What is Tether (USDT)?

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What is Tether (USDT)?

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What is a stablecoin?

A stablecoin is a cryptocurrency whose value is tied to the value of another currency, commodity, or financial instrument. Stablecoins aim to provide crypto users stability with their low volatile nature and are often used as the preferred medium of exchange in crypto transactions.

Namely, there are three types of stablecoins:

  • collateralized by fiat
  • collateralized by crypto
  • collateralized by algorithms

In this article, we are here to explain the most popular fiat-collateralized stablecoin known as Tether.

What is Tether (USDT)?

Tether (USDT) is a cryptocurrency stable coin pegged to the U.S. dollar designed to avoid the market volatility that drastically impacts the value of other cryptocurrencies, such as Bitcoin.

In fact, it is the 3rd largest cryptocurrency to exist in the crypto market with the biggest stablecoin market cap.

For those in the crypto industry, USDT serves as a “safe” digital asset that maintains its stable $1 value over time due to its fiat pegged nature. 

How Does Tether keep Its $1 Peg?

As per the Tether website, the project boasts an impressive reserve of fiat currencies equivalent to the amount of USDT available in the market, therefore, always ensuring that 1-to-1 exchange supply.

It also needs to be noted that Tether is pegged to other fiat assets like Euro, Chinese Yuan, Mexican Peso and Gold, all of which are backed by their Tether Reserves. 

Key Features:

  • Less Market Volatility: Due to its matching 1-to-1 fiat nature, USDT does not suffer the same market volatility that other cryptocurrencies face like Bitcoin and Ethereum.
  • Fiat-backed Digital Asset: Based on their claims, the USDT Reserve is a highly liquid fund that holds assets equal to the entire outstanding market value of USDTs. This means it has one dollar of cash or liquid investments for every USDT in circulation. 
  • Multi-blockchain Compliant: USDT is a unique stablecoin which complies with multiple blockchain networks and protocols. Some of the blockchains it supports are Ethereum, Bitcoin Cash, Solana, Algorand, Liquid Protocol, Omni, and Tron.