What is USDT (Tether) and How Does It Work

Stablecoins, altcoins, and crypto money – are a lot of words in this field that are often used interchangeably. Today, we will talk about one of the most popular stablecoins in the cryptosphere, USDT, also known as Tether.

What type of digital money may be called stablecoins? What is USDT, what are its specifics, and why is it so popular? All questions will be answered! Let’s get started!

Understanding Stablecoins: The USDT Entity

Stablecoins are a type of cryptocurrency that aims to maintain a stable value by pegging their price to an external asset, such as a fiat currency or a commodity. This type of crypto is one of the most popular nowadays due to its effective methods of providing price stability and relatively transparent regulation system.

The world of stablecoins is quite diverse, but for many years, the leader among all of them has been USDT (Tether). USDT is a famous stablecoin pegged to the value of the US dollar in a 1:1 ratio, making it less volatile compared to other cryptocurrencies. It’s crucial to note that USD and USDT are not the same thing, despite their similar names. USD is a designation of the monetary unit of the United States, that literally means United States Dollar, while USDT is just the ticker symbol for the Tether token, fully binding to the USD.

The USDT token is owned by Tether Limited Inc. In turn, Tether Limited belongs to the Hong Kong-based company iFinex Inc., which also owns the Bitfinex cryptocurrency exchange.

USDT, the most well-known stablecoin, is backed by Tether’s USD reserves. This fact has really boosted this token since 2014, when it was launched. USDT was originally designed to be valued, and it is! In 2023, the Tether token reached a market capitalization of over $86 billion, and is commonly used by crypto traders and investors all over the world.

How Does USDT Work?

As we’ve already mentioned, the USDT acronym stands for the USD of Tether. It’s the largest stablecoin by market capitalization that plays a crucial role in the cryptocurrency ecosystem. But in the realm of cryptocurrencies, it’s vital to understand their functioning mechanisms. How does Tether work? Let’s figure it out!

USDT operates on multiple blockchain networks, including Ethereum, TRON, Algorand, Solana, and Bitcoin's Omni Layer Protocol, etc. The most popular networks to utilize USDT are Ethereum and TRON, as they offer users specially created token standards: ERC-20 and TRC-20.

USDT ERC-20 is a specific cryptocurrency issued by Tether, particularly on the Ethereum network. ERC-20 is a standard developed for the creation and management of tokens on the Ethereum blockchain.

USDT TRC-20 is also a specific token on the TRON blockchain, similar to USDT ERC-20 on the Ethereum one, using their developed TRC-20 protocol to create and distribute coins on the TRON network.

The Tether operating process itself fully works on a basis of the mechanism of price stability that is achieved by backing each token issued with an equivalent amount of fiat currency held in reserves, particularly, USD. Tether's reserves, including US dollars and assets like Treasury bonds, are crucial for maintaining price stability and serve as collateral for liquidation in case of the reserve shortfall.

What Is A Fee For Using USDT

Commissions are paid for every transaction and acquisition of USDT if you utilize this token on an official Tether Limited crypto platform. The fee amount per acquisition in USDT is 0.1%. Additionally, the Tether gateway has a specialized verification fee of 150 USD, which is intended to ensure that only those who are serious about establishing an account apply.

What is about the formation of the fee amount on any other crypto service, it depends on which cryptocurrency platform you are going to manage your USDT. Transaction fees on various services can vary greatly, so it’s essential to check the information in advance in order to avoid unpleasant surprises.

Investment And Mining Perspectives Of USDT

USDT has earned its name as a stablecoin due to its specific characteristics, such as effective maintenance price stability, constancy, the absence of drastic changes due to market dynamics, etc. But is it a perfect choice for investing?

Because stablecoins like Tether aren't intended to appreciate in value, they don't make much sense as investments. Since one USDT should always equal one dollar, their only function is as a store of value and a convenient tool for conducting business in a significantly simpler way than utilizing Bitcoin.

As for the mining aspect of this stablecoin, it’s not a good choice, either. USDT cannot be mined in the traditional sense like cryptocurrencies such as Bitcoin or Ethereum because the supply of Tether is centrally controlled by its issuer, Tether Limited Inc., and new USDT tokens are created or redeemed based on market demand.

USDT Use-Cases

Tether is a relatively multifunctional cryptocurrency with massive methods of application. In addition to assets of storing value, USDT is often used as a convenient means of payment, a profitable trading pair on the exchanges, and even a full-fledged crypto tool for business.

USDT is a truly popular choice for traders due to its price stability, liquidity, and wide acceptance, making it easy to buy and sell on crypto exchanges and participate in DeFi activities. Various businesses utilize USDT to offer convenience, cost-effectiveness, and global payment acceptance, making it a perfect alternative to traditional banking methods.

Moreover, USDT is increasingly being adopted in various industries, including gaming, real estate, and supply chain management, to enhance efficiency and transparency. So, there is no doubt that USDT is the most popular and widespread stablecoin globally, even despite the fact that there are other alternative stablecoins, such as USDC, DAI and BUSD which, in some cases, offer more transparency and decentralization.

How Can I Use USDT?

USDT is a perfect choice for crypto beginners who want to start integrating with cryptocurrency for the first time. You can easily store this stablecoin, buy goods, and manage it however you want.

To be able to store USDT, the only thing that you will need is a USDT crypto wallet that you can get quickly by creating an account in Cryptomus. The USDT wallet is a secure instrument for storing and managing your Tether assets. On the Cryptomus platform, you can get it with just a couple of clicks. You need to sign up for the account, confirm the registration, enable 2FA, and get your wallet address.

After that, you will see that you have a wallet where you can put your USDT by buying it on the Cryptomus P2P exchange or other platforms and send it to your Cryptomus USDT wallet for making further USDT payments. USDT payment is an indispensable option for sending and receiving stablecoins as well as making purchases at various online stores and services that accept Tether as payment method, so USDT wallet will greatly suit here!

We hope this article was exciting and helpful, and now you understand all aspects devoted to Tether’s unique stablecoin. Don’t hesitate to leave us a comment below to share your thoughts about the topic, and thank you for reading.