What is Tether (USDT): Definition, Uses , Where to Buy, How it Works
21 Aug 2023 by Crypto Presale 4 min read
What is Tether (USDT): Definition, Uses , Where to Buy, How it Works

If you are new to the crypto space and unfamiliar with stablecoins, chances are you are familiar with Tether (USDT). USDT is the most popular stablecoin within the crypto ecosystem. Its leverage in crypto trades has gained it the position of the third-largest cryptocurrency in the world.

As a token, it offers versatility to crypto enthusiasts while being a less volatile digital asset pegged to the US dollar. If you’ve not read about Tether (USDT) before, you’ve got no worries. This guide covers everything you need to know about USDT.

What is Tether (USDT)? | Definition of Tether (USDT)

Tether (USDT) belongs to a distinct subset of cryptocurrencies known as stablecoins. These stablecoins are known to hold a stable price at any time in the crypto market cycle. USDT is a popular stablecoin used over the years due to its representation of USD in the crypto market. It is an alternative to the US dollar when conducting crypto transactions.

Their website claims that USDT’s value is pegged to the US dollar and has 100% backing of the Tether reserves. This means that one USDT has the same value as $1. While this is the proper stance, USDT has undergone price fluctuations in the past.

Millions of blockchain users hold USDT for various reasons. Some have USDT for transactional purposes, while some keep it to hedge against inflation in their local currency. All these are done without the need for an intermediary or third party.

As of the time of writing this guide, USDT is the third-largest cryptocurrency in the market. It is the top stablecoin in the crypto space, and its market capitalization is currently $83 billion. Thus, you can call USDT the digital dollar with a 1:1 ratio to actual dollars.

How Does Tether (USDT) Work?

Tether's fundamental principle is getting pegged to the US dollar at a 1:1 ratio. This means that you receive 100 USDT tokens when you deposit $100. This principle makes USDT a safe investment when there is economic uncertainty, and it maintains a relatively stable price regardless of the market cycle, be it bullish or bearish.

A supply and demand mechanism ensures the USDT price stays pegged at a 1:1 ratio. When you need more USDT tokens, the platform mints new tokens and deposits them into exchanges. Meanwhile, USDT tokens are burned to reduce token supply when there is less demand for USDT. As a result, investors now have a reliable and stable medium to store value.

Tether originally began trading on the Bitcoin blockchain using the Omni layer protocol. But it is now available on various blockchains Tether supports, such as EthereumTron, Algorand, Solana, etc.

Uses of Tether (USDT) | Benefits of Using USDT

Regardless of what you want to use USDT for, it has many benefits, being the most liquid, stable and trusted stablecoin in the crypto space. Below, we looked into some benefits you can derive from using USDT.

  • Multiple Blockchains Support: USDT is widely used globally by investors for different purposes. It is built on numerous blockchains, resulting in seamless adoption and integration. Thus, you can get it from any exchange of your choice easily.

  • USDT has Unparalleled Liquidity: It is the most traded cryptocurrency considering its daily trading volume. Likewise, it is the third-most popular cryptocurrency with unequalled liquidity.

  • Tether has Widespread Adoption: USDT is widely integrated into exchanges, digital wallet applications, decentralised finance (DeFi) protocol and payment methods. It has offered more efficient payment gateways than the fiat currency system.

  • Available in Different Countries: Tether token versatility enables it to be available in many countries. Its support for multiple fiat currencies makes it easy for individuals to leverage USDT as a digital asset. USDT supports the US dollar, euro (EUR), offshore Chinese yuan (CNH), etc.

  • USDT is Regulatory-complaint: Despite its widespread adoption and utility across borders, USDT follows globally standardised compliance principles for know-your-customer (KYC) laws, anti-money laundering, sanctions and countering activities involving financing terrorism.

Where to Buy Tether (USDT)

Tether (USDT) is the most popular stablecoin in the crypto ecosystem. This is due to its extensive use cases and how it has an equivalent value to the U.S. dollar. Its versatility gives it global acceptance and listings on numerous platforms in the crypto space. As a result, you can buy Tether (USDT) on many crypto exchanges.

USDT has more significance on exchanges that don’t have fiat-to-crypto trading pairs. This is because it stands in the place of the US dollar. 

You can buy USDT on prominent crypto exchanges such as Binance, Huobi Global, HitBTC, KuCoin, Kraken and OKEx.

Should You Buy Tether (USDT)?

There is no certainty about what will happen in the crypto space. This is because the crypto market depends heavily on various, unpredictable factors. Through multiple cycles, Tether has remained the most popular stablecoin in the crypto market, providing liquidity for daily transactions worth billions.

Moreso, the rough times we have experienced in the crypto markets over the decade have proven that USDT will continue to be a significant liquidity provider. This is because it has provided investors with a safe haven during downtimes in the crypto market.

Thus, buying USDT will serve multiple benefits beyond hedging against inflations and market fluctuations.

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This article is intended for educational purposes and is not financial advice.