If you're an investor in the cryptocurrency market, you're likely already familiar with the term Tether (USDT). It is considered one of the most popular stablecoins today, alongside other major cryptocurrencies like Bitcoin, Ethereum, and Litecoin. But what exactly is Tether? How does it work, and how can you buy or sell it? This article provides a detailed overview.
Let's get started.
Understanding Tether (USDT)
Tether (USDT) is a platform that enables fiat currencies to be used on the blockchain through the issuance of tokens or coins with equivalent value.
Founded in 2014 in Hong Kong by Tether Limited and operating under the legal framework of the British Virgin Islands, Tether leverages blockchain technology to create USDT. The primary goal is to bridge the gap between fiat currencies (such as USD, EUR, VND, and GBP) and cryptocurrencies. This allows for the quick and convenient storage, sending, and receiving of digital currencies globally. Additionally, Tether offers stability in asset value.
Key Problems Tether Solves
First, Tether simplifies the transfer of national currencies. It provides users with a stable altcoin alternative to Bitcoin and offers various trading and wallet auditing solutions.
Second, Tether introduces a Proof of Reserves model instead of a Proof of Solvency model. This allows users to easily verify the amount of Tether in circulation on the Bitcoin blockchain.
The total circulating supply of Tether must always match the amount of USD held in Tether Limited's bank accounts. To send or receive fiat currency, users must buy or sell Tether directly on the Tether platform.
To prove that the USD reserves are equal to or greater than the circulating USDT supply, Tether Limited publishes its bank account balances on its Transparency page. These figures are regularly audited and verified, ensuring the publication of fundamental bank balances and transfer reports.
How Tether Operates
According to its whitepaper, Tether's operational process is straightforward:
- Deposit Fiat: You send fiat currency (e.g., USD) to Tether Limited's bank account.
- Receive USDT: Tether credits your account with an equivalent amount of Tether tokens (USDT).
- Trade Freely: You can freely buy, sell, or exchange USDT on various brokerages and exchanges.
- Redeem for Fiat: When you no longer wish to hold USDT, you can convert it back to fiat currency via the Tether platform.
- Token Destruction: Tether destroys the redeemed tokens and transfers the fiat currency to you.
A Detailed Look at USDT
This section delves into USDT, the most popular Tether coin available today.
What Is USDT?
USDT, or Tether coin, is a cryptocurrency whose value is pegged to the US dollar at a 1:1 ratio. It was launched in 2014 by Tether Operations Limited.
The 1:1 peg means that each USDT token is designed to be worth exactly one US dollar (USD). This provides liquidity and minimizes the impact of market price volatility on USDT within the cryptocurrency ecosystem.
Initially, USDT was developed on the Bitcoin blockchain using the Omni layer protocol. Omni is a platform that enables investors to convert, create wallets for, store, and trade USDT.
Today, USDT is the most widely used stablecoin in the crypto market, with a market capitalization exceeding $60 billion. Despite growing competition from rivals like USDC, DAI, and BUSD, it still commands the largest market share, over 60%.
Notable Advantages of USDT
USDT offers several key benefits:
- Price Stability: Backed by banking reserves, USDT offers significant advantages for cryptocurrency trading. Crucially, its value is largely insulated from the extreme volatility common in this market.
- Transparency and Security: Tether publicly discloses its reserve balances, allowing auditors to verify that the reserves always match the number of USDT tokens in circulation.
- Fee-Free Transfers: Transfers between two Tether accounts are completely free.
- Quick Access to Market Stability: When the price of Bitcoin or other cryptocurrencies falls, investors can quickly convert their holdings into USDT to preserve value instead of attempting to cash out into traditional fiat currency.
- Easy Fund Transfers: USDT facilitates rapid transfers between different exchanges, making it a useful tool for arbitrage trading across various cryptocurrencies.
