It is no secret that blockchain technology has many advantages over traditional financial institutions, as it provides a cheap, fast and, most importantly, secure way to make payments without third parties. However, almost all currencies based on this technology are highly volatile, blocking their widespread adoption. Today we will look at one of the most exciting cryptocurrencies - Tether (USDT), which has become a hostage of stability and dependence on fiat currencies. This article will learn what Tether is and why to buy USDT. 

Tether is the most famous stablecoin
Tether is the most famous stablecoin

What is Tether (USDT)?

Tether was founded in 2015 by the Bitfinex crypto exchange team. Tether (USDT) is the world's first full-fledged stablecoin, deployed based on the Omni Layer protocol and using the bitcoin blockchain, which offers investors the ability to convert any fiat currency into a digital equivalent at a 1:1 ratio.

In 2015, Tether was pegged only to the US dollar and was denoted by the ticker USDT. In 2016, the company created a euro counterpart, EURT, and the Japanese yen under the ticker JPYT. However, the latter two cryptocurrencies have not been as widespread as the dollar cryptocurrency.

The Tether team claims that every USDT token issued is backed by real fiat reserves in a bank account. This means that each billion USDT is strictly equal to one billion USD in accounts held by Tether or its partner banks.

The digital currency is based on an open-source Omni Layer protocol that works with the blockchain
The digital currency is based on an open-source Omni Layer protocol that works with the blockchain

How does Tether work?

Tether operates as a digital token built on several blockchain protocols, including Bitcoin, Ethereum, Algorand, OMG, EOSIO (EOS), Tron (TRK) and SLP blockchains. These available options allow more assets to be created in their blockchains. 

In fact, the Ethereum blockchain currently occupies the largest market for USDT.

To better understand how USDT works, we must look at its creation. Tether was initially being released using the Omni Layer protocol. The Omni Layer protocol is a decentralised, open-source platform built on the Bitcoin blockchain. Blockchain-based technology allows Tether Limited to issue and burn tokens based on the number of fiat reserves (USD) that must match the USDT offering.

Tether functions on a BTC blockchain
Tether functions on a BTC blockchain

In theory, each token has a corresponding USD held as collateral in the company's reserves. Therefore, according to Tether Limited, it is technically possible that the total number of Tether tokens in circulation could be tracked and reported through a protocol.

How does Tether work?
How does Tether work?

What is a Stablecoin?

As you know, Tether is a stablecoin. What does it mean? Stablecoins are cryptocurrencies designed to minimise volatile price fluctuations in the cryptocurrency environment by linking each token to the cryptocurrency's underlying fiat money or exchange-traded commodities, such as precious metals. 

Created with the same characteristics as other popular cryptocurrencies, stablecoins offer simple transactions through an existing cryptocurrency infrastructure with untrusted networks using an appropriate blockchain browser. This allows payments requested in a specific fiat currency or precious metal and can protect recipients from sudden price changes.

Although USDT's reserve and issuance system are controversial, compared to most stablecoins, USDT still offers the longest track record of performance and the highest solvency. That's why many people aim to buy USDT. 

Benefits of Tether

If many people buy Tether and invest in Tether, then there are significant benefits. So what sets USDT apart from other cryptocurrencies? 

In the cryptocurrency market, stablecoins perform as a buffer
In the cryptocurrency market, stablecoins perform as a buffer

The cryptocurrency has the following distinctive characteristics:

  • Binding to the national currency - American dollar, euro and Japanese yen. This means that the exchange rate of this currency is stably equal to 1 dollar or euro. 
  • Extremely easy to use on cryptocurrency exchanges.
  • Secure legal environment for crypto traders.
  • There are no risks associated with cryptocurrency volatility, as the exchange rate is almost always stable. Of course, sometimes small fluctuations can be noticed. But they are insignificant and do not pose any threat.
  • Speed and security of USDT transactions. We will tell you about it later.
  • Excellent work of technical support service.

Despite a large number of listed advantages, Tether also has some disadvantages, among them:

  • USDT centralisation.
  • The USDT stored in the reserve fund is likely several times less than the company claims.

These are the main advantages and disadvantages of USDT. If you are planning to buy USDT, always consider all factors that concern the currency: economic, political, global and even tweets from influential people. Everything can affect cryptocurrency rates or even fiat currencies.

Why buy or invest in Tether (USDT)

The fact is that Tether is extremely useful to traders and investors as an alternative to fiat money - for several reasons at once. There are four main reasons traders seek to buy Tether or invest in Tether:

1. Speed of transaction processing.

Withdrawing dollars from foreign exchanges and depositing them into an exchange service account often takes several days, and if you need something after banks are closed or during holidays, that period can grow even longer. 

