Tether, a payment service that uses a bitcoin-backend to settle payments without having to use a bank, just announced integration with Bitcoin merchant processor GoCoin. Merchants using GoCoin who transact in Bitcoin, Litecoin, or Dogecoin can instead opt to use Tether’s system.

GoCoin, founded in 2013, has since raised $2 million in funding to provide merchant payment services in Bitcoin, Litecoin, Dogecoin, and now Tether for a multitude of fiat currencies including USD, GBP, Euros and now TetherUSD.

Tether works by “tethering” payment reserves to bitcoin amounts and protects against volatility by backing payments with fiat currency 1:1. Of the three currencies supported by Tether—USD, EUR, and JPY. While Tether uses bitcoin as a backend, any amount of dollars, euros, or yen deposited as a Tether can be withdrawn as the same amount of bitcoin, dollars, euros, or yen.

GoCoin merchants can transact with Tether in USD, but integration with yen and euros are planned for the future.

“By utilizing Tether’s unique business model of linking digital currency to in-hand reserves, we’re able to stabilize value fluctuations for our merchants, making digital currency even more appealing to them,” said Steve Beauregard, GoCoin’s CEO.

To prove and provide security of reserves, Tether also offers a real-time view of reserves currently stored in the Bitcoin blockchain that is audited regularly.

Because Tether uses the Bitcoin blockchain to transfer value, this allows merchants and customers to avoid fees associated with credit cards and banks.

Tether is currently in closed beta, merchants interested in the platform can sign up on the website—but those who already use GoCoin will be seeing integration appear there soon.

Tether’s 1:1 asset model a powerful use of bitcoin for payments

By locking fiat currencies to “tethers” means that merchants who hold them do not have to worry about the Bitcoin market rising or falling as the value of a Tether remains the same irrespective of current bitcoin market value. This is the go-to reason that merchants who utilize processing services such as Coinbase, Inc. and Bitpay, Inc. instantly liquidate bitcoins received as payment.

As a result, the entire burden of buying extra bitcoins when the market value falls—to maintain reserves according to the transparency promised by the company—will fall on Tether. On the other hand, when bitcoin market value rises, Tether will essentially have a buffer in its reserves.

Since a sudden spike in market value in 2013, where the currency exceeded $1,000 USD briefly, Bitcoin market volatility has begun to smooth out; but it can still rise and fall 4% in 24 hours or more than 12% in a week.

Aside from lessening volatility the other strong value add of the Tether system is that merchants no longer work with bitcoin when receiving it.

Instead merchants get to deal in a local currency facsimile, with the Tether versions of USD, EURO, and JPY, which can be withdrawn or transferred to other local currencies. This uses Bitcoin as an agnostic store of value while letting merchants think and act in their own currency.

This would, in effect, removes much of the complexity and mystery of transacting in bitcoins directly, which could be a stumbling block for already busy merchants.

photo credit: Bitcoin IMG_1924 via photopin (license)