TL;DR

Tether (USDT) is one of the most popular stablecoins in the world and is designed to maintain a 1:1 value with the US dollar. The coin exists on various blockchains and has seen increased trading volume and liquidity over the past few years.

Just like other stablecoins, USDT is useful for trading cryptocurrencies because it allows traders to avoid the market volatility that is common with BTC and other crypto assets. Stablecoin users eliminate additional fees and delays in converting between crypto and fiat currencies.


Introduction

Tether is a major part of the cryptocurrency ecosystem. As of December 2020, Tether was ranked the fourth largest cryptocurrency in the world with a market capitalization of nearly $20B, slightly behind Bitcoin, Ethereum, and XRP. Additionally, Tether often ranks among the coins with the highest daily trading volume, surpassing even Bitcoin.

What is Tether, and how can this token benefit you?


What is Tether (USDT)?

Tether (USDT) is the world's first stablecoin (cryptocurrency that imitates the value of fiat currency). Tether was originally released in 2014 under the name Realcoin by Bitcoin investor Brock Piece, entrepreneur Reeve Collins, and software developer Craig Sellers.

USDT was initially issued on the bitcoin protocol via Omni Layer, but later migrated to other blockchains as well. In fact, as can be seen in the diagram below, most of the supply is on Ethereum in the form of ERC-20 tokens. Tether is also issued on several other blockchains, including TRON, EOS, Algorand, Solana, and OMG Network.



Tether has experienced both success and controversy – like most of the world's leading cryptocurrencies.

Especially in the early days, the price of USDT was quite volatile, even reaching $1.2 at some points. However, the coin has seen a significant decrease in volatility since the start of 2019. This is possible thanks to a steady increase in trading volume, and the progress of the cryptocurrency market as a whole.



How does Tether (USDT) work?

Stablecoins' utility lies in their stability, in contrast to more traditional crypto assets. As a stablecoin, Tether's appeal is tethering, also known as tethering, or pegging to a fiat currency. In the beginning, USDT was pegged exactly to USD, with $1 USD held for every USDT in circulation.

According to Tether's initial whitepaper:

Each tether unit issued into circulation is backed in a 1:1 ratio (i.e., one Tether USDT is one US dollar) by units of the corresponding fiat currency held on deposit by Hong Kong-based Tether Limited.

While the one-to-one asset was initially USD, Tether has grown to include collateral holdings with cash equivalents, assets, and receivables from real-world loans.

As you can see in the USDT/USD chart below, the coin (generally) trades at a stable 1:1 ratio to USD. However, major market events can affect its price.

chart usdt usd


Why Tether (USDT) matters

Tether bridges the gap between crypto and fiat currencies. This asset presents an easy way for investors to make 1:1 transactions against USD, without the inherent volatility of other cryptocurrencies.

By providing this stability, investors can own digital assets similar to fiat currency but with the ease of trading other coins in the crypto market. Tether's key features make it a popular coin – although it is also not immune to risk.

Key features

  • Ratio 1:1 (USD to USDT)

  • Stability (just as USD is considered stable)

  • Available on various blockchains

  • It has various uses, when compared to other cryptocurrencies


Uses of Tether (USDT)

Quick access to market stability

If the price of Bitcoin or another crypto asset drops rapidly, you will be able to exchange it for USDT quickly rather than trying to cash out.


Easily move funds between different exchanges

With Tether, you can move funds between exchanges very quickly. It is also useful for arbitrage trading with other coins.


Trade on exchanges that only facilitate crypto

Some exchanges do not have fiat deposit and withdrawal facilities, but allow USDT trading. By getting Tether first, you can trade on this type of exchange without worrying about market volatility if you place your main trading funds in BTC (or other crypto).


Forex style trading

Since USDT is pegged to the USD, you can make Forex-style trades by exchanging local (non-US) currencies for USDT when their value is high against the USD. Then, you can cash out to local currency when the local currency drops or exchange it for other assets.


How to store Tether (USDT)

Besides Binance and other cryptocurrency exchanges, you can store USDT in a variety of crypto wallets. These wallets include web and mobile wallets (such as Trust Wallet) or cold storage hardware wallets (such as Ledger) through third-party software wallets.

Since USDT is minted on different blockchains, you must ensure that you transfer it to and from the same network.

For example, if you want to open the Binance USDT withdrawal page, you will find five different network options as transfer destinations: Binance Chain (BEP2), Binance Smart Chain (BEP20), Ethereum (ERC20), Tether (OMNI), and Tron (TRC20).

pilihan jaringan

USDT sending network options on Binance.


So, please be careful. If you use the wrong network, you may lose funds. For example, if you try to send Omni USDT to an ERC-20 USDT address, your transferred funds will most likely be lost.

Note that as of December 2020, USDT ERC-20 is the only type supported by Ledger. This means that USDT running on the Bitcoin blockchain (Omni Layer) cannot be transferred to a Ledger hardware wallet.


Another Tether cryptocurrency

Apart from USDT, Tether also has several other stablecoins:

  • EURT: Euro-pegged Tether coin

  • CNHT: Tether coin pegged to the Chinese Yen

  • XAUT: Tether coin pegged to physical gold


You can see the circulation size of each coin on various blockchains on Tether's Transparency page.


Closing

Stablecoins provide a lot of convenience in the world of crypto trading as traders do not need to convert multiple times between fiat and crypto currency. Therefore, USDT becomes a useful asset in crypto trading.

While there have been questions regarding the validity of the USD reserves held, volume over the past few years suggests confidence in Tether's value as a stablecoin. Apart from USDT, you can also choose to use other stablecoins, such as BUSD, USDC, TUSD, and PAX.