What is cryptocurrency Tether (USDT) and how does it work?

What Is Tether (USDT)?

Tether (USDT) is a stablecoin, which is a type of cryptocurrency that actively works to keep its valuation stable through market mechanisms. It’s used by investors who want to hedge against the inherent volatility of their cryptocurrency investments while still keeping value inside the crypto market, ready to be used without hassle.

Tether is a fiat-collateralized stablecoin, which is a type of stablecoin that is backed by a fiat currency like USD, CAD, AUD, or even Yen (JPY). Tether was created to bridge the gaps between fiat currencies and blockchain assets while offering transparency, stability, and low fees for USDT users. Tether is pegged against the U.S. Dollar at a 1:1 ratio. There is no guarantee from Tether Ltd. for any right of redemption or exchange of Tether to USD. USDT cannot be exchanged directly for USD through the Tether company. 

How does Tether (USDT) work?

Each Tether (USDT) issued is backed by one US dollar worth of assets. All Tether was initially issued on the Bitcoin blockchain via the Omni Layer protocol, but can now be issued on any chain that Tether currently supports. Once a tether (a single unit of USDT) has been issued, it can be used the same as any other currency or token on the chain that it has been issued on. Tether currently supports the Bitcoin, Ethereum, EOS, Tron, Algorand, and OMG Network blockchains.

Tether uses Proof Of Reserves, which means that at any time their reserves will be equal to or greater than the number of Tether in circulation. This can be verified via their website.

Who Are the Founders of Tether? (History of USDT)

Tether (USDT) was originally launched on October 6th, 2014 as Realcoin by Brock Pierce, Reeve Collins, and Craig Sellars (a member of the Omni Foundation). This allowed them to build Tether on the Omni Protocol which enabled users to create and trade smart-contract-based properties and currencies on Bitcoin’s blockchain. On the 20th of November 2014, Tether CEO Reeve Collins announced that the name of their token, Realcoin, would be changed to Tether (USDT).

Tether’s contentious history begins with its launch on the market. In January of 2015, Bitfinex allowed Tether (USDT) to be traded on their exchange platform for the first time. Tether volume began to increase rapidly on the blockchain network with USD transactions moving through Taiwanese banks, who would then pass the transactions on to Wells Fargo. This continued until 2017.

On April 18, 2017, Tether’s international transfers were blocked by US Banks. A lack of transparency leading up to and during these events followed by leaks such as the Paradise Papers amid accusations of market manipulation made many users speculate if the Tether currency reserves actually existed or if the entire stablecoin would collapse. This was exacerbated in 2017 when withdrawals were temporarily suspended. These news events caused severe volatility for USDT holders.

Starting from January 2017, the amount of outstanding Tether (USDT) grew from $10 million to almost $2.8 billion in September of 2018. This was followed by a lawsuit in April of 2019 from New York Attorney General Letitia James who accused Bitfinex and Tether of misappropriating reserves funds to cover an 850$ million dollar deficit. Bitfinex and Tether agreed to pay a penalty of $18.5 million in 2021. Tether continues to remain the center of speculation in cryptocurrency markets and blockchain networks with many users doubting their liquidity and stability. 

What Makes Tether (USDT) Unique?

Tether (USDT) has been accepted and used for years and holds legitimacy, though often challenged, that few projects can actually match. It is widely accepted by many vendors and protocols within the blockchain ecosystem as a payment method and means of exchange. Due to Tether’s large reserves, it doesn’t suffer from market risks such as Black Swan events. USDT also enjoys the same luxuries as other cryptocurrency tokens on the network, peer-to-peer trading and PoW or PoS security, which makes it a desirable hedge for traders and users alike. 

What Gives Tether (USDT) Value?

The role of USDT is to provide liquidity and hedge against market volatility since it does not appreciate or depreciate, in theory. The value of Tether (USDT) is entirely dependent on Tether’s reserves. As long as Tether is backed 1:1 Tether will be worth 1 US Dollar.

How Many Tether (USDT) Coins Are in Circulation?

