What is Tether (USDT) cryptocurrency and how it works?
Tether (USDT) is the largest stablecoin cryptocurrency, with its value pegged to the US dollar at a 1:1 ratio. Discover how it operates, its advantages, and the various ways it can be utilized.
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In the cryptocurrency market, there exists a type of digital asset that, unlike others, does not serve as an investment vehicle.
Its value consistently hovers around one US dollar, regardless of market volatility and independent of bull or bear market phases.
This cryptocurrency is Tether (USDT), currently the largest stablecoin and one of the top cryptocurrencies overall in terms of market capitalization.
What exactly is Tether, and why is it a popular tool among both beginners and professionals despite not being used as an investment vehicle?
Learn how it maintains its one-dollar value below.
What is Tether (USDT)?
Tether (USDT) is a cryptocurrency classified in the crypto world as a stablecoin.
It is designed as a digital currency that pegs its value to the US dollar at a 1:1 ratio.
In other words, one Tether is intended to be equivalent to one US dollar.
The objective of this type of digital currency is to provide stable value regardless of whether the market is in a bull or bear phase.
What is USDT then?
USDT is the ticker symbol used to represent the Tether cryptocurrency. Just as Bitcoin is denoted by the symbol BTC, Tether utilizes the symbol USDT.
How does Tether (USDT) work?
As mentioned earlier, Tether belongs to the category of stablecoins.
What is a "Stablecoin"?
A stablecoin is a type of cryptocurrency that directly ties its value to another external asset, such as gold or a fiat currency (dollar, euro, pound, etc.).
Essentially, a stablecoin shares many characteristics of fiat currency but retains all the functionalities of cryptocurrencies. The elements that separate Tether from fiat currencies are blockchain technology and decentralization.
If you're interested in more details about how stablecoins operate and the various types of stablecoins available, read our blog:
What is stablecoin and how does it work? A guide for beginners
How does this concept apply to Tether and how users can benefit from it?
Here is a short explanation.
For instance, if you want to purchase 1 Tether and pay one dollar for it, Tether Limited—the company behind the project—should issue you 1 Tether.
The dollar you spend is then preserved and stored in the company's reserves, ensuring that your Tether retains its value.
You can now send your Tether to an exchange, use it for trading, and more.
If you decide to redeem your Tether back into one dollar, Tether Limited would return the money to you.
After refunding your dollar, they should also burn (i.e., permanently remove) the Tether you sold.
This is a highly simplified example meant to illustrate how Tether operates. It also highlights why Tether can't be mined.
When there is demand for Tether, Tether Limited issues new tokens into circulation.
Each of these tokens must be backed by dollars to maintain their value (1 Tether = $1).
Therefore, if Tether Limited releases one million Tether (USDT) tokens into circulation, they must hold one million dollars in reserve.
How to use Tether (USDT)?
1. Cryptocurrency trading
Tether is primarily utilized as one of the most important tools in cryptocurrency trading on various crypto exchanges.
On many platforms, trading is only available in pairs such as BTC/USDT or ETH/USDT, among others.
This means you cannot directly purchase Bitcoin or Euros.
Instead, fiat money (Euros) must be deposited to the exchange. After thatthe usr must convert fiat money for Tether, which is then used to trade Bitcoin or other cryptocurrency.
2. Protection against volatility
Tether is highly valued by many due to its ability to maintain a stable value around one US dollar.
Tether doesn't generate profits, but it serves as a "safe haven" during times of market uncertainty.
If there's fear of a market downturn, investors often move a significant portion of their portfolio into Tether to preserve value.
3. International transfers (and Transfers to Exchanges)
Deposits and withdrawals in euros on various platforms can sometimes be time-consuming because banks need more time to confirm transfers.
For investors who monitor the market all the time and need to react swiftly to price drops or increases, timing is crucial.
This is why the majority use Tether for international transfers—it can be sent anytime, anywhere, and the transaction is completed within minutes.
What Are the Advantages of Tether?
As a stablecoin, Tether offers several advantages compared to other types of cryptocurrencies.
Price stability
For many users, the primary advantage of Tether is it's ability to maintain its price around 1$.
This feature provides a form of protection during periods of significant price fluctuations, ensuring that USDT maintains its value even during the bear market.
High liquidity
Tether has been in the crypto market since 2015 and remains one of the most popular cryptocurrencies with a large trading volume.
High volume of trading usually means that the cryptocurrency has a high liquidity, allowing it to be easily bought or sold on most global exchanges.
Faster transfers
Transactions conducted with Tether are often faster and sometimes cheaper compared to traditional banking transfers.
This efficiency makes Tether an attractive option for international exchanges, facilitating quick and cost-effective transfers.
Flexibility
Tether simplifies the conversion process between different cryptocurrencies and between specific fiat currencies and cryptocurrencies.
Who Founded the Tether (USDT) Cryptocurrency?
Tether was founded in 2014 by Reeve Collins, Craig Sellars, and Brock Pierce.
Prior to being branded as Tether, the project initially operated under the name “Realcoin.” In 2015, Tether was officially launched as a cryptocurrency.
Today, Tether is owned by Tether Limited Inc.
Is Tether (USDT) the largest stablecoin on the market?
Tether is currently the largest stablecoin cryptocurrency by market capitalization and maintains a significant advantage over other stablecoin projects.
Why is Tether the largest stablecoin on the market?
As previously mentioned, Tether has been present in the cryptocurency market since 2015.
Through the years, it has built a large user base.
Due to its large number of users and high trading volume, the majority of cryptocurrency exchanges have opted to include Tether in their offerings, enhancing its accessibility and reinforcing its position as the leading stablecoin.
How and where to buy Tether (USDT)?
If you want to buy Tether easily, you can do so through the Bitcoin Store platform using three simple methods:
- Bitcoin Store desktop platform
- Bitcoin Store wallet mobile application
- with paper cash at one of Bitcoin Store’s physical exchange locations
Through the Bitcoin Store exchange, you can easily buy Tether (USDT) with Euros using a bank transfer, credit/debit card, or cash.
All you need to do is register and verify your account.
After that, you can proceed to deposit Euros into your account.
Once the funds are available, you can purchase Tether (USDT).
For detailed steps on buying cryptocurrencies on the Bitcoin Store platform, you can read here: How to buy cryptocurrencies in the European Union (EU)?
Conclusion
Tether has established itself as an important trading tool in the cryptocurrency market by enabling users to transfer value quickly and effortlessly.
Its primary functionality lies in preserving the value of a portfolio during periods of high volatility.
Additionally, Tether offers liquidity and flexibility, making trading, payments, and access to decentralized finance more seamless.