Quite a number of crypto enthusiasts have uncleared answers to the question: what is USDT? This page will uncover loads of information about the subject matter and expatiate in simple, clear terms all there is to know about tether. However, before going full-scale, you can check through major key points highlighted below to aid your understanding of the stablecoin.

Key points on the question — “What is USDT”

• Tether is both a protocol and a cryptocurrency.
• As a protocol, it is referred to as Tether, meanwhile as a currency it is tether.
• Tether offers several cryptocurrencies all of which are stablecoins. Its most popular coin is USDT. Tether (USDT) is widely used within the crypto market with about 73 billion tokens distributed around the world (as of the time of writing).
• Some other Tether-issued currencies include: Tether gold (AUXT), Tether Euro (EURT), Tether Peso (MXNT) and Tether Yuan (CNHT). Three of these stablecoins are pegged to the value of currencies while one last one is pegged to the value of gold.

USDT — a Stablecoin

All of the currencies issued by Tether belong to the class of crypto coins that is called stablecoins. Stablecoins are cryptocurrencies with less rate of volatility. The prices and value of this class of crypto assets are pegged on less volatile assets like legal tender currencies (US Dollars, Chinese’s Yuan).

How Does Tether Work?

The Tether USDT coin defies the character of the cryptosystem on two fronts. Unlike many cryptocurrencies, USDT is not mined neither is it decentralized. It follows a centralized control mechanism where the company — Tether retains the right to control the amount of issuance and circulation of the coin. The interaction of the supply and demand of the coin is controlled manually by the company.

Tether is backed up by assets in the company’s reserve to ensure that USDT maintains a one-to-one exchange ratio to the US Dollar. Not just this, but that at every point where a USDT needs to be converted to US dollars or other fiat.

As a way of maintaining transparency and accountability, Tether has been mandated to publish a financial attestation of assets in its reserve. The attestation is published quarterly and reveals the asset classes that the company saves. With recourse to its last publishing, Tether’s reserve contains cash, commercial papers, corporate bonds, loans, digital currencies and some other asset classes. Tether adopts the IOU (I owe you) model such that the company promises instant exchange of stablecoins for currencies.

A Brief History of Tether

The first ever mention of Tether was in 2014 when it issued its first digital currency called the real coin. The real coin was a dollar-backed currency that served the purpose of transferring fiat currencies on the Bitcoin blockchain. It was founded by iFinex Inc. in Hongkong. Real coin was later rebranded into tether later in 2014. Ever since its inception, Tether has branched off into different other blockchains (Solana, Tron, Ethereum, Avalanche, Polygon and some others) and has launched several currencies. Records as of May 2022 showed that on the grounds of market capitalization, USDT tokens ranks third largest cryptocurrency within the market.

How is Tether Backed?

Tether runs in a centralized crypto system and has its value backed by different assets and resources owned by the founding company. These assets have equivalent value as the Tether currency and are kept in the reserve to facilitate immediate exchange of tether for fiat.

Tether vs. TerraUSD (as it was before)

One feature that both cryptocurrencies have in common is the level of volatility. They are both stablecoins with values dependent on the value of the USD. This means that in value, Tether and TerraUSD can be equated because one unit of these currencies are always valued at $1. The difference however, is in the mechanism through which these values are maintained.

Tether is a collaterized stablecoin with a system that ensures its continued value through the company’s assets and reserves. Hence, when the value of resources in the reserve is equal to the value of tokens in circulation or even less, then Tether has reached full reserve. TerraUSD on the other hand is an algorithmic stablecoin meaning, it is backed up by programmatic language rather than cash reserves. This maintenance scheme is a more volatile method when compared to Tether’s as it has fallen below its price peg several times and was even suspended from the Binance exchange platform.

Tether vs. Bitcoin

Tether and Bitcoin vary on many grounds. However, the most obvious difference is the level of volatility. While Tether is a stablecoin whose value is pegged to the value of a real commodity (gold and USD), Bitcoin is a free ranging coin. It is not anchored on the value of any commodity. Its value is dictated by the interaction of demand and supply.

Another striking difference between both currencies is the level of control and third-party intrusion. Tether maintains a centralized financial model meanwhile, Bitcoin is decentralized. One last difference to touch on is the fact that Tether is strictly a value storage instrument unlike Bitcoin that is designed to make money and serve as an investment with Returns of investment.

Tether vs. DAI

DAI is very similar to Tether. They are both stablecoins however, they find their backing in different ways. While Tether is backed up by assets of equivalent value, DAI is a DAO-backed stablecoin. It maintains a decentralized system which differs from Tether’s system. It is operated by a decentralized autonomous organization (DAO).

Tether vs. USDC

Tether and USDC are the two biggest stablecoins in the market (as of the time of writing). They both have 80% combined market share of the total stablecoin market with USDT owning about 50% and USDC about 30%. Generally, USDC is believed to be less volatile with its backup in cash and cash equivalents while USDT is backed up by assets of equivalent value. They both maintain a price peg of 1 coin to 1 USD.

Is Tether a Good Investment?

As earlier mentioned, Tether is more of a currency for storing value rather than earning returns on investment. Hence, if measured using investment as a metric of importance, Tether alongside many other stablecoins may not stand a chance. Investment is not a strong-point feature for the Tether currency because it does not directly increase in value. Tether is an avenue to escape the high volatility of the cryptosystem while still engaging the system. So, while nothing is guaranteed in the crypto network, Tether is closer to guarantee than many other tokens.

How to Exchange USDT

Exchanging USDT is one of the simplest exchange procedures in the cryptosystem. Being a popular coin, it has an inexhaustive list of crypto exchange platforms that supports it. However, as seamless as it is to find the USDT currency and to hold it, a wrong choice of an exchange platform or wallet may ruin the entire seamless process. Hence, it is important to engage reviews and to research several options before making a choice. One of the safest and most efficient is Swapzone. It is a popular exchange platform with a long list of coins.

The platform is easy to use with simple trading procedures, affordable rates, and thousands of users. To exchange USDT, visit the Swapzone, open an account there with all the required information, and follow the instructions outlined. The entire procedure can be completed in a few minutes.