Tether (USDT) has a circulating supply of 40,805,169,352 USDT tokens This supply may increase or decrease according to demand and current market liquidity.

USDT tokens can be purchased on the secondary market or exchanges.

USDT does not support staking or yield farming for USDT. It must be purchased or issued.

How Is Tether (USDT) Secured?

Currently, the USDT token can be issued on several cryptocurrency networks, such as Ethereum, EOS, Tron, Algorand, and OMG Network. Since the smart contracts and tokens are hosted on these blockchain networks, the base security is also handled by the nodes and miners who keep these networks secure using Proof-of-Work or Proof-of-Stake. These platforms conduct regular audits to ensure that the code is up-to-date, secure, and compliant with the current framework and Tether also ensures that USDT remains compliant with each network.

Other Technical Data

Stablecoin – a cryptocurrency that pegs its value to an external reference, such as the US Dollar

Proof of Work (PoW) – a piece of data that is difficult to produce but easy for others to verify

Proof of Stake (PoS) – users who hold tokens on the network mine or validate transactions

Black Swan event – a completely unexpected event that is often financially devastating (can also be used in a positive context)

Bitcoin BTC

Buy

Ethereum ETH

Buy

Solana SOL

Buy

XRP XRP

Buy

Dogecoin DOGE

Buy

How To Use Tether (USDT)

Tether is a stablecoin that can be purchased on many popular exchanges like Kriptomat. Tether (USDT) can be exchanged for a variety of goods at different vendors or used to exchange for a different currency. Some users will acquire USDT to lend, purchase NFTs, and participate in ICOs. Tether’s flexibility makes it incredibly versatile and it can be used almost anywhere a user wants to transfer or transact value. 

How To Choose a Tether (USDT) Wallet

The type of Tether (USDT) wallet you choose will likely depend on what you want to use it for and how much you need to store.

Hardware wallets or cold wallets provide the most secure option with offline storage and backup. Both Ledger and Trezor hardware wallets offer storage solutions for USDT. Hardware wallets can involve a bit more of a learning curve and are a more expensive option, however. As such, they may be better suited to storing larger amounts of USDT for more experienced users.

Software wallets provide another option and are free and easy to use. They are available to download as smartphone or desktop apps and can be custodial or non-custodial. With custodial wallets, the private keys are managed and backed up on your behalf by the service provider. Non-custodial wallets make use of secure elements on your device to store the private keys. While convenient, they are seen as less secure than hardware wallets and may be better suited to smaller amounts of Tether (USDT) or more novice users.

Online wallets or web wallets are also free and easy to use, accessible from multiple devices using a web browser. They are considered hot wallets and can be less secure than hardware or software alternatives, however. As you are likely trusting the platform to manage your USDT, you should select a reputable service with a track record in security and custody. As such, they are most suited for holding smaller amounts or for more experienced frequent traders.

Tether (USDT) Staking

Tether (USDT) does not support staking for USDT.

Conclusion

Tether remains one of the most popular stablecoins on the market, while providing liquidity for transactions worth millions of dollars in value each day. Despite any controversy, Tether serves as a safe haven for users in a highly volatile market and continues to be used by millions of users who want decentralized finance between regions, countries, and even continents. 

Tether FAQ

Is USDT a Competitor to Bitcoin?

No, Tether is designed to help users with their liquidity on the Bitcoin network and serves as a speculative hedge.

When Will Staking Be Released?

Tether does not natively support staking. Users may find staking available through dApps that use USDT.

Tether Price?

Tether price is not affected by market cap, exchange inflows and outflows, sentiment, technical and fundamental developments, the news cycle, and the general economic environment.

Unlike Bitcoin, the price of USDT is designed to remain stable at $1, regardless of market fluctuations. You can keep up to date on the latest market cap changes and news using crypto exchanges or one of the many different cryptocurrency tracking services.

The current Tether (USDT) price is EUR.

The 24-hour trading volume of USDT is EUR. USDT is currently ranked of all cryptocurrencies by total market capitalization, with a market cap of $ EUR. It has a circulating supply of USDT.

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