Stablecoins, the quiet power players in the cryptocurrency market, have been getting a lot of attention recently. For months, questions regarding Stablecoins, particularly Tether, have been circulating in financial circles: are they as stable as they should be?
Tether released an attestation regarding its reserves on August 9th, 2021, as a method to reassure consumers that the most popular Stablecoin is, well, stable. So, this tutorial on “What is Tether” will help you explore all the essential aspects of this popular Stablecoin, Tether.
What Is Tether?
- Tether (USDT) is a blockchain-based cryptocurrency that tries to keep cryptocurrency prices stable.
- It is utilized by crypto investors who want to avoid the high volatility of other cryptocurrencies while maintaining value in the crypto market.
- The native coins of the Tether network are Tether tokens, which were established by the crypto exchange BitFinex and traded under the USDT symbol.
- By market capitalization, USDT is the fifth most valuable cryptocurrency, with a value of about $68 billion as of October 2021.
Is Tether a Stablecoin?
- The Stablecoin industry strives to eliminate volatility, allowing bitcoin to function as a safe haven rather than a risky investment.
- In a volatile crypto market, where it is difficult to convert back and forth between cash and a cryptocurrency like Bitcoin, Stablecoins provide liquidity.
- Tether is, indeed, the world's first and most well-known Stablecoin.
How Does Tether Work?
Tether Limited manages the Tether token reserves and accepts fiat deposits and withdrawals. It also mints and destroys tokens to keep the coin's value stable.
Tether on Bitcoin - Tether was created on the Omni Layer, a Bitcoin blockchain-based system. The ledger is maintained on the Bitcoin blockchain as well as Liquid, a Bitcoin sidechain, and transactions may be viewed using Omni Explorer.
Tether on other blockchain platforms - Tether is also available on Ethereum, Tron, and EOSIO, among other blockchains. As a result, new assets can be developed directly on these platforms. Ethereum happens to be the largest market for USDT.
How Does Tether Stay at $1?
Since Tether is tied to a matching fiat currency fund and 100 percent guaranteed by Tether's reserves, it has been able to maintain its value even when it has fallen below $1.
Uses Of Tether
Currently, crypto trading pairs priced in USDT and other Stablecoins outnumber those priced in US dollars. To be more specific, there are three most common use cases:
- Trading - Users can convert the currency they need for trading to USDT and then use it to acquire other cryptocurrencies to cut costs and wait times.
- Lending - Because lenders do not have to worry about losses due to volatility, USDT is extensively used as a landing asset.
- Cross-Border Payments - International money transfers from/to any area of the world can be completed in minutes.
What Makes Tether Unique?
- Stablecoins assist traders and investors in reducing the dangers associated with the severe volatility that is typical in cryptocurrency markets.
- A trader may limit their risk of being exposed to a rapid decline in the price of cryptocurrencies by converting the value to USDT.
- They enhance the number of trading pairings they can offer by facilitating crypto-to-crypto transfers.
- It also permits merchants to trade cryptocurrency in places where fiat currency is prohibited.
How to Buy Tethers?
Binance, CoinSpot, BitFinex, and Kraken are just a few famous cryptocurrency exchanges that accept Tether tokens.
Is It a Good Investment?
- Tether is the most popular Stablecoin, with no significant competitors. Even compared to other cryptocurrencies (not just Stablecoins), it performs admirably in market capitalization.
- After seven years of prosperity, there are no signs of it slowing down. It is currently one of crypto space's "too big to fail" enterprises.
However, don't expect it to appreciate in value. That is precisely the purpose - USDT is kept at $1, and the organization behind it aims to keep it there. So Tether is a helpful tool, but it is not a typical investment.
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Conclusion
In this tutorial, you saw What is Tether, its concepts, how tether works, and can we buy it. We also came across Tethers' importance and how it acts as a very crucial part of the crypto market. Whether you're an experienced Blockchain developer or just an aspiring enthusiast to break into this exciting industry, to know more about Cryptocurrencies and Blockchain, enrolling in Simplilearn’s Blockchain Certification Training program helps you with all levels of experience to explore and learn more about cryptocurrencies, Blockchain, and its technology.
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