Learn all about Tether (USDT), the world’s most popular stablecoin and its features.
Tether (USDT) has become a popular stablecoin in the world of cryptocurrency. It is backed by the US dollar and has maintained a stable value for years. In this blog post, you’ll learn all about Tether (USDT), including its features, benefits, and how it works. Whether you’re new to the world of crypto or a seasoned investor, this post will provide you with valuable insights into Tether (USDT) and its importance in the crypto ecosystem.
Tether (USDT)
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Tether (USDT) is a stablecoin, a type of cryptocurrency designed to maintain a stable value relative to a specific asset or basket of assets. In the case of USDT, the value is pegged to the US dollar on a 1:1 basis. This means that 1 USDT should always be worth approximately 1 USD.
Tether was created in 2014 by a company called Tether Limited. The company claims that for each USDT in circulation, there is an equivalent amount of US dollars held in reserve, providing a degree of transparency and stability to the cryptocurrency. However, this claim has been subject to controversy and scrutiny.
USDT is commonly used as a means of trading between different cryptocurrencies, as it allows traders to avoid the volatility associated with other cryptocurrencies while still being able to trade them. It is also used by some people as a store of value or a means of making transactions in countries where traditional banking systems may not be accessible.
USDT is built on various blockchain platforms, including Bitcoin, Ethereum, and Tron. The most common version of USDT is based on the Ethereum blockchain and uses the ERC-20 standard.
What is Tether?
Tether is a stablecoin that is pegged to the US Dollar. Stablecoins are cryptocurrencies that maintain a stable value, typically by being pegged to a fiat currency like the US Dollar or to a commodity like gold. Tether is the first stablecoin to be created, and it is currently the most popular stablecoin used in the ecosystem. It has the largest circulation and market capitalization among stablecoins.
Who created Tether?
Tether is controlled by Tether Holding Limited, also known as Tether Limited. The CEO is JL Van Der Velde, the CFO is Giancarlo Devasini, and the general counsel is Suart Hoegner. Tether was launched by the team running Bitfinex, a major cryptocurrency exchange.
How does Tether work?
Originally based on the Omni Layer, a transport protocol on the Bitcoin blockchain, the original version of Tether is characterized by the inherent stability and security of the longest established blockchain network. In September 2017, Tether was launched on the Ethereum blockchain as an ERC20 token to accelerate adoption. Tether’s Ethereum ERC-20 is now the most popular Tether token type.
Tether is now available on Ethereum, Tron, EOS, Liquid, and Algorand. Tether’s Transparency page provides a full breakdown.
On March 20th, 2020, Tether announced that it would also be available on the Bitcoin Cash network via the Simple Ledger Protocol.
How does Tether maintain a 1:1 USD peg?
The USDT peg is maintained via a one-to-one collateral ratio. Tether Limited claims that every USDT in circulation is 100% backed by actual fiat in their reserves, and they publish their balances on their Transparency page. Tether Limited acts as a third-party custodian for the fiat currencies backing USDT.
To understand the process of how Tether is controlled by Tether Limited, here’s a look at the flow of fund process:
- Step 1: User deposits fiat currency into Tether Limited’s bank account.
- Step 2: Tether Limited generates and credits the user’s Tether account. Tether enters into circulation. The amount of fiat currency deposited by the user must be equal to the amount of Tether issued to the user (e.g., 500 USD deposited = 500 USDT issued).
- Step 3: User transacts with USDT. The user can transfer, exchange, and store USDT.
- Step 4: The user deposits USDT with Tether Limited for redemption into fiat currency.
- Step 5: Tether Limited destroys the Tether and sends fiat currency to the user’s bank account.
Users can also obtain Tether outside of the aforementioned process via an exchange or another individual.
What is the purpose of Tether?
Stable Currency: Tether converts fiat US Dollar into blockchain stablecoins and expedites the transaction to other cryptocurrencies compared to using regular fiat currencies.