TL;DR
Tether (USDT) is one of the most popular stablecoins, designed to maintain a 1:1 peg with the US dollar. It operates across multiple blockchains and has seen growing trading volume and liquidity in recent years.
Like other stablecoins, USDT is useful for crypto trading as it allows traders to avoid market volatility common in BTC and other cryptocurrencies. It also eliminates conversion fees and delays between crypto and fiat.
Introduction
Tether is a cornerstone of the cryptocurrency ecosystem. As of December 2020, it ranked as the fourth-largest cryptocurrency by market cap (~$20 billion), trailing only Bitcoin, Ethereum, and XRP. It frequently tops daily trading volume rankings, even surpassing Bitcoin.
But what exactly is Tether, and why does it matter?
What Is Tether (USDT)?
Tether (USDT) is the world’s first stablecoin—a cryptocurrency pegged to fiat currency. Launched in 2014 as Realcoin, it was rebranded by co-founders Brock Pierce, Reeve Collins, and Craig Sellers.
Initially issued on Bitcoin’s Omni Layer, USDT now spans multiple blockchains, including Ethereum (as an ERC-20 token), TRON, EOS, Algorand, Solana, and OMG Network. While successful, Tether has faced controversies, particularly around price stability in its early days (e.g., briefly hitting $1.20). Since 2019, however, volatility has decreased alongside rising trading volumes and broader crypto market maturity.
How Does Tether (USDT) Work?
Stablecoins derive utility from their price stability compared to traditional crypto assets. Tether’s value stems from its peg to fiat—originally 1 USDT = $1 USD, backed by reserves held by Tether Limited.
Per its whitepaper:
"Every Tether issued is backed 1:1 by equivalent fiat currency held in reserve."
While initially USD-backed, Tether now holds collateral in cash equivalents, assets, and receivables from loans.
👉 Explore how USDT maintains its peg
Why Is Tether (USDT) Important?
Tether bridges crypto and fiat, offering investors a stable digital asset with crypto’s tradability. Key features:
- 1:1 USD peg
- Multi-chain availability (Ethereum, TRON, etc.)
- Diverse use cases (e.g., arbitrage, forex-style trading)
Use Cases for Tether (USDT)
- Market Stability: Quickly swap volatile assets (e.g., BTC) to USDT during dips.
- Cross-Exchange Transfers: Move funds between exchanges faster than with fiat.
- Crypto-Only Exchanges: Trade on platforms lacking fiat support.
- Forex-Style Trading: Hedge against local currency fluctuations.
Storing Tether (USDT)
USDT can be held on:
- Exchanges (e.g., Binance)
- Software Wallets (Trust Wallet)
- Hardware Wallets (Ledger, via third-party apps)
⚠️ Critical: Always transfer USDT on the same blockchain network (e.g., ERC-20 to ERC-20). Mismatched networks (e.g., Omni to ERC-20) may result in lost funds.
Other Tether Stablecoins
Tether offers additional pegged stablecoins:
- EURT (Euro)
- CNHT (Chinese Yuan)
- XAUT (Gold-backed)
Track circulating supply on Tether’s Transparency Page.
👉 Compare USDT with other stablecoins
FAQs
Q: Is USDT always worth $1?
A: While designed to maintain parity, extreme market conditions can cause minor deviations.
Q: Can I earn interest on USDT?
A: Yes, through lending platforms or exchange-based savings products.
Q: How is Tether regulated?
A: Tether Limited complies with periodic audits and reserve reporting, though debates about transparency persist.
Final Thoughts
USDT streamlines crypto trading by reducing fiat-crypto conversions. Despite reserve controversies, its trading volume reflects market trust. Alternatives like BUSD, USDC, and PAX offer similar stability.
For traders, holding USDT is a strategic hedge against crypto volatility.