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What is Tether (USDT) and How It Works?

Tether (USDT) is one of the first cryptocurrencies to be pegged to the US dollar, launched in 2014. Previously known as Realcoin, Tether has been among the top 10 most traded cryptocurrencies in 2021, with a total market cap of over $68 billion and a value of $1.00. 

The value of Tether is more consistent than other cryptocurrencies, that’s why it is favored by investors who are wary of the extreme volatility of other cryptocurrencies. Unlike other cryptocurrencies, Tether is a stablecoin, meaning that it’s backed by fiat currencies like U.S. dollars. It is designed to maintain parity with the dollar, that’s why it is often called the digital dollar. 

What is USDT?

Tether, also known as USDT, is a blockchain-enabled cryptocurrency designed to facilitate the digital usage of fiat currencies. USDT offers customers the ability to use fiat money in transactions across the blockchain in a more stable and simple way compared to any digital currency. 

The main purpose of creating USDT was to combine the unrestricted nature of cryptocurrencies with the value stability that characterizes fiat currencies like the US dollar.

USDT was the first stablecoin created in the crypto markets, declaring itself as the leading dollar-backed cryptocurrency. Tether was mainly created to allow anyone to easily store, receive and send US dollars in a digitized form. 

What is Stablecoin? 

A stablecoin is a cryptocurrency of which price is pegged to other assets such as fiat money or commodities like gold. It is a form of cryptocurrency that aims to keep prices stable, compared to the usual fluctuations seen in the prices of other common cryptocurrencies like Bitcoin and Ethereum. 

Stablcoins are used mostly for payments due to the relatively low fees. They can also be used as value storage when investors exit cryptocurrency trades, like when investors want to transfer profits or capital instead, as they offer faster transaction time. 

How Does Tether Work?

USDT
USDT

Tether was initially released using the Omni protocol on the Bitcoin blockchain, which allows the issuance of new cryptocurrencies. Being originally issued on the Bitcoin blockchain, Tether inherited the features of stability and security of the network.  

As a cryptocurrency, Tether operates in the form of tokens on multiple blockchains including Bitcoin, Ethereum (ERC20), Tron, EOS, Algorand, SLP, and OMG blockchains, and is secured by their algorithms. 

The Tether currency is 100% backed by fiat money reserves, which ensures maintaining the parity level of every USDT at $1. That means each USDT issued is backed by 1 USD. So, with a nearly $68 billion dollars market cap, Tether limited is expected to hold total reserves of $68 billion dollars. 

Which Fiat Currencies Does USDT Support? 

Tether is supporting three fiat currencies which are:

  • The US Dollars (USD) as USDT
  • The Euro (EUR) as EURT
  • The Offshore Chinese Yuan (CNH) as CNHT

Check Forex vs Crypto Trading: What Is Your Best Choice?

What is Tether Used For? 

Tether has become a vital currency in the crypto markets. Now, traders can transfer funds seamlessly from the digital dollar into crypto and vice versa. This particular feature made the USDT an irreplaceable asset for many traders. Tether USD is commonly used for purposes of funding and payments Instead of using fiat currencies to trade crypto, USDT offers a more efficient, faster, and cheaper payment gateway than traditional banking which takes longer and costs more. Today, converting cash to USDT is a reliable funding solution, especially for crypto trading.

AximTrade allows its traders to deposit and withdraw from their trading account using USDT.

Who Can Use Tether? 

Anyone can easily get, store and transfer USDT for payment or trading purposes. However, the major users of Tether are the cryptocurrencies traders as Tether is used to hedge against the steep price fluctuations of other cryptocurrencies and as a store of value. Crypto exchanges also accept USDT as a payment method instead of the expensive traditional banks’ transactions. 

Where to Buy Tether (USDT)? 

Tether is available on different cryptocurrency exchanges. In fact, the average daily trading volume of USDT exceeds that of Bitcoin, which is the world’s top cryptocurrency so far. It provides a digital alternative to the US Dollars, which makes it more appealing for transactions. 

How to Buy Tether? 

Like any cryptocurrency, USDT can be bought easily using debit or credit cards and through bank transfers through any crypto exchange. Almost anyone can easily buy Tether using the following steps:

  1. Open an account with a cryptocurrency exchange: Initially, you need to open an account using your personal information and login details to register an account. 
  2. Fund and buy: You will need to fund your account with fiat money, which you’ll use to buy Tether in your account. 
  3. Trade and pay:  Now you can use the USDT in your account for trading or payment purposes. 

Alternatively, you can create an account on Tether Limited website and buy USDT directly. 

USDT is a widely accepted cryptocurrency and can be found on almost every crypto exchange. You can also buy Tether with crypto or fiat currencies.   

What is the Difference Between USDT and USDC? 

USDT Vs USDC
USDC

USDC refers to another popular stablecoin named the USD Coin, which aims to tokenize the dollar and make transactions cheaper and faster. Just like Tether, the USD Coin is a stablecoin, backed by U.S. dollars which makes the currency more stable relative to other cryptocurrencies.  Similarly, the USD Coin is tied at parity to the US dollar, meaning that 1 USDC should be equal to $1. The USD Coin is also operated on multiple public blockchains, describing itself as the digital dollar, and can be used in global transactions. Tether and USD Coins are among the most traded stablecoins.


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