A Tether transaction, on the other hand, takes minutes. Sometimes this is important because cryptocurrency traders need to transfer funds to take advantage of arbitrage opportunities quickly. 

The Tether project is constantly finding new solutions for faster transfers
The Tether project is constantly finding new solutions for faster transfers

2. Transaction costs.

Transfers via the international SWIFT system are very expensive - at least $20 per transfer, and on average, closer to $30. Moreover, if you transfer money in a currency not directly supported by the exchange, the bank will take an additional conversion fee and a percentage for the transfer. 

Transfers between Tether wallets, on the other hand, are entirely free. 

3. Price stability.

Cryptocurrencies are known for their volatility, so a stable currency is beneficial for traders, especially those who don't have access to highly liquid markets. However, buying one highly volatile currency for another carries a lot of complexity and risk. 

Let's take the example of buying ether (ETH/USD) for bitcoin: 

  • A trader buys ether for bitcoin, after which the value of the first currency rises by 10%. 
  • The trader wants to profit, so he sells his ethers for bitcoins. 

Except that during the transaction's processing time, bitcoin falls by 15%. 

It turns out that, despite the growth of ETH, the trader suffers losses due to the fall of BTC. When using USDT, the trader only has to worry about the price of ether. 

Of course, there is the American dollar, which is a relatively stable base currency. The only trouble is that many altcoins can only be bought on exchanges that do not handle any fiat money but accept USDT. 

Also, as stated above, USDT wins in cost and transaction processing time. However, this is still a grey area as far as taxes are concerned. 

4. Staying on the sidelines.

Often in the market, the best position is to have no position. For example, let's say a trader sense that the price of an asset is overvalued but does not want to take the risk of playing down. In this case, the best move would be to cash out and wait for a decline, during which time they would buy. 

In this situation, it may be convenient for the trader to convert the cryptocurrency to USDT, then withdraw the funds to their secure wallet. When a suitable buying opportunity presents, quickly transfer them back to the exchange instead of waiting several days for a wire transfer. 

Coin emission

The company has decided not to limit the issuance of new Stablecoins. It shows a reasonably rapid issuance rate, which has repeatedly caused excitement among crypto investors and regulators, as they were wary of market fluctuations.

The generation of new tokens increases the capitalisation of the project.

A mechanism to limit issuance is usually needed for cryptocurrencies to combat high volatility and inflation. But Stablecoin does not need it. Therefore, the lack of restrictions is justified.

Tether tokens is an alternative to traditional currency deposit and withdrawal methods
Tether tokens is an alternative to traditional currency deposit and withdrawal methods

Where to buy and store Tether cryptocurrency?

USDT can be purchased on almost any exchange. Impressive volumes of USDT are traded on the prevalent cryptocurrency exchange Binance. You can choose any reliable exchange if you want to buy Tether in the Philippines. 

The most common way to buy USDT is by exchanging it for another cryptocurrency. For a complete list of Tether-supporting exchange services, check out CoinMarketCap's website (sorted by currency pair for convenience).

Users can store coins purchased or mined on wallets that have Omni Layer support.

How to start investing in Tether (USDT) in the Philippines? 

Are you thinking about how to invest in Tether in the Philippines? The main way to invest passively in the cryptocurrency market and the main alternative to mining is cryptocurrency stacking. 

Stacking is the process of storing funds in a cryptocurrency wallet to support all transactions on the blockchain. Essentially, it consists of locking a certain amount of cryptocurrency into a wallet for rewards.

In most cases, this process depends on users participating in blockchain transactions using a personal cryptocurrency wallet. 

The concept of staking is closely related to the Proof of Stake (PoS) mechanism. Therefore, this transaction validation option is used in many blockchains that are based on PoS or one of its many variants.

How does staking work?

You can stake or lend Tether  token  to earn on cryptocurrency
You can stake or lend Tether token to earn on cryptocurrency

The concept of Proof of Stake (PoS) involves this type of mining, where instead of participants' computing power, they need to store crypto-assets in their accounts. However, PoS participants have a limited percentage of transactions that can be verified.

The use of cryptocurrencies does not entail significant risks if the user adequately protects their wallet and account. The most significant risk is associated with price volatility, which can hurt your wallet if momentum runs out.

Another risk is excessive centralisation, where the bulk of the assets are in the hands of the big players. This situation is most likely for "young" cryptocurrencies, which trade relatively lowly.

Any trading activity involves risk as well as profit. It all depends on how everyone feels about their activities. How seriously you study the topic and how much you want to delve into the action. But one thing remains the same: whoever strives for something always reaches the goal.  Learn, work and earn!

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