What is Tether – introduction
We’ve already talked about several topics and advances of the cryptomarket. As you can imagine, the cryptocurrency market is still developing, and this brings novelties every day of the week.
You’ll find innovation in the underlying technologies of cryptocurrencies, in transaction forms, in security and mining protocols, as well as in the values and ideals that shape the entire development of the market.
In this post, we’ll talk about a new cryptocurrency called Tether (USDT). Tether is a coin that has gained the attention of crypto investors due to being a great option of stablecoin. If you already know how to talk about Tether and would like to know more about this cryptocurrency, we prepared a great material to help you get informed about everything you would like to know.
You will learn about Tether’s proposal, about what a stablecoin is, what its main advantages are, the relationship between Tether and other altcoins, as well as how to start investing in Tether. Follow up!
What is a stablecoin?
Before we start talking about Tether (USDT), first we need to learn a little more about what a stablecoin is and how this feature works within the cryptocurrency market.
A stablecoin is a class of cryptocoin that has the goal of offering price stability. In order to achieve this, stablecoins are backed by one or more assets (often called reserve assets). These assets can be of different types such as gold, dollar, commodities, and so on.
Volatility is often sought to be controlled by investors because the fluctuation of the values is something that makes buying and selling much more difficult. Due to this, financial reserve assets are used to control this fluctuation.
With the usual currencies, such as the dollar, it is common for market authorities to use certain assets to control the fluctuation in value. The same happens with cryptocurrencies. In the cryptocurrency market, stablecoins are used for this purpose. For this, stablecoins are also pegged to other assets, such as other cryptocurrencies, commodities, and various assets.
After this brief note, let’s now get back to talking about Tether and its role within the cryptocurrency market.
What is Tether (USDT)
Tether (USDT) is a stablecoin and, as we’ve already learned, a stablecoin’s function is to work as an asset capable of adding stability to the price of other assets. Moreover, this stability is created by linking the stablecoin to other assets of low volatility. In the case of Tether, it is backed by our “real money”, like the US dollar, Canadian dollar, Australian dollar, and even the yen.
To be backed by these assets means that the value of Tether is directly indexed to the value of these other assets. Thus, Tether’s volatility is directly controlled by the stability of these other assets. In this case, Tether’s value depends directly on its dollar reserves.
For some investors, Tether’s great advantage is that it fills the gap between cryptocoins and our usual money. At the moment, each unit of Tether is worth one dollar. However, it is still not possible to exchange a Tether unit directly for a dollar at a crypto exchange.
Tether’s proposal
Tether (USDT) was released in 2014 by the american developers and entrepreneurs Brock Pierce, Reeve Collins, and Craig Sellars. At that time, the coin was released under the name Realcoin. However, by the end of the same year, the CEO Reeve Collins announced that the coin’s name would be changed to Tether (USDT) after some important changes to its underlying technology.
In 2017, due to several transactions that took place among Taiwanese banks, all Tether transactions were blocked by American banks under suspicion of market manipulation. At the time, the events caused extreme volatility to the coin.
Since then, Tether’s managers have been able to considerably increase the volume and the number of transactions.
Nowadays, even after all controversy, Tether continues to occupy a central place in the cryptomarket. Currently, the coin is among the most valuable of the cryptomarket, with a total amount of almost US$ 100 billion.
Tether’s great proposal is that it is a stablecoin linked to “real money”. This feature alone makes the USDT particularly attractive to many investors who are not comfortable with the general volatility of cryptocurrencies.
However, it is always important to emphasize that the lack of volatility also diminishes the potential of profit. Thus, stablecoins are not so attractive to investors looking for high returns. In addition to these factors, Tether technology brings some advantages which we will discuss below.
To understand more about the relationship between volatility and earnings, we recommend you this text.
Tether’s advantages
As you already noted, Tether’s first advantage is the fact that its value is backed up by other “real” assets. And why is this important? For a simple reason: if the price of a certain coin is going down, you may transfer your investments to Tether and be able to protect your money.
