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