Meaning and Uses for Tether Crypto Explained

The introduction of blockchain technology has already brought a lot of changes to our lives and can potentially bring many other innovations beyond our imagination. The implementation of crypto coins as payment methods is one of the biggest breakthroughs related to the growth of blockchain ecosystems. These days, cryptocurrencies aren’t just matters of interest for tech freaks but can be used to buy products and services online. Today, we are going to review one of the most popular cryptos for payments – Tether (USDT).

How it all started

The idea to create a new coin based on the Bitcoin protocol, which eventually evolved into the development of Tether, first came to J.R. Willet. In 2014, he, together with Mastercoin, established Tether.

After more than 8 years of being in circulation, USDT is the biggest stablecoin and the third-biggest crypto project, in general. However, the fact that it’s a stablecoin doesn’t mean its performance will be the same all the time. Analysts say that USDT fall a bit below $1 during the period when the crypto market collapsed at the beginning of 2022.

This was the biggest decline in Tether’s history, which was caused by the fears of investors. They were afraid that USDT would repeat the performance of Terra, which was also supposed to be backed by USD reserves. However, as we see now, USDT has its own path. It continues to be one of the best-performing stablecoins in the crypto industry.

USDT Today

Stablecoins don’t work the way the biggest virtual tokens do. They have their pegs to certain fiat currencies, which help them to maintain stable valuations over time despite price fluctuations. This is what USDT is all about today.

The main peculiarity of the Tether coin is that it always follows the value of the U.S. dollar and neither falls below nor spikes above it. The other startups from this niche work the same way, including USD Coin (USDC), Dai (DAI), and Pax Dollar (USDP), to name a few.

What is the biggest benefit of such a concept? Crypto enthusiasts like the fact that there is something that won’t change its value overnight. It provides more liquidity to the cryptocurrency market and helps traders to store their funds in crypto without being afraid of huge financial losses.

As of the date of writing, the market capitalization of Tether is more than $66 billion. Its daily trading volume is reaching $29 billion, which is almost higher than the daily trading volumes of the biggest cryptocurrencies together – BTC is over $22 billion, whilst ETH is more than $7 billion

How it Functions

Tether is a very valuable asset in the digital market because it combines the best of both worlds – fast and secure transactions through blockchain and the stability of the U.S. dollar. Actually, we can even call it a dollar from the virtual world, since the difference between USDT and USD is all about the space where they circulate.

Let us explain how USDT is able to maintain its value at the same level as USD.

In simple words, Tether is a big blockchain-based ecosystem that has its own reserve of US dollars. When you buy USDT, you put your money in that reserve and the system automatically issues the same number of USDT coins. You can use them to pay for products or services or trade them on crypto exchanges. Once you use your USDT coins to redeem for fiat currency, all the tokens exchanged will be removed from circulation. Genius things are simple.

USDT as an investment

Why do you invest money in certain assets? In most cases, you do this because you want to reserve your funds or expect the asset to become more valuable in the future, which will bring good returns. From the perspective of investment returns, USDT and other stablecoins aren’t good investments. If more people start using Tether or invest in it, its coin won’t spike in value, as its main goal is to keep up with the price of the dollar all the time.

Nevertheless, we suggest that investing in USDT is a good idea. It is relevant for people who want to store their funds in crypto but don’t want to make these funds prone to the general volatility of the cryptocurrency market. Of course, no one excludes the risk completely, we’ve already seen the situation when the blockchain of the stablecoin collapsed. However, as for now, experts see no circumstances that could lead to the same collapse in the Tether ecosystem. Maybe, it will be affected in the future by the introduction of crypto market regulatory requirements or some restrictions. As for now, such concerns aren’t relevant.

Final Thought

We hope that after reading this guide, you understand what Tether (USDT) is and why it has become such a popular means for making cross-border transactions and payments. Stay tuned and store your funds safely!

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