USDT (Tether/Tether) is the world’s first stable coin, which Tether Limited began issuing in 2015. Its price is linked to the U.S. dollar and is designed to keep ” 1 USDT = $1 “.
Bitcoin (BTC) and other cryptocurrency have a problem in that they lack practicality and stability as a means of payment due to their large price fluctuation range (volatility).
In this regard, USDT, which is linked to the U.S. dollar and has low volatility, has a high degree of practicality that allows it to be used for payments. This uniqueness sets it apart from other digital currencies, and USDT is in very high demand in the crypto asset market.
This article describes the features, advantages and disadvantages of USDT, a leading stablecoin, and how to purchase it.
What is USDT (Tether)?
Citation: Tether
USDT (Tether) is the world’s first stable coin, launched in 2015 by Hong Kong-based Tether Limited. Pegged to the U.S. dollar, USDT is designed to maintain ” 1 USDT = $1.”
| Currency Name | Tether |
| ticker symbol | usdt (former Soviet Union intelligency agency) |
| number of copies printed | Supply: Approx. 83 billion USDTIssue limit: None |
| consensus algorithm | Proof of Reserves |
| Market capitalization ranking (as of August 22, 2023) | 3rd place |
| publisher | Tether Limited |
| Official Site | https://tether.to/en/ |
Features of USDT (Tether)
USDT (Tether) has four main characteristics
- Stablecoin linked to the U.S. dollar
- Multiple blockchains are supported.
- Used as a reserve currency on foreign exchanges
- Market capitalization is the largest of all stable coins.
Let’s take a closer look at each of these.
Stablecoin linked to the U.S. dollar
The first feature is that it is a ” stable coin linked to the U.S. dollar.
There are many types of stable coins, but they can be categorized into the following four types according to the different mechanisms that stabilize their value.
| name | feature | Applicable Currency |
| legal tender-backed | Stable coins whose value is backed by legal tender such as U.S. dollars. | USDT (Tether)USDC (USD Coin)BUSD (Binance USD) |
| Crypto asset-backed (*) | Stable coins whose value is backed by cryptographic assets | DAIsUSD |
| Algorithm type (unsecured) (*) | Stablecoin, which has no underlying assets and its value is held constant by an algorithm | Flux (FRAX)TerraUSD (UST)Magic Internet Money (MIM) |
| Commodity type (*) | Stable coins whose value is backed by physical assets (commodities) such as gold and oil | Paxos Gold (PAXG)Zipangu Coins (ZPG) |
Of the above, USDTs linked to the U.S. dollar are classified as “legal tender collateralized”.
Legal tender-backed stablecoins are linked to the value of legal tender because the issuer has sufficient backing assets and is recognized as having an equivalent value to legal tender; for USDT, the issued USDT and the USD held by Tether Limited are kept in equal amounts, thereby Tether Limited maintains its value as a currency by keeping the amount of USDT issued equal to the amount of USDT held by Tether Limited.
Conventional cryptocurrency such as Bitcoin and Ethereum have large price fluctuations (volatility), and although they have functions that legal tender does not have, they lack practicality and stability as a means of payment.
In this regard, USDT, which is linked to the legal tender, is used for various purposes such as asset management and settlement due to its low volatility and excellent stability.
(*) Crypto asset-type, algorithmic-type, and commodity-type stable coins do not have underlying assets secured to guarantee the set value, and may fall significantly against the target price due to market fluctuations and other factors.
Multiple blockchains are supported.
The second feature is “support for multiple blockchains.
While most cryptocurrency are supported by only one blockchain, USDT is issued on the basis of multiple blockchains, including
- Algorand
- Avalanche
- Ethereum
- EOS
- Liquid Network
- Near
- Omni
- Polygon
- Solana
The above ability to support multiple blockchains is the reason why USDT is used in various fields such as payments and DeFi (decentralized finance ).
Used as a reserve currency on foreign exchanges
The third feature is that it is “used as a reserve currency on overseas exchanges.
Many foreign exchanges and DEXs (decentralized exchanges) have adopted USDT and other stable coins as reserve currencies.
Market capitalization is the largest of all stable coins.
The fourth feature is that it has the “largest market capitalization of all stable coins.
USDT has the third largest market capitalization among the many cryptocurrency (as of August 29, 2023), behind Bitcoin and Ethereum.
Citation: Coingecko
In addition to market capitalization, USDT also ranks at the top of all 100+ stable coins in terms of daily trading volume. The fact that both market capitalization and trading volume are so large means that USDT is in very high demand and is used in exchanges, stores, and services around the world.
