Tether (USDT): The world's biggest stablecoin
Wild volatility is not everyone’s cup of tea. Tether (USDT) mirrors the value of the US dollar, offering the stability of cash with the efficiency of crypto. It also spares you the hassle of conversions. Transfer value denominated in cash anytime and profit from attractive APY. Discover the best ways to use the USDT stablecoin.
What is USDT?
Tether tokens are pegged to the dollar at a 1:1 USDT to USD ratio. USDT is the most popular stablecoin – as of September 6, 2022, its market cap comes third after BTC and ETH ($67.6 billion). Unlike Bitcoin or Ethereum, whose prices rise and fall all the time, Tether holds a near-constant value.
This digital asset is not susceptible to the same market volatility as most cryptocurrencies. Its virtue is stability, not price appreciation. Tether was conceived as a stable asset for cross-border payments without exchange risks. Today, it is also commonly used for crypto portfolio diversification.
Thanks to the fixed USDT price, users do not worry about their funds getting devalued due to fluid exchange rates. While Tether does experience occasional bumps, any deviations have been momentary. At the same time, the token offers cryptographic security and peer-to-peer trading, just like other cryptocurrencies.
What can you do with Tether?
While USDT is not a speculative asset, it is still versatile in its use. Holders can transfer value, buy goods and services, or gain passive profit.
You can pay for goods and services wherever Tether is accepted. International payments are free, and transactions are faster compared to conventional foreign exchanges.
Hodlers can earn passively through USDT staking. This requires delegating or locking up holdings to earn rewards for contributing to PoS blockchains. An alternative – deposits to Interest Account – provides more flexibility and higher returns. CoinLoan offers attractive APY to users keeping their tokens on the platform. We also loan USDT (read on to learn more).
USDT is accepted by a vast majority of crypto exchange platforms. In trading pairs, it works as an equivalent of fiat for the denomination. Pegging makes its value intuitive, so prices are more readily understandable.
Exchanges that do not support fiat let users hold their funds in USDT. With Tether, you can buy other cryptocurrencies with ease. Thanks to large-scale liquidity, it is ideal for getting in and out of cryptocurrency trades.
History and background of Tether
Tether was launched by Tether Limited Inc. The first token appeared in July 2014, and trading commenced on the Bitfinex exchange (owned by the same company as Tether Limited Inc.) in February 2015. Today, the stablecoin is listed on nearly all other crypto exchanges. Here are the key facts.
- USDT was created by three developers – Reeve Collins, Craig Sellars, and Brock Pierce – using the Omni meta-protocol built on top of the Bitcoin blockchain.
- The token was initially called Realcoin.
- While the company is based in the British Virgin Islands, its head offices are in Hong Kong. Tether Limited and Bitfinex share the CEO, chief strategy officer, and general counsel.
- Tether Limited CEO initially claimed all USDT tokens in circulation were entirely backed by the US dollars, so users could redeem them at any time. This statement was later retracted.
- In December 2017, the total USDT supply surpassed one billion tokens.
- In May 2021, Tether’s market cap hit $60 billion.
From the technical perspective, Tether rests on multiple networks and blockchains – the Omni Layer, Ethereum, EOS, Tron, Bitcoin Cash’s Standard Ledger Protocol, Algorand, OMG Network, Liquid Network, and Solana. They mint USDT tokens with different capabilities depending on the transport protocol.
According to the company’s website, it issues new tokens upon request, and customers must follow strict KYC procedures. Aside from USDT, Tether has grown to support five other stablecoins:
- EURT (pegged to the Euro)
- XAUT (pegged to gold)
- MXNT (pegged to the Mexican peso)
- GBPT (pegged to British Pound Sterling)
- CNHT (pegged to offshore Chinese yuan).
Advantages of USDT for individuals
Unlike volatile cryptocurrencies, USDT tokens cannot provide financial gains in and of themselves. Instead, Tether’s popularity stems from its role as an alternative to fiat currencies.
It takes minutes to process a Tether transaction. In comparison, USD deposits and withdrawals on foreign exchanges may take days, and the transaction times can be extended for a variety of reasons.
