USDT is the stablecoin equivalent of a US dollar. Tether works to change the financial world through a modern and digital approach to money. Tether’s USDT tokens give holders the ability to store value and transact wih an asset that is less volatile than digital currencies and can be used across different blockchains, like Algorand, Ethereum, EOS, Liquid Network, Omni, Tron, Bitcoin Cash’s Standard Ledger Protocol, and Solana. Converting from fiat to crypto or crypto to fiat involves friction and relatively high costs. USDT allows people to hold an asset with the same value as a US dollar without converting out of crypto into fiat.
Tether began offering the first US backed stablecoin, USDT in 2014, and has maintained market dominance. With 78 billion USDT in circulation, Tether’s USD equivalent token is the most widely adopted stablecoin. Tether also offers a Euro pegged stablecoin called EURT. CNHT and XAUT, pegged to Chinese Yuan and gold are also in development.
All Tether tokens are pegged at 1-to-1 with a matching fiat currency and are backed 100% by Tether’s reserves. Tether Holdings Limited is audited quarterly. The reserves are a mix of Treasury Bills, Cash & Bank Deposits, Money Market Funds and Commercial Paper. You can see the details here: https://tether.to/en/transparency
At an institutional level, USDT has been important to the growth of the crypto sector. During recent bull markets, USDT played a fundamental role in moving liquidity from one exchange to another without creating exposure to volatility risk. It also helps at an individual level, particularly in bear markets. For example, if you want to sell one crypto asset, but you are not sure what you want to buy next, rather than converting to fiat, you can sell for USDT and reduce your transaction costs and avoid exchange limits. Before 2014, if you wanted to move assets between crypto and a stable USD-valued asset, you would have to convert your crypto to fiat. Now, when you want to take a risk-off position, you can trade your crypto assets for USDT and when you are ready to return to a risk-on position, you will find USDT is one of the most common trading pairs. You can also earn low-risk returns on your USDT in periods of uncertainty by lending them in staking pools.
Learn more about Stablecoins in our article series: What are stablecoins? Stablecoins collateralized by fiat currency Stablecoins collateralized by cryptocurrency Stablecoins collateralized by commodities Algorithmic stablecoins
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Giorgia Bagnasco