What is Tether
Stablecoin USDT is a rather popular token which is why the majority of users face it in any case during their activity. Consider what kind of cryptocurrency it is, what its features are, and what we should know to work with it.
Tether: What is this
Probably the main characteristic of this token is that the USDT is the first stablecoin on the market. Despite competitors' occurrence, it was able to save the leader position, and many crypto assets are still traded in the pair with it.
USDT is a crypto asset with a digital reserve in USD. When it was created it was working with Omni Layer protocol but then versions were made based on Ethereum and Tron.
As is understood from the previous words, each USDT token is supported by USD and it means that the quantity of USDT is the same as the dollar reserves of Tether Limited. This company is also responsible for the safety of USD assets while clients use cryptocurrency.
Tether: features and description
From the technical documentary of the asset we can notice:
- when the user makes a transaction of the USD equivalent the USDT emission occurs in an instant;
- when the sum is out of the account the tokens are deleted at the same time;
- USDT works the same as any other cryptocurrency (BTC, ETH) and could be used and saved in the same way;
- saving USDT is possible in wallets that support Omni Layer.
The main thing that users must know is that the holders shouldn’t identify USDT as the digital version of USD. The same is reflected in the license agreement. Another feature is that developers use the Proof-of-Reserves as the alternative to Proof-of-Solvency.
In this case, it looks like this:
- the sum demanded in USDT is checked on Block Explorer using the special tools;
- the sum in USD which is the same as buying tokens is confirmed as the bank account;
from the company's side, a regular audit is held which helps users to be sure that all investments are absolutely safe.
Note that the holders can use not only the USD equivalent but also choose another currency, for example, EUR.
USDT: advantages and disadvantages
Despite its popularity among the users, stablecoin has not only advantages but objective disadvantages.
The strength is:
- rate volatility is about 2-3%;
- the nominal value of 1 token is equal to 1 item of a currency.
The weakness is:
- Connecting with the USD is the reason for extra attention from the authorities and regulators;
- all negative processes that happen to the USD affect the value and reliability of the coin.
USDT reinforcing and mining
From the developers occurred the information that the token has no 100% USD reinforcement and the company can cover 74% of all its assets only. It is easy to guess that it will lead to big losses for the USDT holders.
What about mining? The token can be bought on the market or in the crypto exchange only. And on the many stocks, you can buy the token only for BTC и ETH.
USDT: how to keep
As in the case with another cryptocurrency you need a special wallet for keeping the tokens. Above we noticed that the work of Tether is possible on 3 blockchains. To withdraw from the exchange, the user selects the appropriate option. Experts advise not to keep the tokens on stock because of the high risks of cyber attacks.
Among the recommended wallets for such coins are Free Wallet, Trust Walle, Trezor, and Ledger (for the big amount).
How to exchange USDT for USD
There are some special crypto exchanges that can transfer stablecoins into dollars at any time and transport them to the card account. The process can be in automatic and hand mode. As a rule, such platforms have calculators for seeing the rate change.
Payeer and Advanced Cash also can help to exchange USDT into fiat. For this, you need to open a wallet on the chosen platform after verification. You should remember that AdvCash doesn’t keep assets and makes exchanges only when you cash in.
USDT: potential difficulties
Despite looking rather stable at the first sign, many experts are concerned about the future of USDT. The base for it is rather wide and the current situation added the reasons for fearless. Add here the bankruptcies of Terra, Three Arrows Capital, and Celsius.
The main concerns are:
- Part of Tether's amount is provided not real money reserves but shares, obligations, and other kinds of investments. That is why when the majority of holders want to have the cash it will be not enough.
- There is information about the problems of Tether with the Office of the general prosecutor in New York after investigators have been accused of concealing losses.
- If Tether collapses it will lead to consequences for the whole crypto industry. According to Eric Rosengren, the USDT portfolio looks like a major money market fund and a riskier one at that. There is also an indication that Tether operates like a common bank but the rules for consumer protection are not followed.
Thus despite the external attractiveness and stability of USDT, we can see many negative features. But today there is no safe asset on the crypto or fund market and the crisis can touch any part of your investment portfolio.