Today, stablecoins or stable cryptocurrencies have completely changed the usual mechanism of movement and protect our capital from the volatility of other cryptocurrencies. This is exactly one of the functions of USDT, a cryptocurrency whose price is always tied to the dollar.
We have all heard of stablecoins or stable currencies whose value is fixed against fiat currency. For this reason, Tether has developed a stablecoin called USDT that maintains parity against the U.S. dollar. Tether Limited developed a cryptocurrency under the name “Realcoin’’ in late 2014 but later became known as Tether.
What Is Tether coin?
Tether is issued through the Omni Layer protocol and is in many ways a unique currency. Launched in 2015, it is a digital cryptocurrency of the traditional currency, namely the U.S. dollar. Tether is not inferior to other cryptocurrencies in its characteristics, operating on a decentralized network where all data is stored and processed. A distinctive feature is the centralized issuance and value, which is always maintained at one dollar level.
How Does Tether Work?
Stablecoins are designed to represent the value of a real asset or currency on a blockchain. In the case of the core cryptocurrency Tether USDT, it is pegged to the value of the U.S. dollar. Tether claims that each token is backed by a dollar held in its reserves; the token’s value is maintained by bots that buy and sell whenever its value fluctuates against the dollar. In a nutshell, Tether works like this: every time a user deposits a dollar into a USDT account, Tether Inc, the company behind the Tether stablecoin, issues Tether in return. Tether is also available for the euro and Japanese yen.
The Process of Exchanging Fiat Money for USDT
The process has four steps:
- Firstly, dollars are credited to the bank account of Tether Limited.
- Then, following a 1:1 ratio (against the dollar), the company deposits tokens into an account opened by the user.
- And the user manages their assets like any other cryptocurrency.
- Finally, the user can perform the reverse process by placing tokens into the company’s account. The deposited Tether (USDT) will be destroyed, and the dollars will be sent to the user.
Look Tether BTC
Tether began issuing in the Omni Layer. This metaprotocol developed on the Bitcoin blockchain allows projects to create and sell their coins. The ledger is stored in the Bitcoin blockchain and Liquid, the Bitcoin sidechain, and transactions are searchable through Omni Explorer.
Look Tether on Other Blockchains
There are also Tethers based on Ethereum, built on the ERC-20 standard, EOS, Algorand, OMG Network. And now, it is very popular to use Tether on the blockchain Tron on the TRC-20 standard, which is much faster and cheaper than its counterparts.
The Consensus Algorithm
Tether uses a unique network consensus algorithm unmatched by any cryptocurrency: Proof of Reserves. According to the principle of this algorithm, the number of issued USDT and EURT tokens is compared to the actual reserves of euros and dollars in the reserve accounts of Tether Limited. This process is carried out thanks to the capabilities of the Omni protocol.
The Uniqueness of Tether
Tether (USDT) has been used and recognized globally for many years and has legitimacy, though it is often questioned. Tether is actively used as a means of payment and exchange by many organizations and protocols in the blockchain ecosystem. Due to its significant reserves, Tether is not exposed to market risks. In addition, USDT provides the same opportunity as other cryptocurrency tokens on the network, peer-to-peer trading, and PoW or PoS collateral, making USDT a desirable hedging tool for traders and consumers alike.
How to Buy Tether
The Tether and Bitcoin can be stored in virtual wallets or on exchanges that sell them. However, unlike bitcoins, which can be mined, USDT can only be issued by Tether Limited in Hong Kong. Guarda is the go-to software wallet for purchasing, exchanging, staking, and storing USDT. All you have to do is download the app on your devices or access it via the browser of your choice.
Is Tether a Good Investment? Should I Invest in Tether?
Perhaps as a cryptocurrency investment tool, Tether is not suitable because the value of Tether must correspond to the dollar exchange rate, which means that it is not the cryptocurrency that can be bought and kept with the expectation of price growth. However, it has several other practical applications. Below are the most typical reasons to buy it:
- Transferring money from your bank account to a cryptocurrency exchange can sometimes take days. Tether saves its owners from this process. To keep funds in your account to buy cryptocurrency without waiting, you can purchase Tether. And then all you have to do is use Tether to make the purchase. Tether gives you the ability to make transactions to buy and sell cryptocurrencies on an exchange platform while preserving the value of your investment. Since transactions can be made in cryptocurrencies, in the end, the remaining balances are easily converted to USDT.
- Being directly linked to the dollar, this cryptocurrency allows you to work at the dollar rate and always know its real value.
- USDT is used similarly to regular cryptocurrency and has all its advantages. USDT places no restrictions on the transfer of funds and can be quickly sent anywhere globally and at a low cost per transaction.
Despite all the controversy, Tether remains one of the most popular stablecoins on the market. Millions of dollars worth of transactions are made every day using it. Moreover, Tether serves as a reliable companion for users, protecting them from highly volatile market conditions and being a reliable tool for millions of users in need of decentralized finance in different regions, countries, and even continents.