What Is Tether USD (USDT)? How Does Tether Work? How To Buy In 2023

What is Tether USD? Before investing, users need to find out what information about this virtual currency? Let’s find the answer with CoveMarkets in the following article!

What is Tether USD (USDT)?

Tether (USDT) is a cryptocurrency stablecoin pegged to the U.S. dollar and backed “100% by Tether’s reserves,” according its website. In July 2014, RealCoin was introduced, and in November of that same year, it changed its name to Tether. In February 2015, it began trading.

Tether was first built on the Bitcoin blockchain, but it currently now works with the Ethereum, TRON, EOS, Algorand, Solana, OMG Network, and Bitcoin Cash (SLP) blockchains.

With a market worth of close to $83 billion as of May 2023, Tether was the biggest stablecoin and the third-largest cryptocurrency after Bitcoin (BTC) and Ethereum (ETH).

Tether’s USDT made up 2/3 of all Bitcoin exchanges in value in April 2023.

KEY TAKEAWAYS:

Tether (USDT) is a stablecoin that seeks to maintain a steady valuation.
It is used by investors who want to avoid the volatility typical of cryptocurrencies while holding funds within the crypto system.
Tether’s parent company paid nearly $60 million in fines in 2021 to settle two regulatory probes alleging it mishandled and misrepresented its reserves.

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Background of Tether USD

The roots of Tether date back a decade, to when J.R. Willet was looking to build new cryptocurrencies on the Bitcoin protocol. Willet put this concept into practice with Mastercoin, and one of its founding members eventually went on to co-found Tether USDT network in 2014.

Since its inclusion on the BitFinex market in January 2015, Tether has been used as liquidity.

Tether recently lost its $1 worth due to recent market turmoil, which saw the price of TerraUSD, another stablecoin linked to the U.S. dollar, fall to less than $0.23.

Investors’ concerns that if one stablecoin can break its peg, others could be able to do the same were a major factor in the collapse.

Marc LoPresti, managing director of The Strategic Funds, claims that “Tether” has a far higher chance of withstanding the present tsunami shaking the world of digital assets since it is an asset-backed stablecoin with the majority of its holdings in U.S. Treasurys. The only stablecoin, according to him, with equivalent collateral quality is USDC.

According to Kavita Gupta, founder and general partner of Delta Blockchain Fund, “It is challenging for Tether to fully follow the path of Terra because if they decide to take out even 30% to 50% of their collateral, that will shake up not only the cryptocurrency market but also the broader financial markets.”

How Does Tether Work?

When a user puts fiat money into Tether’s reserve, using that money to purchase USDT instead of fiat, Tether then creates tokens representing that same digital value. The USDT can then be sent, stored or exchanged.
If a user deposits $100 in the Tether reserve, then in keeping with a 1-to-1 dollar parity, they will receive 100 Tether tokens. Tether coins are destroyed and removed from circulation when users redeem the tokens for fiat currency.
Tether is a digital currency that flows across blockchains like many others. Tether tokens are accessible on a number of blockchains, including the original Omni blockchain on the Bitcoin platform, Liquid, as well as Ethereum (ETH) and TRON (TRX), among others.
You can trade USDT. If you don’t want to continue investing, you can sell USDT to Tether and get cash back. After receiving cash back, your Token will be permanently destroyed.

What Problems Does Tether Solve?

While Tether USD doesn’t solve any specific problems, it does provide a more stable alternative to other cryptocurrencies. By pegging its value to the US dollar, Tether aims to reduce the volatility that is often associated with digital currencies. This makes it a useful tool for traders and investors who want to hedge their portfolios against market fluctuations.

The Tether Team

Tether was founded by Brock Pierce, Reeve Collins and Craig Sellars.

Brock Pierce is a co-founder of Blockchain Capital and the co-founder of EOS. He was also one of the co-founders of the Bitcoin Foundation. He has played a big role in helping to launch more than 30 companies that have had successful exits. He is also the chairman of the Bitcoin Foundation.
Reeve Collins is the CEO of Block.one. He was the co-founder of MonetaGo and the co-founder of EOS. He also has experience in product development, business development, and management.
Craig Sellars is the CTO of Block.one. He was the co-founder of MonetaGo and the co-founder of EOS. He has also worked with The Bitcoin Foundation, OpenTransactions, and BitPay.

What Is USDT Token?

The USDT token is a stablecoin that is pegged to the US dollar. The token is issued by Tether and is backed by USD reserves. The USDT token can be used to store, send, and receive value in US dollars. The token is also used to trade cryptocurrencies on exchanges that do not support USD deposits and withdrawals. The USDT token is built on the Bitcoin blockchain and is compatible with the Ethereum blockchain.

