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What is Tether (USDT)?

What is Tether (USDT)? Complete set of the largest stablecoin on the market

What is USDT? What is Tether? Where to buy USDT? Find out all the details about Tether and stablecoin USDT right here!

When asked what Tether is, or what is USDT, many brothers will answer that Tether is USDT and USDT is a Stablecoin.

Unfortunately, the above answer is not really correct. That made me think, are there too many brothers when they first joined the cryptocurrency market and have approached the problem incorrectly, leading to the status quo as above.

That is what made me write today’s article with the aim of providing the most basic, necessary and detailed information to thoroughly explain what Tether (USDT) is.

What is USDT?

USDT (or Tether coin) is a 1:1 USD-backed cryptocurrency issued by Tether Operation Limited in 2014.

The 1:1 ratio means that each USDT will be worth 1 USD (US Dollar), which helps to increase liquidity and minimize the impact of price fluctuations on USDT in the Crypto market. .

USDT was originally developed based on Bitcoin’s Blockchain technology through the Omni protocol layer, which is the foundation for users to convert, store, create wallets and exchange USDT.

Currently, USDT is the most popular stablecoin in the Cryptocurrency market with a capitalization of more than 60 billion USD.

Although there have appeared many competitors in the Stablecoin market such as USDC, BUSD, DAI, … but this is still.

Statistics of the total capitalization of Stablecoins on the Crypto market.

What is USDT used for?

Similar to other coins/tokens, USDT is used to store, trade and exchange into other coins in the market.

More specifically, Tether created USDT with the aim of overcoming the payment problem of current currencies (both crypto-currencies and fiat currencies), specifically:

Fiat money: All user information in the transaction process must be public, especially when transacting between countries, the transaction speed will be slow and incur many additional fees such as: fees. currency conversion, spread fee, sending fee,…

Cryptocurrencies: Not stable, price can fluctuate with magnitude depending on market situation and Bitcoin price, high transaction fees.

USDT perfectly solves those problems by:

  • Anchor your value with USD at a 1:1 ratio ⇒ Ensure stability.
  • Developed based on Blockchain technology ⇒ Money transfer between countries becomes easier, saves costs as well as ensures user security.

In addition, thanks to its stable nature, in times of market turmoil, when Bitcoin and other Altcoins are both affected and fluctuated strongly, USDT is considered a safe haven to secure. to ensure that the user’s property is not damaged much.

Overview of Tether

What is Tether?

Tether is a platform that allows fiat currencies (Fiat) to be used on the Blockchain, through the issuance of Tether coins / tokens of equivalent value.

The Tether platform was founded and developed by Hong Kong-based company Tether Limited in 2014.

Tether Token (symbol: ₮) is a cryptocurrency whose value is 100% guaranteed by fiat currencies (fiat money) at the ratio 1:1 issued by Tether Operation Limited. One Tether Token (₮) is worth 1 unit of its backing currency.

At the moment, Tether has issued three tokens that are 100% backed by three different fiat currencies, USD, EURO and CNH (Offshore Chinese Yuan). With tokens USD₮, ERU₮ and CNH, respectively.

How does Tether (USDT) work?

In the whitepaper, Tether describes the operation of the system quite simply as follows:

Step 1: User deposits Fiat money (USD) into Tether Limited’s bank account.

Step 2: Tether will create and credit the user’s account with an amount of Tether token (USDT) equal to the amount deposited by the user.

Step 3: Users can freely trade Tether tokens: directly buy, sell, exchange on exchanges, …

Step 4: When there is no longer a need to use, users can convert Tether tokens into fiat money through the Tether platform.

Step 5: Tether will destroy that Tether token and send Fiat money to the user.

Simple working model of the Tether system.

As mentioned at the beginning of the article, Tether issues tokens with a value that is 100% backed by fiat currencies at a ratio of 1:1, typically USDT.

This raises a small but influential question: Who audits the amount of money in Tether’s reserves to make sure that 1 Tether (₮) is always equal to 1 unit of Fiat currency?

The answer will be found in the following sections!

Classification of USDT on Blockchains

After many years of establishment and development since the first USDT was issued to date.

