Tether cryptocurrency (USDT)

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24.12.2021 08:43
Tether cryptocurrency (USDT)

    Ever since the first cryptocurrency appeared, the attention to blockchain has grown considerably. Particularly the period of 2017-2018, when the bitcoin price reached the $20,000 mark for the first time, influenced this growth. This was a period of significant growth in demand, as well as the emergence of a huge number of new crypto assets. 

    A special place among them was taken by the so-called stablecoins (a cryptocurrency that is pegged to a certain fiat currency or asset and has a stable rate in relation to it). Tether was one of the first of these stablecoins.

    A company with the same name, Tether Limited, is responsible for the issuance of tokens. Each new USDT is backed by a dollar in the company's reserves. For example, if 100 units of Tether cryptocurrency are issued, $100 is added to the reserve (a special account in the bank).

    This project doesn't have its own blockchain. Instead, it uses the Proof of Solvency consensus mechanism. Each unit of USDT cryptocurrency must have a U.S. dollar unit underneath it.

    If, for example, some USDT ETH20 tokens are burned, exactly the same amount of fiat dollars is sold from the reserve. When new tokens are issued, the same amount is added to the reserve.

    HISTORY AND THE TEAM

    Tether's USDT is the ancestor of the stablecoin market. This stablecoin has been in operation since 2014. Like the Bitfinex exchange, the Tether startup is managed by iFinex. The association of the stablecoin with Bitfinex was not disclosed at length. This was due to the exchange being targeted by hackers.

    Tether is best known as the company that created USDT. But it has a range of tokens in its arsenal:

    • EURT, a stablecoin backed by the euro.
    • CNHT is a stablecoin backed by an offshore version of the Chinese yuan. The financial policy of the PRC implies the division of the yuan into domestic (CNY) and offshore (CNH). 
    • Tether Gold is a stablecoin backed by gold.

    Brock Pierce is the face of the project. The Hollywood actor helped conduct the ICO for the Tether team in 2013. As many believe, it was this fundraising campaign that laid the foundation for the future ICO boom. Curiously enough, Pierce's role in the rise of the crypto market didn't end there. In 2014, he became the head of the Bitcoin Foundation, which significantly strengthened interest in the advanced technology.

    The co-founder and first CEO of Tether is Reeve Collins. Reeve started his career at Razorfish, a digital marketing company. Soon Collins grew into a genuine entrepreneur - he launched FusionDirect, Pala Interactive, Traffic Marketplace, and many other startups.  From 2013 to 2015, Reeve served as CEO of Tether. He later returned to his roots in digital marketing by launching vAtomic Systems and Blockv.

    The current project manager is Jean-Louis van der Velde. Jean-Louis is a serial entrepreneur and high-tech specialist. Originally from the Netherlands, he has lived permanently in Asia since 1985. He has founded several companies there, including Bitfinex itself. Van der Velde is known not only as an entrepreneur and blockchain expert, but also as a lecturer at the National Taiwan University of Science and Technology.

    WHAT IS THE USDT CRYPTOCURRENCY USED FOR

    Stable cryptocurrency has the following goals and purposes:

    1. To hedge the risks associated with transactions in other cryptocurrencies. In periods of instability before the emergence of stablecoins, owners needed to exchange their tokens for fiat money to survive price declines in the cryptocurrency market. With the advent of stablecoins, this is no longer necessary. Now it's possible to withdraw in USDT TRX20, for example, while staying within the blockchain.
    2. A tool to diversify your portfolio. Given the previous statement, it's also feasible to buy Tether in order to distribute funds between different assets in a depositor's portfolio. With USDT, depositors make even aggressive portfolios with lots of risky tokens more conservative. 
    3. An intermediary between different cryptocurrencies. Users may buy or exchange USDT for any token during a period of price volatility and then, without going into fiat currencies, purchase other tokens.
    4. Payment for goods and services. Tether cryptocurrency is now accepted by many online stores, as well as services offering online services.
    5. A way to start trading on some trading platforms. Some professional cryptocurrency platforms do not accept fiat money. Therefore, you can first exchange rubles for USDT, and then proceed to trade on any platform. 
    6. No restritions. One of the advantages of USDT over the dollar itself is not yet so obvious. It lies in the lack of ability of banks in a particular region to forcibly keep the USDT exchange rate at a certain level, contrary to the market. In addition, the supply of USDT in a particular region, unlike the supply of banknotes, can not be limited.

