Tether (USDT) is a pegged currency pegged to the US dollar operated by Tether Limited.
A pegged currency is a currency that is linked to the value of another currency, and is fixed so that one dollar (USD) is roughly equal to one USDT.
This value is maintained by keeping the amount of Tether issued equal to the amount of dollars held by Tether Limited.
By using blockchain technology, Tether aims to provide convenience and functionality that cannot be found in legal tender.
|Current price (May 2021)||$1.00|
|Market Cap (May 2021)||$58,625,471,873|
|Date of Launch||2014|
Benefits of Tether (Tether/USDT)
- No significant change in value
- Has been adopted as a key currency by many exchanges
- The most stable exchange coin in the cryptocurrency market
No significant change in value
Tether is a currency with considerably less fluctuation in value than other cryptocurrencies, although it can deviate from the dollar by as much as 2%.
Therefore, it provides a strong sense of security in unstable markets that are prone to spikes and crashes.
Many exchanges have adopted it as their reserve currency.
Many foreign exchanges, especially those based in the U.S., have adopted Tether as their base currency and offer currency pairs that can be traded with Tether.
For example, Poloniex and Bittrex. Other exchanges, such as Liqui, have also introduced Tether as a base currency.
The most stable gainer in the cryptocurrency market
As mentioned earlier, Tether is fixed in such a way that 1 USDT is almost equal to 1 USD. Therefore, the value of Tether is stable even in a rough market where even major cryptocurrencies such as Bitcoin and Ethereum fluctuate greatly in price.
As such, it is attracting attention as a stable source of interest.
USDT can only be newly issued by paying USD to Tether Limited, and the fact that the total amount of USDT issued has increased tenfold in the past six months, from 60 million USDT to 600 million USDT, shows how much attention USDT has received.
It is sometimes treated as one of the key currencies in the cryptocurrency market.
Disadvantages of Tether (Tether/USDT)
- Strong centralized system
- Counterparty risk
Strong centralized system
Unlike other cryptocurrencies, USDT is managed under a very strong centralized system by Tether Limited in order to fix the price.
Therefore, if Tether Limited were to go rogue or go bankrupt, it would instantly become worthless.
This counterparty risk is greater for USDT than for other currencies, so please be careful.
As mentioned in the section on how it works, Tether is known to be very centralized and operated by Tether Limited in order to fix the price. Therefore, if something goes wrong with Limited, there is a risk that the value of USDT will disappear at once.
For example, if embezzlement of pooled funds occurs, the credit and value of Tether will drop at once.
In addition, the risk of embezzlement of pooled funds may increase as the amount of Tether issued increases in unstable market conditions.
In addition to fraud, the value of USDT will be lost if Limited goes bankrupt.
How Tether (Tether/USDT) works
Mechanism to maintain 1USDT(Tether) = 1USD
The mechanism to fix the price of Tether at 1USDT=1USD is in its issuance process.
Tether’s new issuance system, called Proof of Reserves, is completely different from other cryptocurrencies.
New issues are made only when a user deposits dollars into Tether Limited and the Limited issues an equivalent amount of Tether.
The deposited dollars are pooled by Limited, and when you want to convert your Tether back into dollars, you can deposit your Tether into Limited and withdraw the same amount of dollars as you deposited.
In this way, the amount of Tether on the market is kept equal to the amount of dollars pooled by Limited, thus keeping the value of Tether and dollars constant.
Because of the importance of this equilibrium, Limited publishes the pooled amount every day. This shows its solvency and maintains confidence in Tether.
Also, in order to maintain the price, Tether is operated under a strong centralized system by Limited.
The price difference with the dollar will occur
Nevertheless, when there is a large selling or buying activity in the cryptocurrency market, the price will change somewhat.
It is not exactly 1USD = 1USD, but there will be an error of about 1USDT = 1±0.04USD.
Future and potential of Tether (USDT)
Tether (Tether/USDT) is regarded as a key currency in the cryptocurrency market.
The risk of price fluctuation is very low, so you can send money with peace of mind.
However, it does not have a high future as an investment. As mentioned above, Tether is a pegged currency linked to the US dollar.
Rather than investing in Tether, it would be better to invest in the U.S. dollar because of its policy rate.
Tether has a high potential as a functioning cryptocurrency, but from an investment standpoint, there does not seem to be much merit in buying and holding Tether.