What is Tether (USDT)?

Tether, often referred to as USDT, is a US dollar-pegged cryptocurrency created to address the volatility typically associated with other cryptocurrencies by pegging each unit of Tether to an equivalent amount of fiat currency and U.S. treasuries.

USDT is one of the most widely traded cryptocurrencies, often ranking just below Bitcoin and Ethereum in terms of market cap. Its high liquidity for many crypto pairs - highest among all existing stable coins - makes it a favourite among traders across crypto exchanges.

A little bit of background

Launched in 2014 by Tether Limited, Tether was one of the first cryptocurrencies to introduce the concept of stablecoins. The goal was to provide a digital asset that combines the advantages of cryptocurrencies, such as fast transactions and global accessibility, with the stability of fiat currencies.

Initially launched on the Bitcoin blockchain using the Omni Layer protocol, Tether has since expanded its presence to accommodate the growing demands of various blockchain ecosystems and now operates on over 10 blockchain networks, including Ethereum and Solana. This multi-chain approach provides flexibility and accessibility to users across different platforms, ensuring wider adoption and compatibility. The availability of Tether on numerous trading platforms allows users to quickly convert their Tether into other cryptocurrencies or fiat currencies, giving it high liquidity and making it a popular choice among investors and traders.

While Tether Limited has multiple coins all backed by different fiat currencies (and gold), the primary purpose of USDT is to maintain a stable value by pegging it to a reserve of U.S. dollars.

According to Tether’s Independent Accountant Report, their reserves are made up of mostly cash or cash equivalents, but a portion consists of corporate bonds, secured loans, precious metals and digital currencies.

What's the difference between Tether (USDT) and USD Coin (USDC)?

While Tether and USD Coin are both stablecoins, they are separate cryptocurrencies with their own unique characteristics and approaches to stability. Both aim to maintain a stable value relative to the US dollar but operate under separate entities.

Can Tether be depegged?

In the past, Tether has been depegged from its intended value due to various market factors, which resulted in its value fluctuating slightly below or above the $1 mark.

Though critics argue that Tether has not provided sufficient evidence to substantiate its reserves, Tether Limited claims to maintain a meticulous approach by regularly undergoing third-party audits to validate the backing of its USDT tokens.