Advantages of USDT (Tether)
USDT (tether) has the following main advantages
- Stable prices
- Adopted as a reserve currency by many foreign exchanges
- Can be used for liquidity mining on the DEX
We will explain in turn what it is all about.
Stable prices
The first advantage is that prices are stable.
As mentioned above, USDT is price-linked to the U.S. dollar and is designed to maintain “1 USDT = 1 dollar”.
Because of the volatility of cryptocurrency such as Bitcoin and Ethereum , they are inferior to legal tender currencies such as dollar in terms of practicality, such as for settlements. In this regard, USDT, a stable coin linked to the U.S. dollar, has a high level of practicality that can be used for settlements.
Adopted as a reserve currency by many foreign exchanges
The second advantage is that it is “adopted as a reserve currency by many overseas exchanges.
cryptocurrency such as Bitcoin are not suitable for holding assets for a long period of time due to their large price volatility. Therefore, at overseas exchanges where USDT is adopted as the reserve currency, you can hold your cryptocurrency stably by converting your holdings into USDT, which has less volatility.
Can be used for liquidity mining on the DEX
The third advantage is that it can be used for liquidity mining at the DEX.
A decentralized exchange (DEX) is an exchange that utilizes blockchain to allow users to trade cryptocurrency directly with each other without the need for an administrator. Typical services include Uniswap, PancakeSwap, and SushiSwap.
The DEX earns interest and fees by depositing tokens (providing liquidity) for a certain period of time, which are needed to trade cryptocurrency. This mechanism is called ” liquidity mining ” or ” yield farming”.
In liquidity mining, fluctuations in the price of deposited tokens result in losses called “impermanent losses”. In this regard, USDT has low volatility, so it can be used in liquidity mining to generate stable profits.
Cautions and disadvantages of USDT (Tether)
While it has the aforementioned advantages, USDT (Tether) also has the following disadvantages.
- High counterparty risk
- Regulations on stable coins may be tightened
Let’s take a closer look at each of these.
High counterparty risk
The first disadvantage is “high counterparty risk.
Counterparty risk refers to the risk of incurring losses when a counterparty fails to fulfill a contract when trading financial instruments.
USDT is centrally controlled by Tether Limited to maintain a fixed price of “1 USDT = $1”. Therefore, if Tether Limited were to have a scandal or go bankrupt, trust in USDT would be lost and the currency could lose its value.
Regulations on stable coins may be tightened
The second disadvantage is the “possible tightening of regulations on stable coins.
The worldwide movement toward regulation of stablecoins increased after a de-pegging (deviation in value) in the stablecoin UST (TerraUSD) in May 2022 and the resulting crash of the entire cryptocurrency market.
Regulations on stable coins are expected to continue to be tightened around the world. Therefore, when considering holding USDT, it is prudent to keep a close eye on the trends of governments toward stricter regulations.
How to buy USDT (Tether)
USDT (Tether) is not offered on domestic exchanges, so the original cryptocurrency must be purchased on a domestic exchange and then on an overseas exchange or DEX (decentralized exchange).
The specific steps are as follows
- Open an account at a domestic cryptocurrency exchange
- Deposit money to the exchange
- Buying cryptocurrency on exchanges
- Transfer purchased cryptocurrency to an overseas exchange
- Purchase USDT *In case if the first exchange do not have.
Q&A about USDT (Tether)
Frequently asked questions about USDT (Tether) are presented here in a Q&A format.
What is USDT (tether)?
USDT is the world’s first stable coin, which Tether Limited began issuing in 2015. Its price is linked to the US dollar and is designed to maintain “1 USDT = $1”.
What are the characteristics of USDT (Tether)?
The USDT has four main characteristics
- Stablecoin linked to the U.S. dollar
- Multiple blockchains are supported.
- Used as a reserve currency on foreign exchanges
- Market capitalization is the largest of all stable coins.
What are the precautions for USDT (Tether)?
USDT has the following caveats and disadvantages.
- High counterparty risk
- Regulations on stable coins may be tightened
How do I buy USDT (tether)?
If USDT is not handled on domestic exchanges, the original cryptocurrency must be purchased on a domestic exchange and then on an overseas exchange or DEX.
The specific steps are as follows
- Open an account at a domestic cryptocurrency exchange
- Deposit money to the exchange
- Buying cryptocurrency on exchanges
- Transfer purchased cryptocurrency to an overseas exchange
- Purchase USDT *In case if the first exchange do not have.