Stablecoins have become an essential part of the cryptocurrency market, offering a reliable way to store funds and transfer money between digital assets. Tether USD (USDT) is the largest and most widely accepted stablecoin.
Stablecoins are cryptocurrency tokens, coins whose value is tied to a real asset such as the dollar or gold. Unlike volatile cryptocurrencies, stablecoins offer constant value regardless of market instabilities.
Crypto traders use stablecoins as an alternative to the dollar for accompanying financial transactions on exchanges and wallets, as well as as the main means of protecting their deposits from losses due to unexpected price volatility in the cryptocurrency market. This makes USDT and other stablecoins an significant instrument for managing risk and creating investment plans. In addition, stablecoins are convenient in many other areas: from international payments to payment for goods and services.
How Tether Works
The stability of USDT is ensured by a special collateral system, where each USDT token in circulation is backed by equivalent or greater liquid assets, such as cash, short-term bonds and time deposits. Tether Limited regularly publishes reports detailing the total volume of USDT and its reserves to show transparency and increase trust among users.
Buying, selling and trading Tether stablecoins is easy on various cryptocurrency exchanges and crypto exchangers. When a user buys USDT, it does not affect the total supply, but if investors need large amounts of USDT, they directly cooperate with the company to receive newly issued tokens.
Tether does not have its own blockchain; instead, it uses other blockchains such as Ethereum, Tron, Solana or Polygon. This allows Tether to increase transaction security and speed. The use of USDT on the Tron network (TRC-20 standard) is the most popular due to its fast and inexpensive transactions.
Controversies Surrounding Tether
Tether’s history with regard to transparency and support for USDT has not always been as clear and consistent as it is now. For some time, the structure of Tether reserves was practically unknown, which caused distrust in the stablecoin.
Cryptocurrency users have questioned the company’s claim that “all tokens are 100% backed by Tether reserves,” criticizing the company’s opaque governance and financial structure.
When the crypto market experienced a sharp drop in the value of tokens in May and November 2022, USDT briefly lost its peg to the dollar, but quickly restored it, which strengthened self-confidence among crypto enthusiasts. Also, the USDC rate in the spring of 2023 fell below $1 for several days due to problems with the company’s bank accounts, but quickly recovered.
Despite these events, Tether is still widely used and maintains its position as the leading stablecoin in the crypto market.
How is Tether used?
Users see the main use of a stablecoin as a reliable coin for trading and investing. USDT is a reliable tool for traders who want to quickly and securely deposit and withdraw their funds to exchanges. It completely offers an alternative to the dollar in various financial transactions. A stable rate ensures the safety of the deposit during periods of high volatility, allowing traders to store funds without worrying about the cryptocurrency market.
Tether allows you to quickly send money wherever you are, often with lower fees than traditional bank transfers. The recipient can convert USDT to local currency or use it directly, making cryptocurrency processing easier.
Crypto platforms and wallets offer deposit accounts for stablecoins so that the user can earn interest at rates higher than banks while maintaining the liquidity and stability of USDT.
In addition, an increasing number of merchants accept cryptocurrencies, including Tether, as payment for goods and services. This can be especially useful in areas where traditional banking services may not be available.
Tether is widely used in the decentralized finance (DeFi) space to provide credit, borrowing, and earning through various financial instruments. Stability makes this coin an attractive asset that reduces the risks inherent in cryptocurrencies with volatile prices.
However, when using Tether or any other cryptocurrency, it is important to remember personal responsibility and understand the possible risks.