Tether (USDT) – best-known stablecoin

The growing global interest in the cryptocurrency market is undeniable. Among the investors and market participants, there is a growing curiosity towards stablecoins — cryptocurrencies with relatively low price volatility tied to the value of an underlying asset.

Tether (USDT) stands out as the most renowned and widely used stablecoin in today’s market. Launched by Tether Limited in 2015, its popularity is rooted in the earlier creation of the Mastercoin protocol in 2013, which was later rebranded as Omni Layer.

The Mechanics of Tether (USDT)

The functioning of Tether revolves around the principle of linking its rate to a major underlying asset, which could be a fiat currency, another cryptocurrency, a commodity, or a security. At present, Tether maintains a 1:1 ratio with the US dollar, ensuring its value remains steadfastly equivalent to one dollar.

Why is USDT so highly regarded in the crypto realm?

Tether occupies a prominent position among stablecoins, boasting substantial capitalization and trading volumes on a monthly and daily basis. This prominence is attributed to its utility in preserving wealth during periods of market instability, aligning well with the inherent nature of stablecoins.

Several factors contribute to Tether’s enduring relevance:

• Stability. Linked to the US dollar, USDT exhibits reduced volatility compared to other cryptocurrencies.
• Accessibility. Widely accepted across multiple cryptocurrency exchanges supporting various blockchains, enhancing its broad availability.
• Transparency. Despite speculation, Tether Limited asserts that each token is backed by one dollar.
• Risk Management. Offering risk hedging strategies to traders and investors, mitigating potential losses from cryptocurrency price fluctuations.

Distinctive Features of Tether (USDT)

With a shared objective of minimizing price volatility, stablecoins like Tether aim to provide a more stable investment option compared to traditional cryptocurrencies. The USDT value is anchored to the US dollar, maintaining a consistent 1:1 exchange ratio.

To uphold the coin’s value, Tether Limited relies on its reserve funds. According to the company, every USDT token is fully collateralized. Tether Limited acquires necessary funds to back the stablecoins; these funds can originate from various sources, including loans and collaborations with financial institutions. The price stability of Tether is maintained through collateral, proportionate to the issued tokens.

Blockchain Networks Utilized in Tether

Lacking an independent blockchain, USDT operates on the blockchains of other cryptocurrencies. Initially introduced on the Bitcoin Omni blockchain, it transitioned to faster networks like Ethereum and Tron due to Bitcoin’s slower transaction speeds.

Information from Tether’s official website indicates support for Algorand, Avalanche, Bitcoin Cash, Ethereum, EOS, Liquid Network, Near, Omni, Polygon, Solana Statemine, Statemint, Tezos, and Tron blockchains.

Future Outlook and Competitive Landscape

Market forecasts anticipate sustained growth in the stablecoin sector, necessitating stringent regulatory measures to curb its expansion. Notably, USD Coin (USDC) emerges as Tether’s closest and virtually sole formidable competitor in this domain.