Résumé
Tether (USDT) is one of the most popular stablecoins. This is designed to be worth $1 at all times. This currency exists on several blockchains and has seen a sharp increase in volume and liquidity in recent years.
Like other stablecoins, USDT is useful for trading cryptocurrencies. In fact, this helps avoid market volatility. The use of stablecoins also removes the costs and delays inherent in crypto/fiat conversions.
Introduction
Tether is a key part of the crypto ecosystem. As of December 2020, Tether was the fourth largest cryptocurrency, with a market capitalization of almost $20 billion. He was therefore behind Bitcoin, Ethereum and XRP. Additionally, it is often the coin with the most daily trading volume, often surpassing Bitcoin. How can Tether be useful to me?
What is Tether (USDT)?
Tether (USDT) is the largest stablecoin (a cryptocurrency that mimics the value of a fiat currency). Tether was launched in 2014 under the name Realcoin by Brock Pierce, a Bitcoin investor, Reeve Collins, an entrepreneur, and Craig Sellers, a developer.
USDT was initially issued on the Bitcoin protocol using Layer Omni. Obviously, this has since migrated to other blockchains. Indeed, as you can see in the table below, the majority of its supply is on Ethereum in the form of an ERC-20 token. USDT is also available on TRON, EOS, Algorand, Solana and the OMG network.
Tether has had both successes and controversies. In its early days, the price of USDT was volatile and could reach $1.2 at times. This volatility has been lower since 2019. This is explained by the constant increase in its trading volume, as well as the increase in the market capitalization of cryptos.
How does Tether (USDT) work?
The usefulness of stablecoins lies in their stability (all relative sum) as opposed to other crypto-assets. The appeal of Tether lies in its ability to be pegged to a fiat currency. USDT was designed to be exactly pegged to USD. So for each USDT in circulation, there is one USD in the bank.
As per the original Tether whitepaper:
All Tether tokens are pegged 1:1 to matching fiat currency and are 100% backed by Tether reserves. The value of our reserves is published daily and updated at least daily.
Although the asset enabling the 1:1 USDT ratio was originally USD, it has evolved to be used as collateral on certain protocols.
As you can see from the USDT/USD chart below, USDT is generally equal to $1. However, during large market movements, its price may vary.
Why is Tether (USDT) important?
Tether bridges the gap between cryptocurrencies and fiats. This allows investors to escape volatility by securing their positions on an asset imitating the USD.
By providing this stability, investors can hold a digital asset similar to a fiat currency while easily being able to use it to trade cryptos. The main characteristics of USDT make it a popular currency, but it is not without risks.
main Features
Ratio 1:1 (USD/USDT)
Stable (as much as USD can be considered stable)
Available on multiple blockchains
Several use cases, unlike more traditional cryptocurrencies.
Use cases for Tether (USDT)
Easily escape market volatility
If the price of Bitcoin or another asset drops sharply, it will be faster to convert your funds to USDT than to fiat.
Easily transfer funds between exchanges
With USDT, it is easy and quick to move your funds from one exchange to another. For example, you can use this property of USDT to arbitrage other currencies.
Trading on exchanges that only offer cryptos
Some exchanges do not support fiat currencies. On the other hand, almost all exchanges support USDT. By obtaining USDT in advance, you will be able to protect yourself from volatility.
Trading de type Forex
Since USDT is backed by USD, you can make Forex type trades by exchanging currencies other than dollars into USDT when their value is higher than that of USD. You will then simply convert your USDT back to the base currency when its value drops.
How to store Tether (USDT)?
In addition to Binance and other crypto exchanges, you can store your USDT on several crypto wallets. These wallets can be web or mobile, such as Trust Wallet, or hardware wallets, such as Ledger. Since USDT is available on multiple blockchains, make sure the transaction originating and terminating network is the same.
For example, if you go to the USDT withdrawal page on Binance, you will see that it can be sent to BNB Beacon Chain (BEP-2), BNB Smart Chain (BEP-20), Ethereum (ERC-20), Tether (OMNI) and Tron (TRC-20). Be careful ! If you use the wrong network, you risk losing your funds. For example, if you send USDT from the Omni network to an ERC-20 address, your funds will most likely be lost.
Note that as of December 2020, USDT as ERC20 is the only one supported by Ledger. This means that USDT based on the Bitcoin blockchain (Omni Layer) are not transferable to Ledger key wallets.
Other cryptocurrencies Tether
Apart from Tether (USDT), there are other stablecoins:
EURT: a Tether based on the euro
CNHT: a Tether based on the Chinese yuan
XAUT: a Tether based on gold
You can see the number of coins on each blockchain from this page.
To conclude
Stablecoins make it easier to trade cryptocurrencies by saving traders from having to convert them into fiat currencies. USDT is therefore a convenient asset for trading cryptocurrencies.
Although various questions have been raised about the validity of the reserves, the volumes over the past few years are proof of people's confidence in USDT. In addition to USDT, you can also choose other stablecoins such as BUSD, USDC, TUSD and PAX.