Basic Information About USDT

Tether (USDT) is a cryptocurrency token that is anchored to the value of the US dollar. The idea behind Tether is to provide a more secure and stable cryptocurrency that can be used for everyday transactions. USDT is issued by Tether Limited, a company based in the British Virgin Islands.

The value of USDT is always equal to $1 USD. When you buy USDT, you are buying a token that is backed by actual US dollars that are held in reserve by Tether Limited. This means that you can redeem your USDT for $1 USD at any time.

Market Capitalization

The market cap of Tether (USDT): $69,169,055,579.00 USD.
Volume: $57,319,276,538 USD The last 24 hours.
Circulating supply: 67.57B USDT.
Total supply: 69,158,976,374 USDT

Circulating Supply

USDT is a digital asset, backed by USD (fiat currency). This means that for every USDT crypto in circulation, there is an equivalent amount of USD held in reserves. The circulating and the total supply of USDT are always equal because the stablecoin is not mined.
The circulating supply of USDT is approximately 67.57 billion as of August 2023. However, the actual amount fluctuates because it is continuously being bought and sold on USDT trading platforms.

What is USDT Backed By?

The Tether is backed by US dollars. That means that for every Tether that is in circulation, there is a US dollar held in reserve. This is different from other cryptocurrencies, which are not backed by anything.

The main difference between US Tether and Bitcoin is that US Tether is backed by American dollars, while Bitcoin is not backed by anything. Tether is also different from Bitcoin in that it is designed to be used as a currency, while Bitcoin is designed to be used as a store of value.

Types Of USDT On Blockchains

There are 3 types of USDT on blockchains. They are:

Bitcoin-based USDT

The original USDT is based on the Bitcoin network. It uses the Omni Layer protocol to track USDT balances and transfer the token. The Tether team developed a way to mint and burn USDT on the blockchain of Bitcoin.

Ethereum-based USDT

Ethereum-based USDT was introduced in 2015. The ERC20 standard for tokens allows for the creation of a smart contract to track USDT balances and transfers. Tether also has the ability to mint and burn USDT on the Ethereum blockchain.

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TRON-based USDT

TRON-based USDT was launched in 2018. The TRON Foundation and Tether teamed up to create a USDT token on the TRON blockchain. TRON-based USDT is built on the TRON network and uses the TRX10 standard for tokens.

How to Buy USDT Tokens?

You can deposit USDT crypto with a credit card, debit card, bank transfer, or cash.
To purchase USDT with a credit card or debit card, you will need to create an account on an exchange that supports USDT. Once you have created an account, you will be able to link your your card to your account and purchase USDT.
If you would like to purchase USDT with a bank transfer, you will need to create an account on an exchange that supports USDT and then deposit funds into your account. Once your funds have been deposited, you will be able to purchase USDT.
If you would like to withdraw USDT with cash, you will need to find a local seller who is willing to sell you USDT for cash. Once you have found a seller, you will need to meet them in person and exchange cash for USDT.

The top exchanges for trading in Tether are currently Binance, Coinbase, FTX, Uniswap, Huobi Global, OKEx, Hydax Exchange, and HBTC. You can find others listed on our crypto exchanges page.

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How to Store USDT Coins?

To store USDT coins, you can either use a software or hardware wallet:

For a software wallet, we recommend using Trust Wallet, which is a secure and easy-to-use wallet for Android and iOS devices.
For a hardware wallet, we recommend using the Ledger Nano S, which is a secure USB device that stores your private keys offline.

What Are The Risks Involving In USDT?

There are a few risks involved in USDT, which include:

The possibility that the value of Tether could drop if people lose faith in the peg.
The possibility of government regulation.
The possibility that Tether could be used to launder money.

The Crash of UST and its Impact on USDT

USD/Tether is a currency pair that represents the value of USDT, a digital asset known as Tether, in terms of US dollars. The value of USDT is pegged to the US dollar, meaning that one USDT is always worth $1 USD. Despite this peg, however, the value of USDT has fluctuated over time. On April 25th, 2021, for example, the value of USDT plunged from $1.03 to $0.93 in a matter of hours.

The reason for this sudden drop in value was due to a major crash on the cryptocurrency exchange UST. UST is a popular cryptocurrency exchange that allows users to trade USDT for other digital assets. On April 25th, however, UST suffered a major outage, causing the price of USDT to crash.

The crash of UST had a ripple effect on the entire cryptocurrency market. Most digital assets, including Bitcoin and Ethereum, fell in value as a result of the UST crash. The value of USDT, however, recovered quickly, and as of April 26th, 2021, it is once again trading at $1.03.

