What is Tether (USDT) and What to Expect

This article provides a comprehensive overview of Tether (USDT), a kind of crypto to which people also refer to as a stablecoin. It covers various aspects of Tether, including what is USDT, its operation, founders, and key features. The article also explains the concept of a stablecoin and compares Tether with other major stablecoins. It delves into how Tether works, how it makes money, and the blockchain networks it operates on. The unique features of Tether, its creation, history, and major stakeholders are also discussed. The article further explores how USDT is different from other stablecoins, its advantages and disadvantages - keep reading to find out more about what is Tether crypto.

Disclaimer: SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.

Key Takeaways

1. Tether (USDT) is a stablecoin that is pegged to the U.S. dollar on a 1:1 basis.
2. It operates on multiple blockchains including Bitcoin, Ethereum, Tron, EOS, Algorand, SLP, and OMG.
3. Tether is a centralized stablecoin managed by a central entity, Tether Ltd., that issues and destroys USDT tokens.
4. Tether cannot be mined or staked as it is a stablecoin and its supply is controlled by Tether Ltd.
5. The future of Tether is largely dependent on the continued adoption of stablecoins and the regulatory environment.
6. Despite controversies and legal challenges, Tether remains the largest and most widely used stablecoin.

What is Tether (USDT) 

It’s a good idea to start from answering the question of what is USDT coin - it’is a type of cryptocurrency known as a stablecoin. It was launched in 2014 by Tether Ltd., a company founded by Brock Pierce, Reeve Collins, and Craig Sellars. The Tether token, USDT, operates on multiple blockchains including Bitcoin, Ethereum, Tron, EOS, Algorand, SLP, and OMG.

Key features of USDT include:

1. It’s pegged to the U.S. dollar on a 1:1 basis.
2. It provides a stable digital asset that usually maintains a steady valuation.
3. It’s used by crypto traders to provide steady, reliable liquidity.

RealCoin, initially launched in July 2014, underwent a rebranding in November of the same year and emerged as Tether. Originating on the Bitcoin blockchain, Tether has since expanded its support to include Bitcoin's Omni and Liquid protocols, as well as the Ethereum, TRON, EOS, Algorand, Solana, and Bitcoin Cash (SLP) blockchains. As of January 2023, Tether holds the position as the third-largest cryptocurrency, following Bitcoin (BTC) and Ethereum (ETH), and stands out as the largest stablecoin with a market capitalization nearing $68 billion. Throughout 2022, Tether's USDT dominated most cryptocurrency exchanges in terms of value, outpacing Bitcoin.

The stability of Tether comes from its currency reserves, as the company claims to hold dollars and other assets that are equal or greater than the total number of USDT in circulation. For every one Tether token in circulation, the company claims it owns one dollar in its reserves, either in cash or cash equivalents like short-term bonds or time deposits. On its website, you can find more information about what is Tether coin, as well as daily reports on the amount of reserves it holds versus the number of USDT tokens that are outstanding. 

What is USDT Backed by?

To understand what is Tether backed by, we first need to dive deeper into the concept itslef. Tether, abbreviated as USDT, derives its backing from the reserves held by Tether, secured in various bank accounts. The company asserts that these reserves encompass dollars and other assets, equivalent to or exceeding the total quantity of USDT in circulation. According to Tether, for each Tether token in circulation, the company holds one dollar in reserves, which may exist in the form of actual cash or cash equivalents such as short-term bonds or time deposits. This strategy is employed by Tether to sustain its peg to the U.S. dollar. Nevertheless, the legitimacy of Tether's reserves has raised questions and controversies, prompting investigations by regulatory bodies like the Commodity Futures Trading Commission (CFTC) and the New York Attorney General. For those seeking further clarity on the backing of Tether, it is advisable to explore the official platform's resources and additional informational articles.

What Is A Stablecoin

A stablecoin is a type of cryptocurrency whose value is pegged to a stable asset like gold, the U.S. dollar, or another fiat currency. Some major stablecoins include Tether (USDT), USD Coin (USDC), and Binance USD (BUSD).

Tether (USDT) price, supply and Market cap

Tether - how does it work

In order to define Tether, we need to introduce the concept known as Proof of Reserves. 

