While some cryptocurrencies are plagued with instability and uncertainty, Tether (USDT) is an exception to the rule. Built on the strength of the US Dollar, Tether is an asset-backed cryptocurrency known as a stablecoin. Its value is intrinsically linked to the US Dollar which gives it a unique edge over other digital assets like Bitcoin and Ethereum.
This ‘tether’ to the US Dollar protects USDT from the dramatic price swings that often sweep the cryptocurrency market. No, you won’t see USDT earn a profit of almost 5,000,000% over a matter of weeks (Pepecoin, we’re looking at you). Instead, Tether attempts to maintain a consistent value of 1 USDT = 1 USD.
What is a stablecoin?
Before we take a closer look at Tether, it’s important to define the term stablecoin. It describes a class of low volatility cryptocurrencies backed by stable assets. In the case of Tether, the stable asset is the US dollar. The goal is to keep the value of the stablecoin at a constant 1 USDT = 1 USD, regardless of market fluctuations.
A short history of USDT
USDT was launched in 2014 by Tether Limited Inc. The company is owned by Hong Kong-based crypto enterprise, iFinex Inc, which also operates globally used cryptocurrency exchange platform, Bitfinex.
Instead of building its own blockchain technology to host USDT tokens, Tether uses third parties. These include Avalanche, Ethereum, Polygon, Solana and Tron.
How Tether works
Tether uses liquid currency reserves to maintain the stability of the USDT tokens. The company owns genuine US Dollars and other liquid assets, such as term deposits and bonds, that add up to more than the total value of USDT tokens available. For every Tether token in circulation, the company owns either 1 USD or the cash equivalent of 1 USD. Tether regularly publishes reports that reveal how many USDT tokens are circulating versus the value of its liquid currency reserves.
How to buy USDT
USDT is available to purchase on most major cryptocurrency exchange platforms. When a purchase is made, the company tops up USD capital to match the order. For example, if you purchase 50 USDT, the company will then add 50 USD in stable assets to its reserves. This maintains the 1 USDT = 1 USD exchange rate.
Should I invest in Tether?
As we’ve explored, stablecoins like Tether aren’t designed to independently gain value. Instead, the goal is to echo the value of the stable asset they’ve tethered to. Rather than invest in Tether, experts suggest using the token as a way to store cryptocurrency value and avoid the volatility of making transactions in currencies like Bitcoin.
For example, an increasing number of online gamers are using USDT as a replacement for fiat currency. Platforms like Bitcasino have embraced stablecoins like Tether as a fast, easy and secure way to play online games and eliminate the risks associated with making transactions in currencies like Bitcoin.
Want to know more about Tether? Find a complete guide to investing in USDT here: https://bitcasino.io/blog/cryptocurrency/a-guide-to-investing-in-usdt.
This is a submitted article