Where to Buy, Sell, and Store USDT
USDT is currently listed and supported for trading on numerous popular exchanges, including Binance, HitBTC, Gate.io, Huobi, Uniswap, OKEx, Kucoin, and Bitstamp. The largest trading volume for USDT occurs on the Binance exchange.
Once you acquire USDT, you can store it in the built-in wallets of the aforementioned exchanges for convenient trading. However, for long-term storage, consider these dedicated wallet options:
- Hot Wallets: These are software-based wallets connected to the internet. Popular options include Coin98 Wallet, Trust Wallet, and MetaMask.
- Cold Wallets: These are physical hardware devices. They are generally more suitable for long-term investors who trade infrequently. Secure cold wallet options include Ledger and Trezor.
How to Buy and Sell Tether (USDT) on Binance
To trade Tether (USDT) on Binance, you must first create an account and complete the identity verification process (KYC). For a smooth experience, it's recommended to change the platform language to your preferred one.
How to Buy USDT
- Navigate to P2P: After successfully logging into your Binance account, click on Trade in the top navigation bar and select P2P.
- Select Quick Trade: Choose the Quick Trade option.
- Set Up Purchase: Select Buy. Set the "I Want to Pay" currency to your local fiat currency (e.g., VND). Then, enter the amount of USDT you wish to purchase in the "I Will Receive" field. The system will automatically display the required fiat amount. Click Buy USDT.
- Choose Payment Method: Select your preferred payment method, such as Bank Transfer or a supported e-wallet. Click Confirm.
- Complete Payment: The interface will display the seller's information, including bank account details. Transfer the exact amount to the provided account. After completing the transfer, click Transferred, Notify Seller. The seller will then release the USDT to your account, usually within 1-5 minutes.
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How to Sell USDT
The process for selling USDT is similar to buying it. However, in step 2, you will select Sell. Enter the amount of USDT you want to sell in the "I Want to Sell" field and set the "I Want to Receive" currency to your local fiat. Choose your preferred payment receipt method and wait for the buyer to transfer the funds. Once you confirm receipt, Binance will release your USDT to the buyer to complete the transaction.
Frequently Asked Questions About Tether (USDT)
Is USDT mineable?
No, USDT does not support mining. It is exclusively issued by Tether Operations Limited based on its verified dollar reserves.
Should I invest in USDT?
Unlike BTC, ETH, or other altcoins whose values fluctuate significantly, allowing traders to profit from price movements, USDT is designed to maintain a stable value of ~$1. It is not an investment asset for capital appreciation but rather a tool for storing value and facilitating transfers within the crypto ecosystem.
What are the potential risks of using Tether?
The primary risk revolves around the system's reliance on trust. Users must trust that Tether Limited truly holds sufficient U.S. dollar reserves to back all USDT in circulation. A failure to maintain adequate reserves could pose a significant risk to its stability.
Where can I find official Tether information?
You can find the latest official information through these channels:
- Official Website: tether.to
- Whitepaper: Available on their official site.
- Transaction History: Viewable on blockchain explorers like OmniExplorer.
- Social Media: Official Twitter and Facebook pages.
- Market Data: Tracked on sites like CoinMarketCap.
How is Tether different from other stablecoins?
Tether (USDT) was the first major stablecoin and has the highest adoption and liquidity. Competing stablecoins like USDC (by Circle) and DAI (a decentralized stablecoin) often emphasize more frequent or transparent audits and different operational models, but USDT remains the market leader in trading volume.
Can USDT ever lose its peg?
While the 1:1 peg is designed to be stable, extreme market conditions or a crisis of confidence in Tether's reserves could theoretically cause USDT to temporarily trade slightly above or below $1. However, its deep market liquidity and redemption mechanism generally work to restore the peg.
Summary
Tether (USDT) is a pivotal innovation in the cryptocurrency space, providing a stable digital asset pegged to the U.S. dollar. It solves critical problems related to volatility and fund transfer efficiency between exchanges and the traditional financial system. While its centralized model requires trust in the issuing company, its widespread adoption and utility make it an essential tool for many crypto traders and investors.