Crypto Academy

What is tether used for?


7 min reading

Heard about Tether before? Here is vital information for you.

What is tether used for



Introduced in 2014 by Tether limited, Tether corresponds to the value of the dollar. The main idea of the company was to create a stable cryptocurrency that could be used as the equivalent of the US dollar. Tether is a cryptocurrency, based on blockchain technology. Also, it is backed by an equivalent amount of traditional fiat currencies such as the Dollar, Euro, and Japanese yen. Tether is backed by fiat currency as 1 USD is equivalent to 1 USDT. This currency belongs to a type of cryptocurrency called stablecoins that aim to keep the cryptocurrencies stable.

Technical features

The majority of Tether operates on the Ethereum blockchain and is backed by physical reserves whose value is equal to or greater than the amount of issued cryptocurrency. Since cryptocurrencies are highly volatile, they can be exchanged for a USDT making the equivalence identical to avoid the risk of losing the value of a bitcoin, for example. Important to note that Tether was specifically developed to fill the gap between fiat currencies and cryptocurrencies in order to offer stability, transparency, and low transaction fees.

Moreover, Tether was the first stablecoin to gain a foothold in the cryptocurrency industry. Interesting fact: its original name was Realcoin before it was later changed to USDT. Stablecoin’s potential has grown significantly since its inception, allowing Tether to quickly climb the ranks.

How does it work?

As mentioned above, Tether holds fiat currencies in reserve in an amount equivalent to a U.S. dollar in circulation. Therefore, Tether eliminates the complexity of auditing fiat currency and cryptocurrency and does not affect the transparency or security of the audit. More so, Tether works as a relay between fiat and cryptocurrencies. For instance, some exchanges do not accept some cryptocurrencies but have the option where users could use USDT for transactions.

In addition, USDT is used at different points and for different reasons like easy market accessibility. When the price of a cryptocurrency is declining, it is much easier to use USDT to trade rather than cash out the available cryptocurrency and users can also move their funds quickly between different exchanges. Using USDT gives you access to cryptocurrency exchanges that do not accept cash payments meaning users can purchase the required USDT and then trade in crypto.

Benefits of using Tether

Tether transactions take place within minutes and are beneficial to everyone, including traders who want to trade instantly.

Since other cryptocurrencies are known to be very volatile, many exchange platforms are switching to use Tether as their currency of exchange. Express transactions are usually very expensive and commissions can be very high when you exchange crypto to fiat currencies. But transfers between Tether wallets involve no fees.

Investing in USDT is as easy as buying other cryptocurrencies. You will need to create a wallet where your crypto-currencies will be stored. However, the demand for the asset is growing steadily and shows no signs of slowing down.
Role of Tether

Given the fluctuation in prices in the crypto market, traders tend to either make a profit or lose. However, tether acts as an exit strategy in that when there is a change in the crypto market either in favor of bull or bear traders, crypto traders have the tendency of either selling the coins they have for-profit or incur the loss that comes with them. Tether provides an option where instead of a trader losing, he can convert his cryptocurrency to Tether and avoid the fees and volatility.

Also, Tether facilitates payments especially for companies that take payments in cryptocurrency. payments done in cryptocurrency are sometimes challenging because of their volatility. Knowing its exact exchange value was somewhat difficult given its high volatility. Tether, however, eliminates this because its exchange rate is equivalent to its fiat counterparts.

However, it is worth noting that Tether also plays the role of a transit cryptocurrency because it can convert real cash to digital cash. It is certain that converting cryptocurrency to fiat currency is not really easy. This is because not all countries have welcomed cryptocurrency as a medium of exchange and purchase. The use of USDT will be a wonderful alternative since it can easily be converted to US dollars before converting to any other currency.