What is USDT cryptocurrency? Features, advantages and disadvantages of cryptocurrency

USDT (Tether) cryptocurrency is one of the most popular and widely used stablecoins on the digital asset market. Its main feature is that it is pegged (‘counter-weighted’) to the value of real assets, most often the US dollar (USD). This means that 1 USDT is approximately equal to 1 USD. In this article, we will look in detail at what USDT is, how it works, its advantages and disadvantages, and its role in the modern world of cryptocurrencies.

Basic information about USDT

What is a stablecoin?

Stablecoins are a category of cryptocurrencies that maintain a stable value by being linked to real assets such as fiat currencies (e.g. the US dollar), gold or other assets. The main advantage of stablecoins is that they combine the convenience of cryptocurrencies with minimal volatility, making them ideal for trading and storing funds.

How did the USDT come to be?

USDT was created by Tether Limited in 2014. It was originally called RealCoin and was launched on the Bitcoin blockchain via the Omni Layer protocol. Later, Tether started issuing tokens on other blockchains such as Ethereum, TRON, Solana and others.

Since its inception, USDT has become one of the key elements of the cryptocurrency ecosystem. Its high liquidity and availability made it an indispensable tool for traders and investors.

How does the USDT work?

USDT is powered by blockchain technology, but its value is backed by Tether's reserves. According to the company, each USDT issued is backed by real assets (e.g., U.S. dollars, other currencies or financial instruments). This means that if there is 1 billion USDT in circulation, the company must have at least $1 billion in reserves.

However, it is important to note that this information regularly causes controversy and scepticism in the cryptocurrency community. The company periodically publishes audit reports on its reserves, but many experts doubt their accuracy and transparency.

Advantages of USDT

Stability

The main advantage of USDT is its stability. Since it is pegged to the US dollar, its value remains virtually unchanged, making it an ideal tool to protect against the volatility of other cryptocurrencies.

Usability

USDT can be used for fast and cheap transactions between different crypto exchanges. For example, if you want to transfer funds from one exchange to another, using USDT is often more favourable and faster than transferring fiat money.

Global availability

USDT is available on almost all major cryptocurrency exchanges and is supported by many blockchains. This makes it a universal tool for trading and storing funds.

Alternative to fiat currencies

In countries with unstable economies or strict restrictions on the use of foreign currency, USDT can serve as an alternative to the US dollar. For example, in some developing countries, people use USDT to protect their savings from inflation.

Disadvantages and risks of USDT

Transparency and trust

One of the main issues surrounding USDT is the transparency of Tether's reserves. While the company claims that all tokens are fully asset-backed, some audits show that some of the reserves consist of commercial paper, loans and other financial instruments, raising concerns about the liquidity of these assets.

Regulatory risks

Tether Limited faces pressure from regulators in many countries. For example, in 2021 the company was fined by the US Commodity Futures Trading Commission (CFTC) for providing false information about reserves. This creates certain risks for USDT users.

Centralisation

Unlike decentralised cryptocurrencies such as Bitcoin or Ethereum, USDT is a centralised asset managed by Tether Limited. This means that there is a risk of manipulation or technical problems on the part of the issuer.

Technical risks

Although USDT is supported by multiple blockchains, technical failures or security issues on one of them could affect the token's performance.

Where is the USDT used?

Cryptocurrency trading

USDT is widely used on cryptocurrency exchanges as a trading instrument. Many cryptocurrency pairs are traded exactly against USDT (e.g., BTC/USDT, ETH/USDT), which allows traders to avoid converting to fiat money.

Transfers and payments

USDT can be used for fast and cheap international transfers. Blockchain transactions take only a few minutes and are much cheaper than traditional bank transfers.

Protection against volatility

Investors often move their funds into USDT during market turmoil to protect capital from the falling value of other cryptocurrencies.

Decentralised Finance (DeFi)

USDT is actively used in the DeFi ecosystem to participate in liquidity pools, lending and other financial transactions.

How to buy and store USDT?

USDT Buying

USDT can be bought on most crypto exchanges such as Binance, Coinbase, Kraken and others. To buy, you will need to register on the exchange, pass verification and fund your account with fiat money or other cryptocurrency.

USDT storage

USDT can be stored in a variety of wallets: