Tether USDT Definition, How It Works, and Pros and Cons

Stay up to date with our latest exchange reviews, promotions, how-to guides and educational articles on Bitcoin, cryptocurrency & more. This article is not an endorsement of any particular cryptocurrency, broker or exchange nor does it constitute a recommendation of cryptocurrency or CFDs as an investment class. As with any financial decision, thorough research and a clear understanding of the potential risks and rewards are crucial. Speaking with a financial advisor is always recommended if you are unsure if an investment is right for you. However, while it won’t provide the same growth potential as other cryptocurrencies, it serves different purposes. Tether’s history of transparency about USDT’s reserve backing has not always been clear or consistent.

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Tether the protocol is closely connected to the crypto exchange Bitfinex as it shares the same parent company, iFinex Inc., which was founded in 2012 in Hong Kong and is registered in the British Virgin Islands. The comments, opinions, and analyses expressed on Investopedia what is tether are for informational purposes only. As of the date this article was written, the author does not own cryptocurrency. In July 2022, Tether, alongside peer-to-peer data network Hypercore and its sister company Bitfinex, collaborated on a social media app called Keet.

• Tether Limited, the company behind USDT, has faced criticism for lacking transparency in presenting proof that the USDT in circulation is fully backed by its reserves.
• USDT’s most common applications include facilitating peer-to-peer transactions and trading between cryptocurrencies, cross-border payments, and collateral in decentralized lending and borrowing products.
• When transferring USDT, ensure that you are sending it to a compatible wallet.
• Depending on the contract you have, some networks don’t allow you to tether your smartphone at all.
• Investing in Tether should be seen more as a strategic move within the broader context of a cryptocurrency portfolio rather than a traditional investment aimed at growth.

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Stablecoins like Tether provide a low volatility digital asset that usually maintains a steady valuation. The value of a stablecoin is pegged to a stable asset like gold, the U.S. dollar or another fiat currency, which means the coin attempts to maintain the same value as its peg. Crypto traders use stablecoins like Tether to make transfers between different cryptocurrencies or to move their investments into or out of fiat currencies. Understanding whether Tether’s USDT is a good investment requires a shift in perspective from traditional cryptocurrency assets.

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Tether is designed to be pegged 1-to-1 to a fiat currency within the cryptocurrency space. Originally launched in 2014 as Realcoin by Bitcoin investor Brock Pierce, entrepreneur Reeve Collins, and software developer Craig Sellers, USDT has evolved significantly since its inception. Tether (USDT) is a stablecoin that plays a crucial role in the cryptocurrency ecosystem.

• Recent market turbulence, which saw the price of TerraUSD, another stablecoin pegged to the U.S. dollar, drop to less than $0.23, caused Tether to break its $1 value, crypto experts say.
• Instead, it leverages the infrastructure of other established blockchains to host its tokens.
• For instance, sending USDT via Tron to an Ethereum address will likely lead to an unsuccessful transfer.
• “Issued” Tether Tokens are authorized tokens that are in actual circulation, including those sold and issued to Tether’s customers.
• There are Tether tokens available on various blockchains, such as the original one with Omni on the Bitcoin platform as well as Liquid, in addition to Ethereum (ETH) and TRON (TRX), among others.
• Tether (USDT) is a stablecoin that plays a crucial role in the cryptocurrency ecosystem.

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