What is Tether?
Tether (USDT) Review & Guide
Today, we are going to take a look at the world's most used cryptocurrency, which is also the largest stablecoin, and the 5th largest crypto by market cap — Tether (USDT). Tether has been around for quite some time now, and despite numerous controversies. it managed to survive and remain one of the largest, and THE most traded coin in the crypto industry.
So, if you are not familiar with this stablecoin, but you are interested in it and learning all about it — you have come to the right place. Let's see what there is to see about Tether, explain what it is, how it works, as well as what it has to offer.
What is Tether? - A Brief Overview
As mentioned earlier, Tether (USDT) is a cryptocurrency, one that belongs in the category known as stablecoins. The coin was developed by the company of the same name — Tether — which is headquartered in Hong Kong.
Tether has been around for quite a few years now, and it is currently the largest stablecoin in the crypto industry, with a market cap of $4.64 billion at the time of writing. It is also the most traded coin in the world, with a daily trading volume in the last 24 hours sitting at $64.3 billion. In comparison, Bitcoin's trading volume is currently at $45.42 billion, but BTC is still larger when it comes to its market cap, which is at $144.83 billion.
As a stablecoin, Tether's price is pegged to the USD, meaning that it is always at $1. This made Tether extremely sought out, especially back in 2018, when the crypto market crashed, and prices of Bitcoin and all other altcoins started to drop. Ever since then, people had realized the importance of a cryptocurrency that can be used to avoid losses without having to revert their BTC and other coins back into fiat money.
That is when stablecoins took their role as a safe haven within the crypto industry, and Tether got to expand its influence. However, it is also noteworthy that Tether was also involved in a number of controversies, most of which revolve around the fact that it did not provide insight into its bank account, which prevented people from confirming that it has enough fiat money to back all of its circulating coins.
While many expected that this will ultimately lead to its downfall, the coin somehow managed to grow bigger and bigger, until it got to its current position as the fifth-largest coin in the crypto industry.
Stablecoins and Tether explained
As mentioned briefly earlier, stablecoins are a type of cryptocurrency that is in a unique position to act as a bridge between crypto and fiat. After Bitcoin was invented, it quickly became clear that the coin is extremely volatile. It had no real-world asset that would determine its price and secure it at a certain value. As such, BTC is still only as valuable as its users believe, and its price goes up and down based on supply and demand.
However, this was not good enough for a lot of people, who wanted to make sure that they won't lose their money if they start working with cryptocurrencies. Cryptos have benefits that make them quite useful, but the flaws, such as high volatility, were preventing many from trying them out. This is why stablecoins were invented — cryptocurrencies whose price never changes, and is pegged to a fiat currency.
Since their invention, stablecoins came in many different types, some of which are backed by fiat money, others by some other assets, like precious metals, or even by other cryptocurrencies. Regardless of the approach, their price would always stay the same — typically at $1 — which made them quite useful in times when crypto prices begin to drop, and investors need a coin that would protect them from losing their entire investment.
At first, stablecoins were dwelling in the shadows, with most people suspicious of them. But, after BTC hit $20,000 per coin, and the market crashed a few days later, many were desperate for any kind of safe haven, which is when USDT emerged as the best solution.
Since then, it became a way for people to get into crypto, by buying it directly with fiat currencies. It got countless pairs against other cryptocurrencies, which ensured that it will have quite a bit of traffic, as a lot of the money that ends up being invested into altcoins originally passes through Tether.
How Tether (USDT) Works
As mentioned, Tether is a stablecoin whose price is always at $1. It is pegged to USD, and it is backed by it. This means that the company Tether has control of how many coins there are in existence, and the more fiat money the firm locks into its vault, the more USDT coins can be minted.
When you buy USDT, you essentially make a payment to Tether, and the company adds your funds to its reserves, and mints new USDT. The same method is used for removing USDT from circulation, only it goes in the opposite direction.
In other words, when you want to redeem USDT for USD, you sell it back to the company, and the firm destroys the redeemed tokens by removing them from circulation.
However, this process is usually only reserved for bigger customers. Most everyday USDT users will simply buy and sell the coin within exchanges, similarly to how they deal with every other cryptocurrency. What this means is that they trade one coin for another, instead of ordering new coins in and out of existence. As for the company, it is in charge of making sure that USDT will always remain at the same price, and that the demand will not increase its price due to the lack of coins.
To a lot of people, this kind of dependence on the company and its capability makes stablecoins lesser cryptos, as they are not truly decentralized. However, the fact is that it is quite difficult to make a decentralized system that would work in this way without failing at some point due to large changes in the market activity, and in the crypto world, such large changes are always sudden and mostly unpredictable.
Tether Features and Benefits
When it comes to Tether's benefits, there are quite a few to list. We have already spoken at length about the fact that it has an unchanging price that makes it a safe investment at all times, and under any circumstances.
If the price of your coin of choice — let's say BTC — starts dropping, and you fear of losing your investment, you can simply buy USDT and wait for BTC price to start rising again. Tether will remain at $1, and your money will be safe.
Another big advantage is that you can easily buy it with fiat currencies, as it has trading pairs against many traditional currencies, including USD, EUR, GBP, and many others. At the same time, it makes investing into other altcoins quite easy, as it is paired against many of them, as well.
It is also supported by almost all exchanges, so no matter which one is available to you, you can get Tether at one of them, and then send your coins to others. This is useful for accessing and trading on exchanges that do not allow buying coins with fiat currencies such as US dollars, which is often the case due to regulations and laws of the countries in which these exchanges are headquartered.
Tether also has incredibly low fees, which means that you get to keep most of your money when buying it or trading it. It is also available in most Ethereum-supporting wallets, as it is an ERC-20 token, meaning that it is based on Ethereum's network. It also enjoys high liquidity, it is easy to integrate, and more.
The coin certainly doesn't lack features and advantages, which is one of the reasons why it managed to become as high-ranking as it did.
The company Tether is, unfortunately, not exactly active on social media such as Twitter, where most other crypto firms tend to post announcements, predictions, plans for the future, and generally interact with their community.
As such, its short-term plans are not quite well-known as those of other firms and their officials. However, the company does post general updates with long-term plans from time to time, even though this also happens quite rarely.
From what it is known of its plans, Tether wishes to continue working with other payment avenues and channels, which also includes third-party payment processors, banks, and alike. This was announced after the company's primary banks in Taiwan were blocked by US correspondent banks.
However, Tether still wanted to make itself available to the US-based corporate customers, which is why it opened an escrow-based relationship with a US-based firm.
The company has also been working hard on expanding Tether to other blockchains, as well as on adding new currency options. Apart from USD-backed Tether (USDT), the company is also after creating EURT, which is EUR-backed Tether. The goal is to do the same with the British GBP and Japanese JPY.
Finally, it is also known that Tether is collaborating with the Lightning and Trezor teams, improving the coin's support at Trezor wallet and working on Lightning transactions that would be even faster and cheaper than ever before.
Tether (USDT) is the fifth-largest cryptocurrency in the crypto industry, as well as the largest stablecoin in the world. It comes with numerous benefits, such as an unchanging value of its coins, great stability, availability, liquidity, and more. The coin is backed by fiat currencies, and pegged to the USD, meaning that its price is always at $1.
The coin has had quite a few controversies in the past, but it managed to survive them and remain relevant. More than that, it rose to become one of the largest and most used coins in the industry, and it is nearly as available as BTC itself these days. Its plans for the future include being even more widespread, with faster and cheaper transactions, and expansion into other forms and on other blockchains.