    How it differs from other stablecoins

    1. At first glance, USDT and USDC appear to be two almost identical U.S. dollar-backed stablecoins. In fact, when it comes to the financial component, the two teams take different approaches.
    2. Issuance. In the case of USDT, Tether is solely responsible for minting new coins. As for USDC, the members of the Centre consortium, which now includes Circle and Coinbase, can mint the coins.
    3. Collateral. The value of USDT is backed by various assets, the value of which is equivalent to the volume of issued dollar coins. The value of USDC is backed more by cash and less by cash equivalents.

    So far we've talked about so-called "centralized" stablecoins, with a specific company or companies in charge of issuance. But lately, so-called "algorithmic" stablecoins have been gaining popularity. Perhaps the most striking example with obvious differences from USDT and USDC is UST (TerraUSD). It's a young cryptocurrency, the value of which is maintained at the right level of $1 thanks to an automatic mechanism that encourages traders to sell and buy the asset at a lower or higher price - depending on the situation.

    The use of different chains and a bit of DeFi

    Initially, at the time of its launch in 2014, USDT was based only on Omni Layer, the protocol over Bitcoin's blockchain. Back in the early days, USDT went by the name RealCoin, but that's another story...

    Pretty soon the developers of Tether turned their attention to other chains. Today, USDT is available on:

    • Omni Layer (Bitcoin);
    • Bitcoin Cash;
    • Ethereum;
    • Tron;
    • EOS;
    • OMG;
    • Solana;
    • Binance Smart Chain;
    • Liquid (bitcoin sidechain).

    This helps reach more users and attract more liquidity to the project.

    Chains like Ethereum or Solana are the flagships of the decentralized finance (DeFi) market. This opens up additional opportunities for stablecoin holders:

    • earning money by supplying coins to pools;
    • earning from borrowing or, conversely, securing collateral;
    • exchanging it for other promising tokens;
    • and more.

    At the beginning, USDT users had problems with the fact that coins running in the Ethereum ecosystem, say, could not be exchanged for the same  EOS stablecoins. But this issue is gradually being resolved, and developers are working on solutions that allow USDT from one chain to be exchanged for USDT from another.

    One of the popular channels - and we are going to consider it now - is Metamask. With its help, it's quite convenient to move USDT based on Ethereum and Binance Smart Chain between each other. Admittedly, you can't do without prior preparation - you need to have Binance network connected (MetaMask offers only Ether mainnet and testnet by default), and you need to have accounts for gas fees deposited. 

    There is more to it. The preparation stage here is the hardest, indeed. Afterwards, you can transfer funds between the two top networks with a light click of the mouse. Another step is to connect Binance Bridge, the official instruction for which is located here. The basic idea of the item is that you need to come up with a password and remember the seed phrase.

    By this point, you will have an icon with Binance Bridge in your browser. Open the app, open MetaMask, and connect your wallet to the bridge. The connection itself looks simple - MetaMask will automatically prompt you to connect to the bridge.

    Now you can freely move funds.

    Yes, it all looks not so easy. That's the reason why we recommend Broex for ETH-to-BNB transfers and other token transactions. This convenient and safe wallet doesn't require any unnecessary settings and will be suitable for everyone who just started crypto trading.

     

    TETHER RATE AND PROSPECTS

    The cryptocurrency USDT TRX 20 has a clear link to the U.S. dollar. Accordingly, at any given time, the rate of Tether is equal to $1. However, in practice, this isn't always the case. There are times when the price of USDT is not equal to the U.S. currency. But these discrepancies are just a few cents.

    The Tether network functions as follows. There is a smart contract that is responsible for issuing coins. As soon as new coins are added, Tether Limited is required to freeze the same amount of U.S. dollars in its currency account.

    However, many users are wondering what happens if the company does not back up the issued tokens with fiat currency. There is no way to check using blockchain, as fiat money is a completely different financial and technological circuit. It has nothing to do with a distributed ledger.

