USD Tether, also known as USDT, is a digital currency released on the Bitcoin blockchain and the world’s third-biggest digital coin by market value. It can be spent, traded, transferred, or stored in specialized wallets like any digital currency. USDT is a stablecoin which means that its value is tied to a real-world asset. Unlike most digital currencies such as Bitcoin, which is highly volatile, USDT is tied to the US Dollar to maintain a stable value.
As of December 2021, the market capitalization of stablecoins hit the $167 billion mark, compared to only $5 billion in 2019. Stablecoins represent 6.68% of the $2.49 trillion digital currencies market economy and have had a 388% growth in 2021. Stablecoins also play a critical function in facilitating activity in DeFi (Decentralized Finance) which utilizes smart contracts on blockchains.
According to Tether, USDT has been used to secure over $60 billion dollars of value and users can deposit Tether tokens as collateral to participate in DeFi networks without needing to manage volatility.
The reason why 1 USDT is actually worth $1 USD is that exchanges keep a reserve of USD to back every USDT in existence. The blockchain can verify the USDT in circulation and the TUSD, which is the total USDT in circulation at any time. This amount must equal the amount in the bank account used by Tether Limited to receive and send money to buyers or to pay tethers on the Tether platform.
USDT Benefits
1. Price Stability
As the price of USDT is stable and predictable unlike other digital currencies, many exchanges accept Tether in replacement of fiat. Moreover, many businesses are starting to accept digital currencies as payment due to its lower transaction fee compared to credit cards. If you are looking to transact with digital currency, USDT could be the safest option if you are worried about volatility.
2. Transaction Time
USD deposits and withdrawals often take 1-4 business days to complete in a traditional banking system. Tether transactions take place in minutes which is important for digital currency users who often want to rapidly transact in minutes, not days. Many users prefer this swift and seamless method and are highly beneficial for those that don’t have easy access to banking.
3. Transaction Fees
Transaction fees on exchanges can be very high. Especially if you are using a fiat because there’s an additional fee for Forex conversion and a percentage on the transfer. Tether charges zero transaction fees between Tether wallets. With this, users prefer to invest and transact in USDT to avoid costly fees. This makes sense for those that are paid in digital currencies as well, as many migrant workers or overseas employees don’t need to pay up to 7% of the sum they wish to send to family members overseas using traditional remittances.
4. International Payments
International payments can be challenging especially in certain countries where it’s difficult and costly to wire cash such as those with underdeveloped financial systems. Stablecoins give users easy access to new financial products in the DeFi ecosystem. Using USDT as payment eliminates the hassle of long processing times and funds getting stuck. This also benefits businesses that often transact with international clients and partners, as a USDT payout option not only speeds up payments but also leaves room for additional savings.
5. Access
Stablecoins make an excellent medium of exchange and reach to those that don’t have convenient access to their bank accounts such as those in rural areas, or simply individuals that are unbanked. The convenience and accessibility of stablecoins make a big impact in the world of instant low-cost payments. Recently in the light of the pandemic, stablecoins have been used as a form of aid for areas impacted by natural disasters for relief to purchase goods. With difficult access to banks, it eliminated the hassle of transporting physical goods and cash.
Although Ethereum and Tether are both popular digital currencies, just like Bitcoin, the three can be very different in their function and use. As more people are leaning towards USDT as their chosen stablecoin, this opens doors for businesses to start accepting this digital currency as well as leveraging on the benefits of this stablecoin for payouts to their partners and clients or payroll to their employees and staff. Because it’s the safest digital currency by far, it’s considered low-risk with significant potential and has emerged as a tool for mainstream utilization of digital currencies payments as it’s been adopted by businesses and financial institutions all over the world.
