What is Tether USDT
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Everyone Is Talking Tether and Here’s Why

Volatility among cryptocurrencies is a double-edged sword. On one hand, it makes investors drool from pure money-making potential. On the other, it eliminates a crypto’s use as a means of storage of value.

But what if we told you there was a way to eliminate one of the edges, specifically the negative side? Stablecoins like Tether (USDT) aim to do that exactly. How? Let’s break it down.

An in-depth breakdown of USDT

On a livestock farm, animals are often tethered to structures, meaning they’re tied using a rope. In the technological aspect, although we don’t use the term too often, our smartphones are often tethered to other devices via WiFi networks or Bluetooth technology.

What does this have to do with Tether, the cryptocurrency? Well, the way the word “tether” is used is similar in the crypto landscape. Instead of tying a cow to the nearby barn or connecting your phone to the WiFi, Tether creates a new bridge between crypto and fiat currencies.

USDT is considered to be part of a new breed of cryptocurrencies: stablecoins. A stablecoin is a type of cryptocurrency backed by reserve assets and offers minimal price volatility.

Tether integrates fiat currencies with cryptocurrencies, creating a new digital asset with all the perks of being blockchain-based, yet without the danger of cryptocurrency volatility—the perfect middle ground. As each token is backed by a corresponding fiat currency like the US dollar, the Euro, or the Japanese Yen, the coin maintains a 1:1 ratio (1 USDT = 1 USD)—with the reserves being held in Hong Kong by Tether Limited.

Because of this 1:1 ratio, Tether has no supply cap. It also provides people a cryptocurrency that can act as a medium of exchange and a mode of storing value.

Let’s say you want to convert your 50 USD into USDT. You get the same amount in USDT. However, your funds are now easily tradeable, exchangeable, and redeemable as a cryptocurrency.

Here’s another example, this time, in the eyes of an avid trader: say there are open positions on the Bitcoin (BTC) market. If the market turns bearish, traders may convert their BTC into USDT until the (probable) end of the bear run to prevent their funds from bleeding out. This opens up the opportunity to repurchase the BTC at a lower price using the same USDT and wait for the price to go up again.

Why should you consider using Tether?

The scope of its benefits extends from the trading individual to entire exchanges.

Before we get into how its integration can help each level of crypto trading, let’s look at its key features:

  • It’s stable and 100% backed. Because each token is anchored to a specific fiat currency, the value will always be stable. The stability of value ensures a 1:1 ratio, which means 1 USDT will always be equivalent to 1 USD. 
  • It’s transparent. If you’re feeling a little uneasy with the safety of the fiat reserve, don’t worry! Tether publishes a report daily, making sure that all USDT in circulation matches their reserves. 
  • Being backed by blockchain technology makes it more secure (and even more transparent). Tether is built on top of open blockchain and other technologies, taking advantage of the features that make blockchain technology safe and transparent.

How do these features affect each level? Mainly, Tether has advantages for three levels: exchanges, individuals, and merchants.

The integration of Tether on exchanges will allow for more comfortable and seamless transactions. At times, many steps can get in the way of converting your fiat to crypto through an exchange. There are also some waiting times—mostly for confirmation and verification when converting. Together, these two hurdles can overwhelm and wear out a trader, especially if they’re new. To fix this, exchanges can provide Tether pairs, enabling the movement of any trader’s assets (via blockchain) across borders and networks in the most efficient way possible.

On the level of individuals, Tether can provide an opportunity for traders to HODL without worrying about the unforgiving volatility of cryptos. Say you’re in the example mentioned earlier where the market turns bearish, you’ll have opportunities to save your digital assets from any sudden plunges in price and save your pockets from going on a diet.

Merchants can have a more comfortable and less worrisome alleyway for accepting crypto payments. Since they don’t have to worry about price volatility, merchants can focus on their businesses. The integration of Tether can eliminate issues like chargeback risks, price plunges, any hassles coming from centralized money systems, and intermittent conversion across fiats.

A promising future

Tether can revolutionize the way we see and hold cryptocurrencies—it’s even designed to work with many existing cryptos. The USD Tether, or USDT, is the first Tether currency, but we can safely assume that more are in the works.

This technology, however, is still in its early stages. Once it starts being integrated across the board, we’ll really see how it’s going to affect the way we use our funds. It’s exhilarating to see strides like this in the crypto industry and we can’t wait to see it blossom into something that will sprout many more real-use opportunities for enthusiasts like us.

Disclaimer: The information provided herein is not, and is not intended to be, investment, financial, or other advice.

Iggi Vargas

All his life, Iggi has been interested in the arts—painting, music, film, writing, and now, cryptocurrency. He loves to connect with other people and figured, what better way to do so than through the magic of borderless cryptocurrency? He's been learning and writing about cryptocurrency for over two years now, with no plans of stopping soon.

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