Tether has released versions of USDT on various platforms including Tron, Ethereum, EOS, Liquid, Solana, Alrogand, and more. In which, the two most noticed platforms are Ethereum and Tron.

USDT on Ethereum

Realize the weakness of Bitcoin Blockchain transaction speed and fees. In September 2017, Tether decided to issue USDT on Ethereum’s platform according to the ERC20 standard.

Currently, the value of USDT on Ethereum’s platform is over $2 billion. You can check the amount of USDT-ERC20 at Contract: 0xdac17f958d2ee523a2206206994597c13d831ec7

For USDT-ERC20, you can store it on wallets that support this standard such as Coin98 Wallet, MyEtherwallet, Mycrypto, Metamask, Ledger Nano S, Trezor, etc.

USDT on Tron

After issuing USDT on Ethereum, Tether issued more USDT according to Tron’s TRC-20 standard on April 16, 2019.

USDT on another platform

Some other versions of USDT can be mentioned as:

  • USDT – Omni: The first version of USDT, released on October 6, 2014 on the Layer Omni layer of the Bitcoin Blockchain.
  • USDT – EOS: Released on May 31, 2019 on the EOS platform.
  • USDT – Liquid: Released on July 29, 2019 on the Liquid platform.
  • USDT – Solana: Released on December 9, 2020 on Solana platform.
  • USDT – Alrogand: Released on February 10, 2020 on the Alrogand platform.

How to distinguish USDT wallet address on each Blockchain

USDT is deployed on a lot of different Blockchain, besides, the place to check USDT transaction will be different on each different Blockchain.

Therefore, you need to know how to distinguish the Address on each Chain to avoid loss as well as the occurrence of unfortunate events.

When transferring USDT from exchanges to Non-Custodial wallets, or between Non-custodial wallets, there are a few points you should note as follows:

  • Sending and receiving addresses need to be on the same Blockchain.
  • Pay special attention to the deposit and withdrawal operations on the exchanges that need to pay attention to the Blockchain being used to send/receive tokens.
  • When making a money transfer, pay attention to check that the deposit and withdrawal address is correct.

Note, networks like Binance Smart Chain, Matic (Polygon), Heco, Fantom, Avalanche C-chain, etc. use Ethereum virtual machines, so they will have wallet addresses similar to ERC-20.

Therefore, if you mistakenly send from the exchange through one of these Blockchains, just add the corresponding network in your wallet and import the Smart Contract of the Token and the Token will appear on your wallet.

Frequently asked questions about USDT

What is USDT Wallet?

As I mentioned in each type of USDT above, each USDT on each Blockchain will be stored on that Blockchain’s wallet address.

Besides, USDT wallets can be divided into the following 3 types:

  • Hot wallet (or Hot Wallet) is an online USDT storage wallet, in which users will hold a private key to secure their own assets. For example: Coin98 Wallet, Trust Wallet, MetaMask, etc.
  • Cold wallets (or Cold Wallets) are physical wallets that can be held in the hand. Usually, cold wallets are suitable for long-term investors who rarely have to trade because each transaction is quite laborious. But in return, the security of cold wallets is extremely high. For example: Ledger, Trezor,…
  • An exchange wallet is a wallet created on exchanges and users do not directly hold the private key. For example: Binance exchange, Remitano, …

How to mine USDT?

All Tether Tokens, including USDT, are not mineable and are only issued by Tether Operations Limited.

Is USDT an Altcoin?

All Tether Tokens, including USDT, are not Altcoins, they are called Stablecoins.

How long is the USDT transfer rate?

USDT transfer speed will depend on two factors, including:

  • The speed of the Blockchain platform that USDT is using.
  • The transaction confirmation number is regulated by the exchange.

Therefore, the USDT transfer rate will not have a fixed number.

Controversy surrounds the value of USDT

Skepticism of Tether (USDT)

The biggest controversy about Tether as well as USDT is that this stablecoin is not actually backed by USD.

And if this is true then it is very dangerous for the Crypto market, then the Crypto market will suffer heavy losses when there is no real value backed behind the price increase.

