What is USDT?

Main page » What is USDT?

The cryptocurrency market is relatively new, but it is developing extremely fast. Therefore, it can be argued that there have already been several landmarks that have had a significant impact on the development of the industry. One of these was the creation of the stablecoin USDT. Tether was created back in 2014 and is still considered one of the most important stablecoins today.

Since the launch of USDT, many other stablecoins have been created. They have become an important part of the cryptocurrency ecosystem because, unlike other digital assets, they are immune to fluctuations in value. Despite the flurry of new projects, Tether continues to break popularity records against other cryptocurrencies. Currently, the biggest competition for USDT is USD Coin (USDC), considered the second largest in terms of market capitalisation. 

Genesis – what is USDT?

Tether (USDT) is one of the first stablecoins. It was created in 2014 by three originators: bitcoin investor Brock Pierce, programmer Craig Sellers and entrepreneur Reeve Collins. Originally launched under the name RealCoin, it was renamed Tether a few months later. The idea behind USDT was to provide price stability in the cryptocurrency market by linking the token to the US dollar.

It is worth mentioning that Tether is not the only stablecoin based on the dollar. True USD (TUSD) or Paxos Standard (PAX) or the aforementioned USD Coin have also appeared on the market. However, it is certainly one of the first stablecoins to gain much popularity and reach in the cryptocurrency world.

Key facts about the USDT 

Tether (USDT) is a stablecoin, meaning it belongs to a group of cryptocurrencies that replicate the value of a fiat currency. USDT is pegged 1:1 to the value of the US dollar. This means that its value should be fixed at USD 1 per token. USDT tokens can also be described as a digital asset that moves around the blockchain like other cryptocurrencies, but linked to fiat currencies at the same time.

Hong Kong-based private company Tether Holdings Limited is responsible for issuing Tether. This company declares that the USDT supply is fully backed by US dollars. 

How does it work? We find in Tether’s whitepaper that each USDT token issued for circulation is backed 1:1 by the corresponding fiat currency held by Tether Limited. For example: if a user deposits USD 100 into Tether’s reserve, they will receive USDT 100 according to the 1:1 ratio. Tether tokens are destroyed and removed from circulation when users exchange them for fiat currency.

Another important fact is that initially Tether was launched on the bitcoin protocol via the Omni Layer. However, over time this stablecoin has also been ported to other blockchains. Currently, much of USDT is on the Ethereum blockchain using the ERC-20 standard, and Tether has also appeared on blockchains such as TRON, EOS, Algorand, Solana and OMG Network.

As it turns out, USDT is not only one of the most popular stablecoins, but also cryptocurrencies in a general sense. In the first half of last year, it was the third largest cryptocurrency right after bitcoin and ethereum and the largest stablecoin with a market capitalisation of almost $83 billion.

It is worth mentioning that Tether is available on global cryptocurrency exchanges such as Binance, Bitbay, Kraken or Bitfinex and many others. This has certainly had a huge impact on the popularity of this stablecoin. As a result, USDT is widely known and has become widely used. In fact, it can be bought, sold and exchanged for other cryptocurrencies without any problem.

Advantages of the USDT

It seems that the most important advantages of USDT, which other stablecoins also have, are security and stability. As a stablecoin, Tether is backed by the assets on which it is based, which means that the risk of losing value is much lower than with other cryptocurrencies. 

Using Tether can be a good solution for users who are concerned about sudden drops in the value of cryptocurrencies. With USDT, they can safely store digital assets in a similar way to fiat currencies. However, they retain the ability to exchange them for other cryptocurrencies that are available on the market. 

Its widespread availability is also cited as an advantage of USDT. This stablecoin is backed by many exchanges and services, making it easy to use.

USDT also allows funds to be transferred instantly between different cryptocurrency exchanges.

And transactions using USDT are much faster than those using traditional payment methods, as they do not require going through several layers of verification. The costs of these transactions also tend to be much lower. This is crucial for those who frequently transact internationally.

USDT controversy 

How does Tether differ from its biggest competitor USDC? In the case of USDC, its reliability and transparency are pointed out. Therefore, investors often consider it one of the safest stablecoins. Tether, on the other hand, is a very controversial cryptocurrency as there are quite a few doubts about its functioning and transparency.

Over the years, there have been many questions about whether USDT really has the dimension of security that Tether Limited claims. Therefore, users have begun to question the validity of Tether’s reserves. This stablecoin is also not controlled by any regulatory bodies, which has raised concerns about the potential for abuse.  

These controversies have caused USDT to be inundated with a wave of criticism from investors, cryptocurrency experts. However, the company involved in issuing USDT assures that its operations are legitimate and conducts audits of its reserves. Despite any doubts, USDT has remained one of the most popular cryptocurrencies for many years.

Latest articles
Latest articles
kanga-blog-post-img-Black Friday at Kanga Cash!
kanga-blog-post-img-How can blockchain technology impact the HR industry?
kanga-blog-post-img-Why are cryptocurrencies so important to Nigeria