    That's why Tether Limited agrees to conduct independent audits in which specialized firms check the USDT balance and compare it to the number of dollars in the reserve. So far, all audits have confirmed Tether's transparency.

    One of the features of USDT is that this coin is represented on multiple blockchains simultaneously. USDT ETH20 is based on the Ethereum network, USDT BEP20 is based on the Binance Chain blockchain, and USDT TRX20 is based on the TRON distributed ledger. These tokens are interchangeable, and their total number doesn't exceed the dollar amount frozen.

    USDT token outlook

    The future of USDT directly depends on the development of blockchain and other cryptocurrencies. It's fair to say that the project has already succeeded, as Tether is in high demand among professional traders, depositors, and ordinary users. In the future, this trend is expected to continue, as Tether is an asset that insures against cryptocurrency risks.

     

    IS IT WORTH INVESTING IN TETHER

    Stablecoin is primarily attractive as a bridge between fiat and digital currency. With its help, beginners can take their first steps in the world of blockchain.

    Stable cryptocurrency is favorable to buy during periods when the digital asset market is in correction. Moreover, stablecoins can be included in portfolios to protect against risks in case of sharp price fluctuations.

    As for trading and investing, since USDT has no intrinsic value (a clear peg to the US dollar), it's of no interest for professional speculation, both short-term and long-term.

    Pros and cons of USDT

    Among the pros of Tether:

    1. Like the dollar, only faster. USDT is backed by real currency, which allows it to be used in settlements. At the same time, coin transfer transactions are much faster and cheaper compared to traditional currency and traditional banking systems.
    2. Best crypto trading. Due to legal restrictions, not all crypto exchanges and not all regions can use real dollars. However, there are no restrictions on USDT - and it makes trading safer and more flexible.
    3. Mobile Reserve. Participants in both markets - traditional and cryptocurrency - can transfer some of their savings into USDT. Crypto players can protect their savings from fluctuations. Traditional market players can have a reserve that can be instantly used to buy cryptocurrencies as soon as they start to move in the right direction.

    However, it's not without a fly in the ointment:

    1. The (un)stable coin. Although USDT is secured by real USD, the developers do not guarantee full compliance with the U.S. currency rate. As a result, there can be deviations of 2-3% from the real value of the dollar.
    2. Tether's Reputation. The reputation of Tether and Bitfinex is quite ambiguous, and both companies often become the subjects of legal proceedings. Lately, however, the developers have been trying to meet high legal standards and conduct financial audits.
    3. Mining and Staking. Mining and staking - or more accurately, their absence - is certainly hard to call a disadvantage of Stablecoin, but those who have already stocked ASICs should be aware of it.

     

    WHERE TO BUY USDT, WALLETS, INVESTMENTS

    The best way to buy, sell, exchange or withdraw tether is choosing reliable specialized platforms like Broex. It offers all conditions for comfortable work for both novice token holders and professional traders, since transactions are fast and the price doesn't change. Broex is registered and regulated in the European Union. The platform meets all the security criteria.

     

    The main benefits of Broex

    The advantages of working with this platform include:

    • Wide choice of deposit and withdrawal methods including credit and debit cards of any emitters.
    • More than 600 trading instruments, including the most popular cryptocurrencies and stablecoins. Users can send a request to add new tokens available on the Binance platform.
    • Simple and user-friendly interface. You can buy USDT TRX 20 or USDT ETH20 in just a few clicks. The user won't have to understand the intricacies of the platform for a long time.
    • Reliable storage. All tokens are located on special servers disconnected from the Internet. This protects the cryptocurrency from encroachment by hackers. As for the fiat money, they are on a separate circuit, which the administration of the platform has no access to.
    • Building portfolios. Thanks to a special function, users can invest in ready-made portfolios. Some of them, by the way, contain USDT tokens.

    CONCLUSION

    Tether cryptocurrency is a promising coin that acts as a kind of bridge between the fiat world and the blockchain. Despite the controversial attitude towards it, it has already achieved some results and today USDT is actively used by many cryptocurrency holders.

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