The cryptocurrency market is highly volatile. Coin’s rate fluctuations are sudden, and the value of assets can rise or fall rapidly. But we have good news: there is a stable cryptocurrency! In this review, we will take a look at Tether stablecoin, which is considered by many to be the most stable and secure way to store assets in the modern world.
What is Tether
Tether (USDT) is a stablecoin, that is, a cryptocurrency with its rate tied to another currency that stabilizes it. In the case of Tether, the value of one coin is backed by the US dollar exchange rate in a ratio of 1:1. The project was officially launched in 2014 by Tether Limited, and in the same year, the project’s team announced a partnership with the well-known cryptocurrency exchange Bitfinex.
Stablecoins are the cryptocurrency that is least subject to market fluctuations. Algorithms and users themselves can be responsible for stability, as well as the peg to real assets (for example, dollars or gold) smoothes out jumps in supply and demand, just like in the case of Tether. If you want to learn more about what stablecoins are and how they work, read our detailed material on it.
Tether on the crypto market
Tether (USDT) is one of the leaders in the digital asset market. According to CoinMarketCap, it is the third-most valuable cryptocurrency as of January 12, 2023, with a capitalization of $66.2 billion, so the token’s total supply is 66.2 billion.
The USDT chart on CoinMarketCap.
Even in the middle of the crypto winter, the USDT remains stable, and at the beginning of 2023 it ranges from $0.9986 to $1.0007. At the same time, there were two short-term drops, determined by negative news on the cryptocurrency market. The first ($0,9959) one is tied to the Terra platform crisis in May 2022, when its stablecoin dropped to $0. The second one ($0,9978) took place in November 2022 and was tied to the collapse of the FTX crypto exchange. As of January 12, 2023, the USDT token is trading at $1.0001.
We recently published a review of the best stablecoins on a bear market. And Tether (USDT) took first place in the top in all aspects! If you haven't seen the review yet, here's the link.
How Tether works
USDT doesn’t have its own blockchain. Tokens are created on existing cryptocurrency platforms. USDT was built on the Omni Layer platform when it first launched in 2014. It is a software layer built on top of the Bitcoin network that facilitates interaction with its blockchain.
Today, we have different USDT standards determined by tokens on the different blockchains, including Ethereum, Avalanche, Algorand, Binance Smart Chain, Solana, Tron, EOS, and others. This allows the stablecoin to be used in different platforms’ ecosystems, which are made up of modern decentralized applications developed on the basis of smart contracts and managed without human intervention.
Smart contract is a computer algorithm that is executed automatically when the predetermined conditions are reached.
There are no restrictions on the supply of Tether. USDT creation is carried out after every single purchase. When a user wants to return the cryptocurrency, they take back its equivalent amount in dollars. Unclaimed tokens are burns.
The emission and burning of tokens, as well as the adjustment of the USDT token exchange rate, are regulated by the Proof-of-Reserves consensus algorithm (PoR). It controls the compliance of the total amount of issued coins with the collateral.
The consensus algorithm is a mechanism that checks the implementation of the rules in the blockchain (whether the transaction is correct and whether the protocol of its execution is followed), and only in case of a positive result, the transaction is added to the blockchain.
USDT is a centralized stablecoin. All reserves are managed by the head company. That means that it can also block the assets if they are used in illegal activity.
Since USDT exists on several blockchains, a few token standards have been developed with the goal of sending tokens across different networks:
📎 Omni Layer, the very first Tether standard token was built on;
📎 ERC-20, an Ethereum-based token standard;
📎 TRC-20, TRON’s ecosystem standard;
📎 TIP-3, Everscale’s native standard;
📎 BEP-2, standard build for Binance’s ecosystem;
📎 BEP-20, the Binance Smart Chain’s standard.
It might seem difficult to remember all the standards at once, but it is better to know them, since if the wrong network is selected when buying or sending tokens, it will be impossible to cancel the transaction, and you will simply lose your money.
