The problem, and expense, of sending money from one place to another has been the bane of individuals and businesses for decades, at the very least. One problem is the time factor. In many cases it can takes days to simply transfer money. But the largest problem has always been expense. International transfers often cost as much as US$30 for even small amounts, and if you exchange one currency for another, the costs can be extreme.
One of the largest advantages of the blockchain is that it eliminates, or at least reduces, these issues to insignificance. Tether, a new private beta that opened this week, is designed to allow Bitcoin users to interact with fiat currencies in a way that is revolutionary.
Created by Realcoin, Tether utilizes the efficiency and cost effectiveness of the blockchain for P2P transactions, allowing users to shop online and pay bills with fiat currencies. Whenever we transfer funds using traditional methods such as PayPal, banks, or money-transfer services such as Western Union, we are dealing with third-party intermediaries, which charge high fees.
So far, the volatility of cryptocurrencies, and the bad reputation given to them by the media, have made it difficult to attract people to them. But Realcoin, through Tether, is adapting the blockchain to allow fiat currencies to be transferred without these intermediaries. Reeve Collins, cofounder and CEO of Tether, says this about the problem:
“While the blockchain shows great promise to more efficiently connect the world to banking, individuals are very hesitant to use Bitcoin until we effectively end the volatility concern. This is a critical step for mass adoption of this technology, and Tether is bridging the gap by bringing familiar currencies to the blockchain.”
The way that they accomplished this is relatively simple. The platform simply formats fiat currencies as tokens. Currently, there are only three currencies available—the US dollar, the European euro and the Chinese yen. But the platform itself is completely transparent, and regular audits are promised as well. Each Tether token is fully backed by its original currency, so there is no exchange risk.
Tether has partnered with some of the largest names in the cryptocurrency industry, such as Bitfinex, GoCoin, ZenBox, Omniwallet, HolyTransaction and Expresscoin. These give the beta access to exchanges, multi-coin wallet providers, payment platforms and Bitcoin kiosks. Users can not only move freely from one fiat currency to another, but also from fiat currencies to and from Bitcoin. The private beta will likely last through 2014, according to Collins, who told Money Beat in July:
“Unfortunately, there has been confusion for people between the currency called bitcoin and the technology called Bitcoin, when they are distinctly different things. In effect we are digitizing the dollar and giving that digital dollar access to the bitcoin blockchain.”
Digitizing the dollar seems like a good idea for sure, and it will certainly make money transfer much easier, especially for the average consumer who suffers considerably from the fees charged by third-party intermediaries.
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