Ethereum Has Been Dethroned…
The currency in question is Tether, which has stirred quite a bit of controversy over the past 12 months given its potentially unrequited statements surrounding its status as a stable coin. While Tether execs have alleged that the currency is backed by specific amounts of reserve fiat, this was ultimately proven as not entirely true.
In addition, Tether is often thought to have been responsible for bitcoin’s rapid price booms in 2017. A report that emerged last year by University of Texas finance professor John Griffin alleges that Tether holders were potentially using the stable currency to purchase bitcoin units whenever the asset fell by even a marginal bit. This would ultimately tie bitcoin to the stable currency, thereby boosting it further up the financial ladder.
The report also alleges that those who bought bitcoin using Tether ultimately cashed out the following year, which accounts for the rapid descent of the world’s number one cryptocurrency by market cap.
As we all remember in 2017, the Ethereum blockchain network became clogged up when the digital currency-based game Crypto Kitties became one of the most popular forms of entertainment for digital asset enthusiasts. Then, there was an entire swell of initial coin offerings (ICOs) and new currencies that utilized Ethereum’s smart contracts capabilities. With so many new coins being built on Ethereum’s network, it was bound to lose its footing somewhere down the line.
Co-creator Vitalik Buterin recently commented:
The Ethereum blockchain has been almost full for years. I think it’s still good to develop apps, but anything substantial should be developed with scalability techniques in mind so that it can survive higher transaction fees that would come with further growing demand for Ethereum. In the longer term, Ethereum 2.0’s sharding will, of course, fix these issues.
Lately, however, Tether seems to be taking up a lot more space. In the last month alone, Tether has paid computers processing Ethereum-based transactions fees of up to $260,000. That’s nearly 18 times more than Crypto Kitties and more than five times that of IDEX, the world’s largest distributed exchange.
The problem is that Tether is being issued more often now, and the more it’s issued, the more space it requires. It’s market cap now exceeds $4 billion, and approximately 40 percent of all Tether-based transactions occur on the Ethereum network.
Tether Might Be Making Things a Lot Harder
Jeff Dorman, chief investment officer at Arca in Los Angeles, comments:
The biggest implication today is simply that developers may be incentivized to wait until this transition happens before fully committing to build on Ethereum. Tether isn’t helping.