What backs Tether’s value
Initially, Tether Limited was supposed to provide full USDT backing with US dollars. However, on March 14, 2019, the terms of the collateral were changed in order to add other assets, including loans to third parties as a reserve. On October 13, 2022, Tether Limited announced that it is going to reduce the share of commercial paper (which constitutes loans to other companies) in its stablecoin reserves in favor of safer US Treasury bills.
US Treasury bills are debt securities that allow companies to make loans to the US government. Treasury bill buyers are essentially lending their money to the state in order to profit once the government buys it back.
As for December 20, about 70% of total USDT supply is backed by US Treasury bills. Other important parts include:
🔹 Market funds: 12,66%;
🔹 Secured loans: 9,02%;
🔹 Cash and bank deposits: 10,83%;
🔹 Corporate bonds, funds & precious metals: 4,69%.
To increase financial transparency, Tether conducts regular checks (audits) of its internal reserves through well-known international inspection companies. The last two audits were conducted by the international audit company BDO Italia. The Tether team stated that audits are now carried out quarterly.
Best wallets to store Tether
You can store USDT tokens in digital cryptocurrency wallets. They are divided into custodial and non-custodial, hot and cold ones.
🔓 Custodial ones are less secure, since the user trusts access passwords to third parties (it can be the wallet’s developers or a cryptocurrency platform, including exchanges).
🔐 Non-custodial has a greater level of protection, since in this case full control and password management are carried out only by the user himself.
🥵 The hot wallets have a permanent connection to the Internet, which determines their lower security against the hacker’s attacks.
🥶 The cold wallets are the safest. They are mostly represented by a physical hardware device. There is no constant Internet connection, which reduces the risk of hacking.
It is recognized by many as one of the best crypto wallets. The versatility of Trust Wallet sets it apart from the competition. Here you can store USDT and other popular cryptocurrencies in different standards. The app provides the tools for coins’ exchange as well as the staking options for more than 12 tokens, including Binance Coin (BNB), TRON (TRX), Algorand (ALGO), and Tezos (XTZ). The wallet is available as an app on macOS, iOS, or Android, and in browser extension format.
Staking is a profit from keeping a fixed number of coins on your balance.
It is a multi-coin wallet with a high level of reliability and security. It provides the setup of several protection levels, as well as setting a multi-signature (the right to send tokens only when several users entered passwords), 2FA, and a fingerprint as a log-in. The wallet supports more than 100 popular cryptocurrencies. It allows you full-time control over your cryptocurrency portfolio. Freewallet is available as a browser extension as well as an iOS and Android app.
It is a crypto wallet designed to conveniently group all related cryptocurrency operations in one mobile app. There are options for buying and exchanging more than 60 cryptocurrencies. Simultaneously, users have the opportunity to stake 15 different coins, including Cardano (ADA), Solana (SOL), Binance Coin (BNB), Cosmos (ATOM), and others. The application is available on Windows, MacOS, iOS, and Android.
❗ When choosing a wallet for storing Tether, it is very important to figure out which network/networks it will work with. We have already talked about USDT standards above, but before buying a stablecoin, we advise you to refer to this part of the article again to choose the appropriate option. To make it easier, we have prepared instructions for you on how to create wallets for storing four most popular Tether standards: USDT TIP-3, USDT ERC-20, USDT TRC-20 and USDT BEP-20.
How to get Tether
🌟 Purchase on exchanger
This is the easiest and fastest way. For example, you can buy USDT for fiat at the best rate using a bank card at a licensed exchange itez. The platform has a simple intuitive interface that even a beginner can handle, as well as low fees and high transaction speed, that’s why it looks more suitable than its competitors.
💻 Purchase on the Tether website
You can get USDT tokens directly from the official website. Pre-registration and authentication are required for the platform, which can take several days (up to several weeks). You will be required to pay a one-time fee of $150 as part of the verification, which will be partially refunded during the USDT purchase process. After purchasing, you can withdraw coins by entering the wallet address in your personal account.