Proof of Reserves (PoR)

The company claims to hold dollars and other assets that are equal or greater than the total number of USDT in circulation. For every one Tether token in circulation, the company claims it owns one dollar in its reserves, either in cash or cash equivalents like short-term bonds or time deposits. This is how Tether maintains its peg to the U.S. dollar. However, there have been controversies and legal challenges regarding whether Tether actually holds enough reserves to back all the USDT in circulation.

Proof of Stake (PoS)

Proof of Stake (PoS) is another consensus mechanism used in some cryptocurrencies. In PoS, the creator of a new block is chosen based on their stake, or ownership, of the cryptocurrency. Again, Tether does not use PoS as it does not involve staking.

Proof of Work (PoW)

Proof of Work (PoW) is a consensus mechanism used in some cryptocurrencies, including Bitcoin. It involves solving complex mathematical puzzles to validate transactions and create new blocks. However, Tether does not use PoW as it is a stablecoin and does not involve mining.

How does Tether make money?

Tether derives its income by issuing stablecoins, predominantly in the form of USDT. When individuals or institutions acquire USDT tokens, they typically incur a transaction fee, thereby adding to Tether's revenue. Additionally, Tether generates income through assorted fees, extending loans to other institutions, and engaging in investments involving digital tokens and precious metals.

Blockchain Tether (USDT) operates on

Tether (USDT) operates across various blockchains. To gain a comprehensive understanding of the project, it's crucial to delve into the subject of what blockchain does Tether use. The following is a concise overview of each:

Initially launched on the Bitcoin blockchain through the Omni Layer protocol, Omni Tether facilitated the creation and trading of digital assets atop Bitcoin. The Omni Layer allowed the minting and burning of Tether tokens based on the amount under custody. Furthermore, the protocol enabled the tracking and reporting of Tether circulation. It's important to note that support for the Omni Layer implementation was discontinued by Tether on August 17, 2023.

1. ERC20: Tether, existing as an ERC20 token on the Ethereum blockchain, represents a more recent transport layer. This now makes Tether tokens available in Ethereum smart contracts or decentralized applications on Ethereum. As a standard ERC20 token, it can also be sent to any Ethereum address.
2. TRC20: TRC20, also known as USDT-TRON, is Tether’s USDT that is issued on the TRON network. It is a technical standard token, and it works based on TRON’s network or blockchain, using TRON’s address. This means that all transactions made with the TRC20 take place on the TRON network.

In addition to these, Tether also operates on other blockchains including EOS, Algorand, SLP, and OMG. Each of these blockchains offers its own unique features and advantages, making Tether a versatile and widely-used stablecoin.

1. EOS: EOS is a blockchain-based, decentralized system that enables the development, hosting, and execution of commercial-scale decentralized applications (dApps) on its platform. It was launched in June 2018 by Block.one, a technology company based in the Cayman Islands. Tether (USDT) was integrated into the EOS network in 2022.
2. Algorand: Algorand is a scalable, secure, and decentralized digital currency and transactions platform. It was founded by Silvio Micali, a Turing Award-winning cryptographer and MIT professor. Algorand uses a pure proof-of-stake (PoS) consensus protocol built on Byzantine agreement, where the network is secured by the honesty of the majority. Tether (USDT) was launched on the Algorand network in February 2020.
3. Simple Ledger Protocol (SLP): The Simple Ledger Protocol (SLP) is a protocol for token creation on the Bitcoin Cash (BCH) blockchain. It allows anyone to create tokens in a permissionless way. It facilitates faster, more efficient transactions and has been used to create various types of tokens, including stablecoins like Tether (USDT). However, Tether discontinued support for the SLP implementation in August 2023.
4. OMG Network: the OMG Network, formerly known as OmiseGo, is a non-custodial, Layer-2 scaling solution for transferring value on Ethereum. It allows for faster, cheaper transactions and can scale to thousands of transactions per second. Tether (USDT) went live on the OMG Network in August 2020, providing an alternative option for swapping the stablecoin.

What Makes Tether Unique?

Tether (USDT) is a unique stablecoin in the cryptocurrency market due to several reasons:

1. Stability: Tether is designed to maintain a stable value, pegged to the U.S. dollar. This makes it a safe haven during volatile market conditions.
2. Popularity: Although there are many stablecoins out there, the popularity of Tether sets it apart. Tether has a bigger market cap than any other stablecoin.
3. High Trading Volume: Tether routinely has the highest 24-hour trading volume of all cryptocurrencies, so it plays a huge role in the digital token ecosystem.
4. Versatility: Tether is used as a “bridge currency” that allows traders to move funds between different exchanges without having to go through the process of converting their assets to fiat currency first.
5. Multiple Blockchains: Tether operates on multiple blockchains, including Bitcoin, Ethereum, Tron, EOS, Algorand, SLP, and OMG.