In addition, Tether has many other controversies such as:

  • Close relationship with Bitfinex: Many positions in the Tether and Bitfinex companies are held by a person in a similar position. Add in the issues of not being audited, and it’s very likely that there are many non-transparent internal transactions conducted between the two companies.
  • Controversy over $850M: Due to its close relationship with Tether, in the case Bitfinex lost $850 million and accused the company of withdrawing from the Tether Treasury to compensate for this amount (event details). You can read it here).
  • Security Issues: Tether has in the past experienced hacker attacks that stole USDT from its reserves.
  • No formal audit: Commodity Futures Trading Commission (CFTC) – Tether hired Friedman LPP as an auditor. While information on the amount of assets backed by USDT has been confirmed, this is not an official audit.

So what’s actually in Tether’s Treasury Fund?

After the New York District Attorney’s office decided to suspend Tether operations and ordered a fine of $18.5 million for illegal activities. Then Tether released their Reserve Breakdown.

Reserve Breakdown of Tether (USDT).

The Reserve Breakdown shows what is currently backed behind USDT and other Tether tokens. As you can see, there are:

  • 75.85% Tether tokens are backed by cash and cash equivalents as well as commercial papers.
  • The remaining 24.15% is in bonds, secured debt and other investments.

It is worth noting here that only 2.9% of the cash is in the Tether Treasury.

And there is another point to note that the Reserve Breakdown released by Tether is only 1 page and has not been censored by any audit unit.

Risks inside USDT

If the information Tether given above is correct, there are still quite a few risks to the amount of USDT circulating out there.

About 24.15% are bonds, secured debt. Assuming these assets are guaranteed to be of high credit quality (low risk), there is still more than 75% of Tether Funds that are difficult to assess.

Out of about 75.85% of the above assets, 24.2% are Fiduciary Deposits and 65.39% are Commercial Papers (you can simply understand that companies that owe Tether keep these papers).

We do not know who these companies are? How is the credit score? As well as not knowing if these companies really exist? Therefore, there is still a lot of risk on Tether as well as USDT.

That will lead to more FUD in USDT that will continue in the future, but this risk has now been reduced as USDT no longer holds a unique position in the Crypto market.

In addition, with the state of New York for many years investigating Tether but there is no evidence of not having enough assets to back Tether Token and print it short, the current brethren can temporarily rest assured about the Tether’s problem.

Facts you need to know about USDT

There are a number of USDT metrics you need to keep an eye on to understand the current market situation.

Total market capitalization USDT billion

Since USDT accounts for the majority of the market share in the Stablecoin segment (more than 60%), tracking the USDT capitalization index can provide a fairly comprehensive assessment of how the market moves.

Based on historical data, USDT’s capitalization has always been on an uptrend despite strong corrections as well as the Crypto winter in the period 2018 – 2019, showing that the market has so far remained stable continue to grow.

Market capitalization of USDT.

There is one point you should note that the data on the capitalization of USDT in the 2 strong corrections of BTC in 2018 and 2020 are very different.

Back in 2021, you can see that even though BTC corrected very strongly, the USDT capitalization continued to increase. This shows that many investors may not leave the market, and even new cash flows are waiting for opportunities.

Amount of USDT on exchanges

Another indicator of USDT you need to monitor is the amount of USDT inflow (inflow) and outflow (outflow) as well as the amount of USDT on exchanges.

These indicators you can track at Crypto Quant (here) or Glassnode (here), usually you can track these indicators and have the following assessments:

  • If the amount of USDT on exchanges is at a high level, it could be a sign of new money entering the market, or investors have taken profits and waited for a better price zone to buy.
  • If the amount of USDT on exchanges decreases and the price is trending up, this is a sign that the money flow pushed into the market is showing signs of weakening. And if the price is trending sideways or down, it can be concluded that many investors are leaving the market.
  • If the amount of USDT inflow on exchanges increases, there may be more investors pouring into the Crypto market, and conversely when Outflow increases, it is possible that investors are getting bored and leaving the market.

USDT on Different Blockchains

Stablecoins are an important piece of the puzzle in ecosystems. USDT is also the largest stablecoin by market capitalization, so tracking USDT indexes on Blockchains will partly assess the trend of money flow.

The current total supply of USDT is around 62 billion USD and is distributed across the Blockchains as follows:

  • Tron: $32 billion.
  • Ethereum: $30 billion.
  • Bitcoin: 1.34 billion USD.
  • Solana: $190 million.
  • EOS: $100 million.
  • Algorand: $94 million.
  • SLP: 6 million USD.
  • Liquid: $37 million.

