Tether (USDT), the largest stablecoin and third-largest cryptocurrency by market value, is widely used by 75% of investors due to its convenience, speed, and low-cost transactions. Tether is a stablecoin linked to the US dollar, providing a secure relationship between virtual assets and fiat money. Its value remains constant at $1, making it a safe choice for storing or sending funds without fear of price fluctuations. However, its future success relies heavily on its transparency.
A Quick Look Into The History Of USDT
Tether originated in 2014 on the Omni Layer protocol and has been adopted by Ethereum and Tron. Its purpose was to provide a stable cryptocurrency, avoiding the volatility of digital currencies. Tether coins are pegged to a US dollar using fiat col-lateralisation, where an equivalent amount of real-world US dollars backs each token. This innovative approach has made Tether a valuable tool in the cryptocurrency market, facilitating smoother transactions and offering a digital equivalent to the US dollar.
Benefits Of Tether
Stablecoins like Tether, while not designed to appreciate value, are crucial in maintaining value consistency. They act as a stable store of value, aligning the value of one USDT with one US dollar. Despite not generating profit through capital appreciation, USDT offers several advantages to the financial market.
- Fast transactions. Tether transfers offer quick, efficient transactions, compared to traditional banking systems’ 1-4 business days for USD deposits and withdrawals, making them ideal for cryptocurrency users and those without convenient banking access.
- Price stability. Tether payments are widely accepted by exchanges and companies due to their stable and predictable price, making it a safe choice for transactions amidst volatility concerns.
- Streamlined global payments. DeFi ecosystem offers stablecoins for international payments, avoiding long processing periods and blocked funds in weaker nations with expensive and complicated financial systems.
- Low fees. Exchange transaction costs can be high, especially for fiat money, but Tether wallets offer no transaction fees, making them a preferred choice for consumers, migrant workers, and foreign employees, as they can avoid spending up to 7% on remittances.
- Broad access. Stablecoins facilitate efficient trade and connectivity for those without easy access to banks, particularly in rural areas. They facilitate quick, low-cost payments and have been utilised in aiding natural disaster areas during the pandemic.
Despite all the advantages, Tether, a cryptocurrency that provides stability, faces risks, including transparency concerns. Critics argue that Tether’s claims of holding real-world US dollars in reserve are not consistently clear, leading to doubts regarding the company’s financial stability. Legal challenges, such as a 2020 lawsuit, have also raised questions regarding Tether’s reserves. Global governments are increasingly scrutinising stablecoin issuers’ adherence to anti-money laundering and KYC regulations, leading some to advocate for centralised stablecoins to replace Tether.