Who created Tether?

Tether was created in 2014 by Brock Pierce, Reeve Collins, and Craig Sellars. The project was originally called Realcoin, but they changed the name to Tether shortly after launch. The company behind Tether, Tether Limited, is responsible for issuing it and managing the reserves.

History of Tether

Let’s explore how and when did Tether start.

Beginnings 

Tether was founded in 2014 by Reeve Collins, Craig Sellars, and Brock Pierce. The original uptake for their stablecoin token, called Realcoin, was not great. In September 2014, Tether Holdings Limited was established by the operators of Bitfinex, a cryptocurrency exchange platform headquartered in Hong Kong. The following month, the first Tether tokens (USDT) were issued.

Stage 2 (Rebranding) 

In November 2014, Realcoin rebranded under the name ‘Tether’. This marked the onset of media allegations and suspicions from crypto experts regarding the rebranding and the connection between Tether and Bitfinex.

Stage 3 (Expansion) 

In 2015, Tether started trading on cryptocurrency exchange sites. An additional 200,000 Tether tokens were issued, creating a total of 450,000. By December 2015, a further 500,000 Tether tokens (USDT) were issued, totaling approximately 950,000 USDT in circulation. By December 2016, Tether had issued a staggering 6 million USDT – more than six times as much as it issued in 2015.

Controversies

In 2017, the alliance between Bitfinex and Wells Fargo deteriorated. Wells Fargo terminated its services to both Bitfinex and Tether, cutting off access to the four main Taiwanese banks that Bitfinex had previously utilized. During the same year, an unidentified online profile accused Bitfinex of generating Tether tokens out of thin air to settle its debts. At that juncture, over 55 million USDT were in circulation. By April 24, 2017, the value of Tether had plummeted to $0.91. This decline was attributed to speculation surrounding the relationship between Bitfinex and Tether, coupled with doubts about the legitimacy of both entities.

Despite the controversies, from Tether foundation, it remains the largest and most widely used stablecoin. Its ability to provide a stable digital asset makes it a valuable tool for crypto traders.

The major stakeholders of Tether

The major stakeholders of Tether are:

1. Giancarlo Devasini, a former plastic surgeon, founder of Bitfinex, CFO of Tether (43% stake)
2. CEO Jean-Louis van Der Velde, an executive of both Bitfinex and Tether (15% stake)
3. Chief Counsel Stuart Hoegner, an executive of both Bitfinex and Tether (15% stake)
4. Christopher Harborne, a UK and Thai Entrepreneur (13% stake)
5. Brock Pierce and his VC firm Blockchain Capital

How USDT is different from other stablecoins

Tether (USDT) is a popular stablecoin in the cryptocurrency market. Like other stablecoins, its value is pegged to a fiat currency, in this case, the US dollar. However, there are several aspects that differentiate Tether from other stablecoins such as USD Coin (USDC), Dai (DAI), Pax Dollar (USDP), and Binance USD (BUSD).

USDT vs. USD Coin (USDC)

USD Coin is a stablecoin that is also pegged to the US dollar. It is issued by Circle, a financial services company. Unlike Tether, which has faced controversies regarding its reserves, USDC is often described as a safer stablecoin since Circle makes a greater effort to comply with audits and governmental regulation, and has more transparent, fully-backed reserves.

USDT vs. Dai (DAI) 

Dai is a decentralized stablecoin over-collateralized by various cryptocurrencies. While Tether and USD Coin are centralized stablecoins backed by physical reserves of US Dollars, Dai maintains its peg to the US dollar in a decentralized manner through Ethereum-based algorithms. This makes Dai a unique option for those looking for a more decentralized form of a dollar-backed token.

USDT vs. Pax Dollar (USDP)

Pax Dollar, formerly known as Paxos Standard, is issued by the Paxos Trust Company. It was one of the first regulated stablecoins in the market. However, Paxos has been embroiled in various controversies recently. In contrast, Tether has managed to maintain its position in the market despite facing controversies of its own.