What happened If USDT Collapses?

If USDT collapses, it will likely have a negative impact on the cryptocurrency market. The value of USDT will drop sharply and may even become worthless. This would cause losses for anyone holding USDT, and could potentially trigger a financial crisis.

Advantages and Disadvantages

Some benefits of USDT token:

USDT is stable because it is backed by real banks, bringing many benefits to investors when trading. What is more special, is that Tether is not affected by the volatility of cryptocurrencies.
Transparency and safety of USDT, that is, always clear the balance in the account. Therefore, users can audit verifying that the reserves will always be equal to the amount of USDT in circulation.
Publicity of USDT: USDT transaction information will be stored on public Blockchains, so users can easily track themselves.
Free Transactions: Transactions between two Tether accounts will be free of charge, or any two wallets capable of storing Tether will have no fees for sending funds.
Quick access to market stability: Users can convert cryptocurrencies like Bitcoin to USDT, when they see signs of a decline in the price index instead of trying to withdraw into fiat.
Easy money transfer: USDT supports users to transfer money quickly between exchanges. So it is very useful for arbitrage transactions between coins.

There are some disadvantages of USDT Token:

Tether may not be that advantageous after all. Its value has been pegged to the US dollar, which means it is subject to inflation. The coins are also not that easy to use in real life.
In terms of security, Tether is not very safe. In February 2018, $30 million worth of tokens were stolen from a Japanese exchange. Tether also lacks transparency when it comes to its banking relationship. It is hard to track where the money is coming from and where it is going.
Tether is also centralized. This means that it is controlled by a single entity, which can manipulate the price.

FAQs

Why USDT instead of USD?

USDT allows anyone to transact cheaply and quickly, and earn interest on decentralized finance protocols. Additionally, it provides businesses with a mechanism to accept fiat-denominated cryptocurrency payments without having to assume the market risk that comes with accepting payments in the form of more volatile cryptocurrencies.

Tether (USDT) is a well-known stablecoin that cryptocurrency investors have long utilized as leverage in their transactions. USDT is pegged to the U.S. dollar, and in theory it should be unaffected by the market volatility that can so dramatically impact the valuation of other cryptocurrencies, such as Bitcoin.

What is USDT payment?

USDT is a the third-biggest digital coin by market value. It can be spent, traded, transferred, or stored in specialized wallets like any cryptocurrency as a mean of payment.

Where is Tether located?

Its headquarters are in British Virgin Islands, Hong Kong, Isle of Man.

How does Tether stay at $1?

Tether doesn’t use any complicated mechanisms to stay at $1. It doesn’t have to. The reason Tether can stay at $1 is because it’s backed by actual dollars that the company holds in reserve.
If the price of Tether falls below $1, people will start selling because they know they can get their dollar back. This selling pressure will drive the price back up to $1.
If the price of Tether rises above $1, people will start buying because they know they can get more than a dollar back. This buying pressure will drive the price back down to $1.
In other words, the price of Tether is kept at $1 by the simple fact that it’s backed by actual dollars. There’s no need for any complex mechanisms.

How to earn USDT tokens?

The way to earn USDT stablecoin may vary depending on the individual’s circumstances and goals. However, some methods of earning USDT stablecoin include participating in online surveys, completing tasks on digital platforms such as CrowdFlower, or investing in USDT-backed assets such as Tether Gold.

Why is Tether USD popular?

USDT is popular because it is a stablecoin that is pegged to the US dollar. This means that each Tether token is worth $1 USD. This makes it a popular choice for traders who want to trade cryptocurrencies without having to worry about the volatility of the market.

What can I buy with USDT?

USDT is a stablecoin, meaning it is pegged to the value of the US dollar. As such, USDT can be used to purchase any goods or services that are priced in US dollars.

How to convert Tether to crypto on Binance?

Click on “Buy Crypto” in the menu.
Click “Convert” on the right of your screen.
Select which cryptocurrencies you would like to convert from and to.
Choose the amount of cryptocurrency you would like to convert.
Click “Preview Conversion”

How can I find more information about Tether?

Please refer to the Tether stablecoin website for more information.

Conclusion

Cove Markets has presumably given everyone a better understanding of USDT and a broader perspective on it via the aforementioned essay. Don’t forget to follow the Cove Markets.com community to update your knowledge of crypto trading & investing from basic to advanced!

Disclaimer: The information provided in this article is not investment advice from Cove Markets. Cryptocurrency investment activities are yet to be recognized and protected by the laws in some countries. Cryptocurrencies always contain financial risks.

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