What is Tether? Cryptocurrencies explained by Blockchart.io
While most cryptocurrencies exist in a state of flux, swinging from high to low, Tether has adopted Blockchain technology and brought it together with the stability of fiat currencies to create a new type of cryptocurrencies; StableCoin. In effect the value of one Tether token, or USDT, aims to be equivalent to 1 US Dollar.
What is Tether?
Tether is what is known as a StableCoin, what this means is that the value of the cryptocurrency token is tied, or tethered to the value of the US Dollar. The company behind Tether, Tether Limited, owns the equivalent of USDT in US dollars and this is open for all to see on their website. It is also in the process of having these records audit in order to ensure complete transparency. This also makes Tether a highly centralised cryptocurrency, which offers a certain degree of stability.
Tether is extremely useful for crypto only exchanges. Some Cryptocurrency exchanges refuse to trade using fiat money due to the restrictive legal framework involved, so Tether acts as a bridge for individuals who want to invest in cryptocurrencies using fiat money on exchanges which do not use fiat money. Utilising Tether as such a tool has helped it to become increasingly popular, as the value of Tether is considerably stable it acts as an excellent store of value and medium of exchange.
Why use Tether?
Tether has managed to combine the best of both cryptocurrencies and fiat money to provide a service that is stable, secure, transparent and 100% backed. By pegging its digital asset, USDT to a stable national currency means that its price retains low volatility, as such it can actually be used as a means of exchange rather than means of speculative investment.
Blockchain technology brings with it a huge degree of security as each transaction is encrypted in such a way that it can only be deciphered by the sender and receiver of that transaction. Besides that, the amount of fiat money held in reserve by Tether Limited is always available for viewing, this is important as Tether claims to be 100% backed.
To put this into perspective, most conventional banks are only legally obliged to keep 10% (this amount may vary from country to country) of their client’s investments. This is what is known as fractional reserve. The problem behind this, is that if every single one of the bank’s clients decides to withdraw money at once, only 10% of those clients would get all of their money back and the rest are left with nothing. Tether, on the other hand claims that it is 100% backed which that your investment is always available to you for withdrawal!
How Tether works
Most cryptocurrencies have a finite amount of tokens, determined by the genesis block of a Blockchain’s inception. Tether does not, new USDT tokens are created every time a client buys, and thus deposits, the equivalent in dollar, euro or yen to Tether’s bank account. This has given rise to a number of controversies surrounding Tether and as a result Tether has often appeared in headlines. But as it stands Tether has retained its value and acts as a conduit on several exchanges to facilitate the trade within the world of cryptocurrencies.
How to buy Tether
When trading USDT, there are several platforms which you can use. It is strongly recommended that you find a service which offers the best exchange rates and an established track record to ensure safe and secure transactions. Changelly is a popular cryptocurrency exchange which has been providing the ability to instantly and seamlessly exchange over 100 altcoins at the best market rate or buy them using a bank card for over two million registered users.
While Tether might not offer much in terms of returns, the value of 1 USDT aims to remain 1 US dollar, Tether does fulfill a very necessary role within the cryptocurrency ecosystem. Namely acting as a bridge between fiat currencies and cryptocurrencies. Tether is a tool, used on several exchange sites which allows for trading cryptocurrencies.