What Is USDT (Tether)? The Beginner’s Guide
USDT is a cryptocurrency whose value is pegged to the US Dollar. Therefore, its value is always stable at $1 USD. That is why it is called a stablecoin. In fact, it is one of the most popular stablecoins in the world. At the time of writing, Tether is ranked at number 4 most popular crypto with a market capitalization of $4 billion. It is issued and maintained by Tether Limited, which is a Hong Kong-based company.
The introduction of Tether was an important component in the crypto ecosystem. It allowed for the stability of value and ease of trades. Given the highly volatile nature of cryptocurrencies, this was a really important step. The ability to park your value in something that maintains it is what can drive mass adoption.
How Does USDT Work?
Like most other cryptocurrencies, Tether works on top of blockchain technology as well. Initially, Tether tokens existed on the bitcoin blockchain using the Omni Protocol. Then the tokens were also launched on the Ethereum blockchain, making them into ERC-20 tokens. This allowed them to have lower fees and faster transaction times.
Currently, USDT has been launched on a total of seven blockchains. They are – Bitcoin (Omni Protocol), Ethereum, Tron, Algorand, EOS, Liquid Network and Bitcoin Cash. This gives users a lot of flexibility. They can use the blockchain of their choice and reap its unique benefits.
As for the peg, it is maintained by keeping USD as collateral. For every USDT, there is an equal amount of USD in deposits.
Advantages of Using USDT
Having a stablecoin like USDT has a lot of advantages for the entire crypto ecosystem. In the most basic terms, it acts as an alternative to a fiat currency. As such its role becomes ever more important. The following are some of the best advantages of using this stablecoin.
1. Stable Prices
Since USDT is pegged to the dollar, its price remains stable. This has multiple benefits. First, it serves as a base pair for trading against other volatile assets. Traders can simply trade USDT pairs and secure profits that way. Another important benefit is that it serves as an instrument to park your value. This preserves the value of your holdings in times of extreme volatility.
Third, USDT can also be used by merchants and other commercial establishments for payments. The price remains stable so they don’t face any real risk. The tokens can also be easily integrated.
2. High Speed
USDT transfers from and to exchanges happen within minutes. When fiat is involved, it can take anywhere from 1-3 working days. If you are transferring funds in foreign exchange, this adds extra scrutiny and hassle. Crypto markets move fast and this high speed matters a lot.
3. Low Fees
Transaction and transfer fees of USDT are quite low. For day traders and even hobbyists, this can result in huge savings over time. Fiat currencies usually attract very high fees. When foreign currencies are involved, these fees can be sky-high.
4. Ease of Use
The concept of stablecoin is quite easy for users to understand. Since it has the same value as a dollar, the user experience can be kept simple. As a result, mass adoption can be easily achieved.
5. Universal Acceptance
USDT has strong acceptance and support across the crypto industry. So, you can access the token no matter what avenue you choose to use.
6. Based On Tried And Tested Blockchains
USDT is now available on seven blockchains. All these blockchains are highly trusted in the industry. They have been tried and tested under various situations also. This makes USDT more robust than ever to use.
How To Buy USDT
Buying USDT is very easy. It is also one of the first things that newcomers to crypto do. There are basically two ways you can go about this.
First, you need to fund your exchange with a fiat currency. This can take anywhere from 1 to 3 days. After the fiat arrives in your exchange account you can simply exchange it for USDT. You will get an equal amount of USDT tokens for your fiat.
Second, you can buy other cryptocurrencies like bitcoin and ethereum. You can do so by funding your account or simply using your credit cards. There are many payment avenues that directly allow you to buy these coins. Once you have bought them, you can simply trade them for USDT.
How To Store USDT
Security should be the top priority in the cryptocurrency world. Since it is still a nascent industry, there are many hackers and scammer lurking around. Therefore, you should take the most secure step to store your USDT just like any other crypto tokens.
The most common method is to store your USDT on secure and trusted cryptocurrency exchanges. This allows you to take advantage of any opportunities that may arise suddenly. However, an even safer method would be to store USDT on a hardware wallet.
A hardware wallet is an offline device which stores the private keys of your crypto. It is the safest way right now to store your cryptocurrencies. There are many hardware wallets like Ledger, Trezor and others that allow you to do so.
A Word of Caution
While USDT is an important component in the crypto ecosystem, you need to be cautious. Despite its many benefits, you shouldn’t forget that it is run by a single corporation. Therefore, you are putting your trust in that company. This kind of goes against the crypto ethos of trustlessness and decentralization. However, sometimes convenience takes the front seat.
In any case, you should be on top of the latest happenings. This helps you safeguard yourself in case anything bad happens. Planning ahead is the best thing you can do in such a volatile market.