🏗️ Through faucets
Faucets are services that offer the opportunity to receive free coins for completing simple tasks. FireFaucet and FreeTether are examples of popular USDT faucets. FireFaucet awards users with Tether for conducting elementary tasks, such as clicking on a link or watching a video. Freetether can be used to earn up to several dollars per hour for participation in simple online games. It would not be easy to make a lot of money using faucets, but this method should be on the list.
🤝 Purchase in a P2P way
P2P services allow users to exchange cryptocurrencies with another market participant directly (peer-to-peer). The trade is made immediately between two users. An intermediary (the platform) oversees compliance with the terms. Such platforms are less secure, and their users are more likely to become victims of scammers. In order not to fall into the hands of scammers, read our material with tips on safe interaction with P2P platforms.
💱 Purchase on a crypto exchange
Crypto exchanges allow you to purchase and exchange USDT tokens. There are two types of trading platforms: centralized (CEX) such as Binance and Bybit, and decentralized (DEX) such as Uniswap and dYdX.
Many DEX exchanges allow you to purchase tokens without registration and any verification procedures, and without creating internal accounts. All assets here are always stored on users' personal crypto wallets. CEX exchanges may require you to go through a complex set of verification procedures. They use custodial internal wallets to manage tokens, which are controlled by trading platform representatives. DEX is chosen by those who respect anonymity and security. More convenient and widespread CEXs are the choice of users who prefer convenience and high liquidity.
How to use Tether
USDT stablecoins are often used on the cryptocurrency market as the most stable digital asset into which other coins are converted, which makes it possible to protect the capital from depreciation during market fluctuations, when many other tokens are falling in price. In addition, the stability of Tether determines the widespread use of the token as a means of payment. Here are the main ways to use USDT.
🔁 As an exchange tool
USDT is actively used as the exchange tool when purchasing other assets. For example, you can’t calculate exactly how much this or that asset will cost in your country's fiat currency. Instead, depositing with USDT is much easier because the currency to which the Tether is backed is one of the most liquid. After you make a deposit in Tether, you can easily calculate and purchase desirable coins.
By the way, the fact that USDT is tied to USD makes it useful to move funds between different blockchain ecosystems, for example, in order to send funds from the Binance crypto exchange to a Solana crypto wallet.
🛍️ To pay for goods and services
Many stores accept the most capitalized stablecoin. For example, you can pay with Tether for apartment rent on Travala.com, buy a ticket on Alternative Airlines, or even pay for the services of the hosting provider Snel.
Another popular use case for USDT is the purchase of crypto cards, which you can use to pay for goods and services with cryptocurrencies without the need to convert them first into fiat money. Cards of this type are available at crypto.com, cryptopay.com, and wireex.com. The cryptocurrency-to-fiat exchange occurs at the time of payment, in accordance with the current rate. The method is suitable for international travelers, who prefer countries where dollars and euros are accepted.
💰 To keep safe from market volatility
The USDT exchange rate's stability allows you to use it as a "safe harbor" during market fluctuations. Converting volatile cryptocurrencies into Tether helps preserve their value.
For example, John 🧔 has $1,000 in bitcoin. He detects warning signs of a possible market decline. In order to keep the value of his crypto holdings, he converts bitcoins to USDT. After the market stabilizes, John swaps Tether back for bitcoins. Let's assume that the fall in BTC was 20%. Due to the fact that John exchanged bitcoins for Tether on time, he kept the full value of the coins. As a result, even after converting back to USDT, his crypto holdings are still worth $1,000.
If John had not exchanged his bitcoins for Tether, the value of his coins would have fallen by 20%. If John had not exchanged bitcoins for Tether, the value of his coins would have dropped by 20%, and instead of $1000 he would have $800.
You can buy Tether legal and at best price with the licensed exchange service itez. Before purchasing, learn more about the most popular Tether standards wallet creation: USDT TIP-3, USDT ERC-20, USDT TRC-20 and USDT BEP-20.
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This article is not an investment recommendation. The financial transactions mentioned in the article are not a guide to action. Itez is not responsible for possible risks. The user should independently conduct an analysis on the basis of which it will be possible to draw conclusions and make decisions about making any operations with cryptocurrency.