Tether (USDT) is a cryptocurrency that links crypto assets to the fiat currency US dollar. It is a cryptocurrency that is stored in a foreign exchange reserve account and is backed by fiat currency. It was first issued by Tether in 2014 and its value is 1:1 anchored to USD, that is, for every USDT token issued, Tether’s bank account will hold in its reserve 1 US dollar. It has become one of the most popular stablecoins in the market. USDT is the first and largest stablecoin in the market in terms of market capitalization. USDT was originally issued on the Bitcoin blockchain, but has migrated to other blockchains.
Features of Tether (USDT)
As one of the most popular stable coins, USDT has the following characteristics:
1) The price fluctuates less and the coin is more stable. As mentioned above, the value of USDT is anchored to the US dollar, that is, how much USDT it issues, and how much cash reserves there will be in the real world as a capital guarantee. The cash reserves determine that USDT’s price will not fluctuate as much as other digital currencies;
2) Safe and reliable. USDT uses blockchain technology to provide world-class security while meeting international compliance standards and regulations;
3) Open and transparent. Tether publishes foreign exchange reserves on a daily basis and is professionally audited. At the same time, users can also conduct fund inquiries on the Tether platform to ensure transparency.
Usages of Tether (USDT)
As a stable coin, USDT’s main function is to avoid market volatility, eliminate financial service costs, and serve as a medium of exchange between digital currencies and other digital currencies in various exchanges. It can be used to transfer money on the blockchain, or it can be traded like foreign exchange because it is anchored to the US dollar.
1) Conduct USDT to crypto transactions on exchanges. USDT to crypto trading refers to the transaction between USDT and other digital currencies. For example, there are thousands of digital currencies in the MEXC Exchange, but most of them do not support direct purchases with fiat currency (such as USD or GBP). Instead, you need to use USDT to buy other digital currencies.
2) Support cross-chain transfer. As a stable currency, USDT is often used for transfer. MEXC supports USDT transfers on many blockchains, including TRC20, ERC20, BSC, SOL, MATIC, ALGO, and many other transfer methods. The speeds of transactions are different, users can try out the different transaction methods in MEXC Exchange.
3) Avoid the market risks and fight against market black swan incidents. With USDT, when the market is predicted to fall, investors can quickly convert their cryptocurrency into USDT to protect their assets from loss.
Pros and Cons of USDT
1）Pros
The biggest advantage of USDT is that its value is 1:1 anchored to the U.S. dollar, which provides a convenient channel for investors to convert their legal currency to cryptocurrency. Investors can trade and invest USDT in the crypto market. USDT keeps the assets from shrinking and is a good value-preserving token against market fluctuations.
2）Cons
The biggest risk for USDT is that the issuing company Tether may go bankrupt. Tether may also over-issue USDT tokens without sufficient reserves. The issuance of Tether is completely centralized, that is, issuance, acceptance, regulatory risks, and operational risks are all concentrated in Tether. Although Tether promises to reserve 100% of USDT reserves for USDT, the reserves details are not completely open and transparent to the public. No one knows whether Tether has misappropriated the reserves or over-issued the USDT token.
Closing thoughts
According to MEXC Exchange’s official website, USDT currently ranks third in terms of market capitalization and ranks first among stable coins. USDT is the most popular cryptocurrency among investors. Stablecoins do not require traders to convert to fiat currency, enhancing the convenience of cryptocurrency transactions. Although there are a lot of concerns about the risks of its safety, USDT’s high trading volume over the past few years shows that the public has strong trust in stable coins.
Disclaimer: Trading crypto involves significant risk and can result in the loss of your invested capital. The materials are not related to the provision of advice regarding investment, tax, legal, financial, accounting, consulting, or any other related services and are not recommendations to buy, sell, or hold any asset. MEXC Learn solely provides information, but not financial advice. You should ensure that you fully understand the risk involved before investing.
