, with market capitalization exceeding $1 billion, and it expanded to the Ethereum network.

- 2018: Faced the first large-scale trust crisis, with accusations of insufficient reserves and interest transfer with Bitfinex, but did not trigger a collapse.

- 2019-2021:

- The New York Attorney General's office (NYAG) accused Tether of misusing reserves to cover Bitfinex's $850 million losses;

- Ultimately settled for $18.5 million and promised to regularly disclose reserve composition.

- 2022:

- During the market panic triggered by the collapse of TerraUSD (UST), over $20 billion in redemptions were processed in a single month, testing the stability peg mechanism.

- 2025 (current): Market capitalization reaches approximately $95 billion, accounting for over 70% of the stablecoin market share, with daily trading volume exceeding $50 billion.

IV. Controversies over operational mechanisms and value assurance

1. Reserve transparency issues

- Tether has long only provided reserve proof issued by third-party institutions (such as BDO Italy), rather than comprehensive audits, raising doubts about the authenticity of its U.S. dollar reserves.

- After the 2021 settlement agreement disclosure: only about 3% were cash, with the rest being commercial paper, U.S. Treasury bonds, and other assets.

2. Redemption risks and liquidity pressures

- In the event of a large-scale run, Tether would need to liquidate non-cash assets (such as treasury bonds), which may lead to an inability to pay in full due to market fluctuations.

- The 2022 redemption test showed strong emergency capabilities, but systemic risks remained.

3. Regulatory and legal challenges

- Countries such as the U.S. and China explicitly restricted virtual currency trading, making USDT illegal financial activity in China;

- The EU (Markets in Crypto-Assets Regulation) (MiCA) requires stablecoin issuers to operate under a license, which may force some exchanges to delist USDT.

V. Current status and future challenges

- Market position: Still the most traded and widely used stablecoin, covering over 90% of exchanges and DeFi protocols.

- Reserve structure optimization: After 2023, reduce the proportion of commercial paper, increase cash and U.S. Treasury bonds (accounting for 84.05% of reserves), and enhance asset safety.

- Regulatory pressure: Facing stricter legislation in the U.S. and Europe (such as the U.S. (Lummis-Gillibrand Act)), which may lead to non-compliance or rejection from mainstream markets.

- Competitive threats: Stablecoins with higher transparency, such as USDC and DAI, are eating into its market share.

Summary: Coexistence of pioneers and controversies

The birth of USDT fills the rigid demand for a stable medium in the cryptocurrency market, with its **'fiat currency - on-chain token' dual-track model** becoming an industry paradigm. However, the centralized operation model, lack of reserve transparency, and regulatory clampdown have kept it in an **'indispensable yet hazardous'** awkward position. Whether it can achieve a balance between compliance and innovation in the future will determine whether this 'nuclear bomb' in the cryptocurrency circle continues to empower or ultimately detonates.

Note: Data updated to May 2025, regulatory dynamics and market capitalization reference Tether's official report and CoinMarketCap.