Similarly, if you want to generate greater stability for your investment portfolio, allocating a portion of your capital into a stablecoin may be a good option for you.
Remember that lower volatility is a valuable feature because it protects your investment from taking high risk of loss. Furthermore, not every investor is skilled enough to know how to deal with highly volatile assets.
In addition to being a stablecoin, Tether is based on some important technological resources for security, such as:
- Proof of Work (PoW): Security protocol used to protect against attacks and other attempts of fraud and theft;
- Proof of Stake (PoS): Security protocol used in the cryptocurrency transaction process.
Both protocols serve to provide greater security to the storage and transaction of cryptocoins. In general, investors tend to look for stablecoins because such assets offer different advantages in comparison to other cryptocoins. Some of these features are:
- Lower volatility;
- Backed by real-world assets;
- High degree of security;
- Low transaction fees;
- Easy and fast transfer;
- Protection against market volatility;
- Linked to other “real world” assets.
Tether and other altcoins
There are also other stablecoins in the cryptomarket, such as True USD (TUSD), Pazos Standard (PAX), and USD Coin (USD). Each stablecoin is linked to other assets with lower volatility.
In relation to other altcoins, Tether is always considered among the preferred ones by investors seeking to protect their capital in times of high market volatility.
For this reason, stablecoins are preferred because they play a different role within the market. As we said before, they are assets produced to bring greater stability to investment portfolios and to the general movement of that market.
How to buy Tether
Investing in Tether is similar to the process of investing in any other cryptoasset. In order to do this, just go through the following steps below:
- Look for a crypto exchange that allows the purchase and sale of Tether (USDT) (Still don’t know what an exchange is? Exchanges are financial institutions responsible for mediating the purchase and sale of cryptocurrencies. Learn more about it in this text.);
- Register and create your account;
- Execute the purchase order and wait for completion.
- After that, transfer the coin to your personal wallet. There are already several supported wallets for Tether, there are even types of hardware and software wallet options available for Tether. It is important that you find out which option is the best for you. (To learn more about the function of cryptocurrency wallets, check it in this text.)
If you do not have any experience with investing in cryptocurrencies and would like to understand more about what to do to invest in this market, we recommend you this text.
Who should invest in Tether?
If you are looking to protect your crypto portfolio and avoid the volatility of some of your assets, allocating part of your portfolio in Tether can be a great option to ensure greater stability to your portfolio.
As we said earlier, stablecoins are not wanted for their profit potential, but rather for their price stability in face of market fluctuations.
Furthermore, if you are the kind of investor used to dealing with assets linked to other reserve assets, you will certainly be interested in dealing with assets like Tether. Capital allocation in Tether will always depend on your investment profile or strategy. Therefore, it is important for you to be sure that the purchase of a new asset fits your investment profile.
(If you are interested in learning more about the different ways to invest in cryptocurrencies, check it in this text.)
What is Tether (USDT) – Conclusion
In this post, we talk about what stablecoins are and what role these coins play within the crypto market. We also talk about the main features of a particular stablecoin: Tether (USDT).
So that you can recall the most important points in the text, we highlight them all:
- Stablecoins are financial assets linked to other reserve assets;
- The function of a stablecoin is to generate greater stability to a currency by linking it to less volatile assets;
- Tether (USDT) is a stablecoin in the cryptomarket linked to other assets such as dollar and yen;
- Tether (USDT) is among the cryptomarket’s preferred stablecoins;
- Tether (USDT) offers several advantages as a stablecoin, as it is linked to real assets in physical currency;
- Stablecoins are always preferred by investors who want to control the risk of losing their investment portfolio. Thus, such currencies produce greater stability in scenarios of high price fluctuation;
- Capital allocation in Tether will always depend on your investment profile and strategy.
Before investing in any asset, always make sure you learn as much as possible about how that investment works. Also, if you are new to the cryptocurrency market, start by moving small sums and gradually build up.
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