USDT: The Anchor of Value
Recently, the market is going through a tough time. Riding on the crypto roller coaster, investors are extremely anxious. Despite that, USDT is as stable as it has always been. Today, let’s dive into this stablecoin.
Many people’s first reaction to USDT is: what does it have to do with USD? Although USDT is not the dollar, this cryptocurrency is closely bound up with it. In a way, the stablecoin used the name USDT to create perceived notions that serve as a built-in advertisement.
Launched by Tether, USDT (Tether USD) is a stablecoin based on the stable value of the U.S. dollar (USD). It is a crypto alternative to USD. 1 USDT = 1 USD, and users can convert their USDT into USD at any time at a 1:1 ratio.
In fact, USDT is not a new cryptocurrency, and it was first available for trading back in 2015 on exchanges, say, the world-renowned crypto exchange CoinEx. After the advent of spot trading, many people wonder how they could convert their cryptos into fiat currency. USDT emerged as a solution and has been favored by many investors.
In Tether: Fiat Currencies on the Bitcoin Blockchain, Tether defined USDT as a fiat-pegged cryptocurrency. All tethers will initially be issued on the Bitcoin blockchain via the Omni Layer protocol, so they exist as a cryptocurrency token. Each tether unit issued into circulation is backed at a onetoone ratio by the dollar. Tether claims that it will strictly abide by the principle of the 1:1 reserve after USDT was launched. In other words, each USDT issued will be backed by one dollar stored in its bank account.
Thanks to its unique features, USDT has become the favorite crypto of many users. In recent years, USDT remains one of the most popular stablecoins, with a market cap of nearly $3 billion, which is far ahead of its rivals, including USDC, Gemini Dollars, and JPM Coin.
Tether, the father of USDT, is one of the top five crypto companies in terms of cash flow. The company earns 3% to 5% of the $2 billion funds provided by its global users, with almost zero operating costs.
USDT, a 2.0 crypto based on the Bitcoin blockchain, was initially issued and traded via the Omni protocol (formerly Mastercoin). USDT’s parameters, such as transaction confirmation, are the same as those of BTC, and users can wire USD to the bank account provided by Tether through SWIFT or buy USDT on a crypto exchange with fiat money or BTC. Later on, to speed up transactions and reduce transaction fees, Tether issued USDT on multiple chains, including Ethereum, Tron, Solana, and Avalanche. As such, when transferring or trading USDT, be sure to check the specific chain to avoid losses arising from transaction mistakes.
Unlike other cryptos, USDT comes with many prominent features:
1. Straightforward
USDT shares the same value as USD (1 USDT = 1 USD). Moreover, the USDT price of a cryptocurrency is also equivalent to its USD worth.
2. Stable
As USDT is backed by fiat currency, users can still trade USDT in the crypto market even if most cryptos are going through price swings.
3. Transparent
Tether, the issuer of USDT, claims that its fiat account is regularly audited to ensure that every Tether in circulation is backed by a corresponding dollar. The account status is open to the public, and users can check the account information at any time. In addition, all USDT transaction records are released on the public chain.
4. Low transaction fees
All USDT transfers between Tether accounts or wallets that contain Tether are free, and users only have to pay a service fee when converting USDT to fiat currency.
That being said, USDT also comes with certain risks. As Tether put it in its whitepaper, although USDT is a decentralized cryptocurrency, Tether is not a perfectly decentralized company. As a centralized deposit holder that stores all the assets, the company could go bankrupt, freeze accounts, or make a sudden exit with all the funds. Meanwhile, such centralization risks could also bring down the entire system. In a nutshell, users must account for the risks of crypto speculation and make prudent investment decisions.
However, Tether’s reserve has also been questioned. For instance, some doubt that the dollar reverse is not kept 1:1. Meanwhile, according to the figures released by Tether, the cash proportion of the reserve is not that high, and it mostly consists of cash equivalents such as big commercial bills and trusted deposits. The company also holds some credit loans, bonds, and crypto investment targets.
For more information about USDT (Tether USD), please go to:
Official website: https://tether.to/
Block explorer: https://omniexplorer.info/
Market cap ranking: https://coinmarketcap.com/currencies/tether/