All transactions between Tether wallets are free. Foreign currency exchanges charge $30 on average and more for currencies they don’t normally support. Thus, transacting in USDT removes delays and costs that hinder trade execution with the crypto market.
Thanks to the USDT to USD peg, holders do not have to monitor the ups and downs of Bitcoin. All that matters is the price of the underlying currency. Tether can work as a store of value, giving users a safe haven amid the turbulence of the crypto market.
Converting funds to USDT lowers the risk of exposure in case your crypto loses value. Many investors use USDT as a hedge against the volatility affecting their crypto investments.
Advantages of USDT for merchants
For merchants, Tether is primarily a stable and liquid payment system. These tokens are relatively easy to integrate, partly thanks to the innovative support for multiple protocols. The list of companies that have embraced USDT is constantly growing.
Disadvantages of USDT
The biggest concern is the absence of evidence for the company’s 1:1 claim, which is crucial for the USDT Price. The official statement has been changed to include assets and receivables from loans, including those made by third parties, as possible backing. Thus, users cannot be sure that their tokens are fully redeemable for USD.
In April 2017, transparency concerns prompted Wells Fargo to impose a temporary freeze of international transfers in Tether. The company did not reveal its reserves breakdown until May 2021. This information was disclosed as part of a settlement in a court battle with the New York Attorney General’s Office. According to the report, “cash or cash equivalents” (commercial paper and fiduciary deposits) accounted for 76% of the reserves, while the rest included secured loans, bonds, BTC, and other investments.
Contrary to the initial claims, the share of actual cash was less than 3%. Stuart Hoegner, Tether’s general counsel, explained that focusing solely on cash was “misleading”, as its modest share did not entail a lack of liquidity. In October 2021, the Commodity Futures Trading Commission imposed a civil monetary penalty of $41 million for the company's misleading claims about full USD backing.
In theory, Tether was meant to mint one USDT for every US dollar deposited by users. In 2018, this claim was called into question by John M. Griffin and Amin Shams. The academics accused Tether Inc. of printing tokens “regardless of the demand from investors”. They also suggested USDT was used to inflate the Bitcoin price.
Tether proponents countered that the tokens had been minted during both bull and bear markets. This was confirmed by UC Berkeley in its 2021 report “Stablecoins don’t inflate crypto markets”. The researchers concluded, “We find no systematic evidence of stablecoin issuance driving cryptocurrency prices.”
Despite being a stablecoin, Tether is not fully immune to price fluctuations. On May 12th, 2022, the TerraUSD (UST) collapse, which sent shock waves across the market, caused the Tether price to drop by a few cents. The loss of the $1 peg was monetary, as the stablecoin rose back from $0.9485 quickly. Tether still endures as the leading stablecoin, and the USDT price prediction is at around $1.
Tether on CoinLoan
The most popular stablecoin is a few clicks away – buy USDT through our trusted CoinLoan exchange and deposit tokens to Interest Account to earn up to 12.3% APY. You can also borrow other digital assets against your USDT.
CoinLoan has all the tools you need to manage your crypto holdings. If you feel that USDT is a smart buy, we’ve got you covered. Create an account and make the most of USDT in one or more ways:
Use USDT as collateral for crypto loans
Borrow against crypto without the headache of additional paperwork – CoinLoan provides instant loans without credit checks! We accept USDT as collateral for loans in any available cryptocurrency. Set your own terms – our flexible conditions include adjustable loan periods and LTV rates. We also loan USDT – just use another cryptocurrency as collateral.
Use USDT to receive interest
Earn compound interest on your USDT with our Interest Account. We offer:
- 10.3 % APY on USDT
- Up to 12.3% APY on USDT with CLT staking
Buy or swap USDT on CoinLoan Exchange
Buy and sell USDT through our trusted Crypto Exchange. We offer dozens of exchange pairs, including USDT/BNB, USDT/BTC, and USDT/XRP.
Tether taps into the interests of crypto users and traders. Above all, it bridges the gap between blockchain assets and fiat, letting investors safeguard value within this volatile market. Pegging to the US dollar turns it into a store of value. This stablecoin provides stability and transparency, along with quick and low-cost transactions.