USDT vs. Binance USD (BUSD) 

Binance USD is a stablecoin issued by Binance and Paxos. It has undergone more extensive auditing processes and works on many different blockchains. While Tether has higher trading volumes, BUSD is growing in popularity due to its backing by respected companies and its compliance with regulations.

Advantages of Tether 

Tether, as one of the most popular stablecoins, has several advantages:

1. Stability: As a stablecoin, Tether is designed to maintain a stable value, pegged to the US dollar. This makes it a safe haven during volatile market conditions.
2. Liquidity: Tether provides more liquidity than any other digital asset. This makes it a popular choice for traders and investors looking for quick and efficient market entry and exit.
3. Transparency: Tether ensures transparency at all levels, with the company promising to regulate and maintain the coin reserve. This can provide users with a sense of security and trust in the token.
4. Accessibility: Tether offers 24x7 customer service, making it easily accessible for users around the globe.

Disadvantages of Tether 

However, there exist some disadvantages of the coin. Some of them include:

1. Lack of Anonymity: one of the primary advantages of cryptocurrencies is the anonymity they offer. However, Tether does not offer this feature, which may be a drawback for users seeking privacy.
2. Value Fluctuation: while Tether is designed to maintain a value equivalent to 1 US dollar, the value of the US dollar itself is not fixed. This means that the value of Tether can fluctuate based on the value of the US dollar.
3. No Public Mining: Tether does not offer a provision for public mining, which can be a disadvantage for those interested in mining cryptocurrencies.
4. Battery Drainage: Tether can rapidly drain the battery of mobile devices, which can be inconvenient for users who primarily use mobile devices for their crypto transactions.

How Is The Tether coin Secured? 

Tether (USDT) is secured through a combination of blockchain technology and the company’s reserve assets. Here’s how it works:

Blockchain Security: Tether operates on top of various blockchain technologies, including Bitcoin, Ethereum, and Tron. These blockchains are secured by cryptographic principles, making it extremely difficult for malicious actors to alter or tamper with transaction data.

Reserve Assets: the value of Tether comes from its currency reserves. The company claims to hold dollars and other assets that are equal or greater than the total number of USDT in circulation. For every one Tether token in circulation, the company claims it owns one dollar in its reserves, either in cash or cash equivalents like short-term bonds or time deposits. This is how Tether maintains its peg to the U.S. dollar.

Transparency: Tether provides transparency by publishing daily reports on the amount of reserves it holds versus the number of USDT tokens that are outstanding. This allows users to verify that each Tether token is fully backed by the company’s reserves.

However, it’s important to note that there have been controversies and legal challenges regarding whether Tether actually holds enough reserves to back all the USDT in circulation.

How To Use Tether

It’s time to talk about what is USDT used for. Tether is a type of cryptocurrency known as a stablecoin, which is designed to maintain a stable value relative to a specific asset or a pool of assets. Tether is pegged to the U.S. dollar on a 1-to-1 basis. Here are the steps to use Tether:

1. Download the Tether App: Tether is available on iOS and Android devices. 
2. Connect to Your Router’s Network: go to your smartphone’s wireless settings and connect to your router’s wireless network. Your router’s default network name and password are printed on the label located on the bottom or back of your router.
3. Open the Tether App: Once connected, open the Tether App.
4. Select Your Router: Tap on your router Icon under Local Devices.
5. Login or Change Password: You may be prompted to log in or change the password. Quick Setup should auto-launch. Choose your Internet Connection Type and tap “Next”. Check with your ISP if you are unsure which setting to use.
6. Change Network Name and Password: If desired, change the Network Name and Password of your router, then tap “Next”.
7. Save and Wait: Review and tap “Save”. Wait for it to complete the configuration.
8. Finish: Tap “Finished”.

Buying Tether (USDT)

Wondering how to get USDT? If you want to become an owner of the Tether cryptocurrency- head to SimpleSwap and follow these instructions:

1. For example, you want to swap BTC for USDT. Select the currency you want to exchange (e.g. BTC) in the first drop-down list. Then enter the amount you want to swap.
2. Select USDT in the second drop-down list. You’ll see the estimated amount that you’ll get after the exchange.
3. Click the Exchange button.
4. Enter the Recipient's Address. USDT will be sent. Be careful and make sure you use the correct address.
5. Create the exchange.
6. You will see the Bitcoin deposit address. You need to transfer the necessary amount of BTC to this address to start the BTC to USDT exchange.