The total supply of USDT is distributed across the Blockchains.

The fact that USDT is supported for transactions on a Blockchain network can also be news for you to predict that that ecosystem is about to grow (due to the fact that there is already a pretty solid stablecoin infrastructure).

Growth of the total supply of USDT on different Blockchains.

Currently as you can see, USDT issued on Tron is the highest (because this is the main network used by Tether to issue its Tokens).

In second place is Ethereum, and the growth rate of USDT is constantly increasing.

With Ether’s leading position and recent trend of moving to Layer 2 as well as Gas fees are quite cheap, it is likely that Ethereum and Layer 2 platforms will continue to maintain their leading position and Lead Trend is coming.

For other platforms like Solana, EOS, Alrogand, etc., these numbers are quite small and insignificant. Currently, USDT on Solana has only reached 190 million USD.

However, now with the development of many DeFi platforms (decentralized financial applications) belonging to the Stablecoin puzzle, or in the case of Binance Smart Chain developing BUSD as its own Stablecoin, you also need Many other factors must be considered when forecasting the growth of the USDT-based ecosystem.

Some of the current USDT competitors I can mention are USDC, BUSD, UST, DAI, etc.

USDT comparison table with other Stablecoins.

Thus, as you can see now, the Stablecoin market is not what it used to be with USDT alone in a unique position, now there are many competitors with outstanding growth rates.

And when investing in a particular system, you should pay attention to some more details such as: What are the main stablecoins of that system, their growth rate, etc. These details can be a very good indicator. Good to help you realize where the cash flow is moving.

Specifically, the search for investment opportunities based on USDT indexes on Blockchain, I will mention in the later part of the article.

USDT Price on Peer-to-Peer Market

This is quite a difficult factor to observe, because you will have to monitor the price for a long time to be able to make an accurate judgment, and there is no source that I see is completely accurate to follow. with this indicator.

As I often follow data on USDT/JPY, USDT/EUR, USDT/CNY, … on Binance P2P or Remitano.

The USDT price in the P2P market also reflects the demand in the Crypto market.

In addition, you also need to monitor exchange rates on many other markets to have accurate assessments of cash flow.

Learn more about historic market corrections when Bitcoin crashed and the entire Crypto market crashed now!

Looking for investment opportunities with USDT

Stablecoins are a very important piece of the puzzle in any ecosystem.

Since USDT currently accounts for a large market capitalization in the Stablecoin market, keeping an eye on USDT metrics can somewhat gauge the movement of money.

Some metrics you can track to forecast cash flow are:

  • Market capitalization of USDT.
  • Capitalization growth rate.
  • USDT trading volume on the ecosystem.

This information you can find in the Data section of The Block here.

Regarding the USDT capitalization as well as the amount of USDT issued on an ecosystem in Crypto, you should pay attention and update it daily.

With USDT having a fast growth rate on that ecosystem, it will be a sign that the system is about to grow strongly in the future.

A Case Study you can clearly see is the Solana ecosystem (although the main stablecoin in this system is USDC).

Total supply of USDT on Solana ecosystem.

If you access The Block for Tracking Data, you will see a sudden increase in the amount of USDT on March 16, 2021.

USDT on Solana suddenly increased sharply on March 16, 2021.

As you can see, then the SOL price had a tremendous increase after the amount of USDT in the ecosystem grew strongly.

This is a good indicator to forecast cash flow and find investment opportunities.

You can completely use this method to evaluate the projections for other ecosystems, however, it is necessary to pay attention to what the system uses the main Stablecoin to get a more accurate assessment.

Epilogue

I hope the article can help you understand what Tether USDT is and give you a deeper perspective on USDT, the controversies and potential risks as well as possible FUDs about USDT in the future.

In addition, through the article, I also introduce to you some ways to observe the market through USDT indexes, as well as how to use them to find investment opportunities with USDT.

Do you have any other thoughts or questions about this USDT coin? Will USDT be replaced by another stablecoin in the future? Please share your comments below to discuss with Idolmeta.net 

 

 

 

 

 

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