Summary

Tether (USDT) is one of the most popular stablecoins out there. It is designed to hold an analog value with the US dollar. This currency exists on many different blockchains, and has seen rising trading volumes and improved liquidity over the past few years.

Like other stablecoins, USDT is useful in cryptocurrency trading because it allows traders to avoid the market volatility that BTC and other digital assets typically experience. Using stablecoins also eliminates the additional costs and delays involved in converting between cryptocurrencies and supported local currencies.


the introduction

Tether is a pivotal part of the digital currency ecosystem. In December 2020, Tether was ranked as the fourth largest digital currency with a market capitalization of around $20 billion, trailing only Bitcoin, Ethereum, and XRP. Furthermore, it is often ranked as the currency with the largest daily trading volume, surpassing Bitcoin itself. But what is Tether? How can it benefit you?


What is Tether (USDT)?

Tether (USDT) is the first stablecoin (a digital currency that mimics the value of a certified local currency). It was first launched in 2014 under the name Realcoin by Bitcoin investor Brock Pierce, entrepreneur Reeve Collins, and software developer Craig Sellers.

USDT was first issued on the Bitcoin protocol through the Omni Layer, but has since moved to other blockchains as well. In fact, as you can see in the chart below, most of the stock of this coin exists on the Ethereum network in the form of the ERC-20 token. It is also issued on several other blockchains, including TRON, EOS, Algorand, Solana, and the OMG Network.


Tether has seen both successes and controversies. The price of USDT was somewhat volatile, especially at the beginning of its launch, even reaching $1.2 at one point. However, the volatility of this currency has eased since the beginning of 2019, likely due to the stable rise in its trading volume and the general development of the digital currency markets.


How Tether (USDT) works

The benefit of stablecoins is their relative stability unlike more traditional digital assets. As a stablecoin, the advantage of Tether is that it is pegged or pegged to a local, approved currency. USDT is said to have originally been entirely pegged to the US dollar, with US$1 being held for every USDT in circulation.

According to Tether's original technical report:

All Tether tokens are pegged 1:1 to the corresponding local currency and are 100% backed by Tether reserves. The value of our reserves is published daily and updated at least once a day.

Although Tether's original analogue asset was the US dollar, it has shifted to include holding collateral with physical cash equivalents, assets and receivables from loans.

As you can see in the USDT/USD chart shown below, the currency (generally) trades at a stable peer rate with the US dollar, but important market events can affect its price.

مخطط usdt/usd


Why Tether (USDT) Matters

Tether bridges the gap between cryptocurrencies and local, certified currencies. It offers an easy way for investors to get analog trading for the US dollar without the inherent volatility of other cryptocurrencies.

By providing this stability, investors can hold a digital asset similar to approved local currencies, but with the ease of trading other currencies on cryptocurrency markets. Tether's characteristics make it a popular currency - albeit one that is not immune to risks.

Basic features

  • 1:1 ratio (USD to USDT)

  • Stability (as stable as the US dollar can be considered)

  • Availability on different blockchains

  • Different use cases compared to traditional cryptocurrencies


Tether (USDT) Recruitment Status

Rapid access to market stability

If the price of Bitcoin or any other digital asset is falling rapidly, you can quickly trade for USDT instead of trying to convert to cash.

Easy transfer of funds between trading platforms

With Tehter, you can move your funds between trading platforms very quickly. This can also be useful for arbitrage trading using other currencies.

Trading on digital currency platforms only

Some trading platforms do not have facilities for depositing and withdrawing approved local currencies, but they do allow USDT trading. By having Tether first, you can trade on these platforms without worrying about market volatility when placing your underlying trading funds in BTC (or other cryptocurrencies).

Forex style trading

Since USDT is pegged to the US dollar, you can trade Forex style by exchanging local currencies (other than US dollars) for USDT when its value is higher than the US dollar. You can then convert this currency into local currency cash when the local currency falls or exchange it for other assets.


How to store Tether (USDT)

Besides Binance and other cryptocurrency exchanges, you can store your USDT coins in various cryptocurrency wallets. These wallets include web and mobile wallets (such as Trust Wallet) or cold storage (offline) hardware wallets (such as Ledger Wallet) through to software wallets provided by third parties. Since USDT is issued on a variety of different blockchains, you should make sure you are transferring it to and from the same network.

For example, if you go to the USDT withdrawal page on Binance, you will find five different options of networks you can transfer to: BNB Beacon Chain (BEP2), BNB Smart Chain (BEP20), Ethereum (ERC20), Tether (OMNI), And Tron (TRC20). So, be careful! If you choose the wrong network, you will lose your money. For example, if you try to send Omni USDT to an ERC-20 USDT address, your transfer will most likely be lost.

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


Other Tether cryptocurrencies

Besides USDT, Tether includes other stablecoins:

  • EURT: Tether coin pegged to the Euro

  • CNHT: Tether coin pegged to the Chinese yuan

  • XAUT: A physical Tether coin pegged to gold

You can also see how much token is in circulation on different blockchains on the Tether transparency page.


Concluding thoughts

Cryptocurrencies have provided a lot of convenience in the world of cryptocurrency trading because they have reduced the need for traders to convert multiple times between supported local currencies and digital currencies. Hence, USDT is a worthwhile asset to own for crypto trading.

Although there are several questions regarding the viability of the reserves, trading volumes over the past few years indicate confidence in the value of Tether as a stablecoin. Other than USDT, you can choose to use other stablecoins, such as BUSD, USDC, TUSD, and PAX.