How to Stake and Mine Tether (USDT)

Unlike many other cryptocurrencies, Tether cannot be mined. Most cryptocurrencies like Bitcoin, Ethereum, Solana, Cardano, etc., can be maintained and minted by anyone with enough computing power and expertise. However, Tether is controlled by one company: Hong Kong-based iFinex, which mints and regulates the supply of the stablecoin. Tether does this to maintain the peg to the dollar.

As for staking, while some cryptocurrencies offer staking rewards for participants who lock up their tokens to secure the network or earn new tokens, Tether does not offer this feature. This is because Tether is a stablecoin, and its primary function is to provide a stable value in the volatile crypto markets, not to generate new tokens or secure a network.

Tether Roadmap

Tether has not publicly shared a detailed roadmap for its future development. However, the company has announced that it has three significant product launches scheduled for the last quarter of 2023. As Tether continues to evolve, it’s expected that the company will continue to innovate and adapt to meet the needs of its users and the broader cryptocurrency market.

For 2024, Tether’s Chief Technical Officer and incoming CEO, Paolo Ardoino, disclosed that the firm plans to start publishing reserve data in real time. This move towards greater transparency could help to address some of the controversies and legal challenges Tether has faced regarding its reserves.

As for 2025 and 2026, specific plans have not been disclosed either. However, given the rapidly evolving nature of the cryptocurrency market, it’s likely that Tether will continue to adapt and innovate to meet the needs of its users and stay competitive.

Future of Tether

The future of Tether is largely dependent on the continued adoption of stablecoins and the regulatory environment. Tether has been the subject of controversy and legal challenges, particularly regarding whether it holds enough reserves to back all the USDT in circulation. Despite these challenges, Tether remains the largest and most widely used stablecoin. Its ability to provide a stable digital asset makes it a valuable tool for crypto traders.

In terms of price, predictions vary. Some sources suggest that the price of Tether could reach $1.27983 by May 2024, while others predict a more pessimistic outlook with figures as low as $0.259896 by December 2023. However, as a stablecoin, Tether’s value is designed to remain close to $1, so these predictions should be taken with a grain of caution.

The Bottom Line

Tether has played a pivotal role in the cryptocurrency market as the first and most widely adopted stablecoin. Despite facing controversies and legal challenges, it continues to provide a stable digital asset for traders and investors. The future of Tether will largely depend on how it navigates regulatory challenges and continues to innovate in the rapidly evolving cryptocurrency market. We hope that you enjoyed the article and now have Tether crypto explained. As always, potential investors should conduct thorough research and consider multiple factors before investing in any cryptocurrency.

FAQ

Here are some of the frequently asked questions about the project.

What is the difference between Usdt Omni and Usdt ERC20? 

USDT Omni and USDT ERC20 are both versions of Tether (USDT) but they operate on different blockchains. USDT Omni is issued by Tether based on the Bitcoin network and uses the Omni Layer protocol built on the Bitcoin blockchain network. On the other hand, USDT ERC20 is issued by Tether based on the Ethereum network and uses the ERC20 protocol. The choice between the two usually depends on the specific requirements of the user, such as transaction speed and fees.

Is Tether a centralized or decentralized stablecoin? 

Tether (USDT) is a centralized stablecoin. It is managed by a central entity, the company Tether, that issues (mints) and destroys (burns) USDT tokens.

Is USDT backed by the US dollar? 

Yes, USDT is backed by the US dollar. Tether (USDT) is a cryptocurrency stablecoin pegged to the U.S. dollar and is backed “100% by Tether’s reserves,” according to its website.

Which blockchain does USDT use? 

To understand how does Tether work and the blockchain it operates on please refer to the article above. To summarize, Tether (USDT) operates on multiple blockchains. It was originally launched on the Bitcoin blockchain using the Omni Layer Protocol. However, it has since expanded to other blockchains including Ethereum, which is the most usable layer for USDT and supports the majority of the total Tether USD circulation.

Why USDT is not equal to USD? 

While USDT is pegged to the US dollar and is designed to maintain a value close to $1, there can be minor fluctuations in its value due to market dynamics. Additionally, the value of USDT can also be influenced by factors such as the credibility and transparency of Tether’s reserves.