Tether Guide

Tether Guide

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What Is USDT & How Does It Work?

 

Tether or USDT is a unique cryptocurrency in that it has been tied to fiat currency to maintain stability. This is a cryptocurrency over the Bitcoin blockchain that was released by Protocol Omni. Its value is ‘tethered’ to the US dollar’s value. The currency was developed with the goal of addressing 3 major challenges:

  •         Enable national currency transfers
  •         Enable stable Bitcoin
  •         Create options for checking

How does it work?

Tether Limited is a Hong Kong-based entity that serves as a third party for this crypto currency’s assets. It holds fiat currencies in reserve in an amount equivalent to USDT in circulation. A basic implementation helps in eliminating the complexity involved in running fiat and crypto audits. This implementation has no impact on the transparency or security of audits.

USDT works on the Omni protocol, a versatile platform that is used for many currencies and digital assets tethered to the Bitcoin blockchain. The concept is that each USDT is worth $1 and you can redeem it any time against the fiat currency.

Pros and Cons

Pros of USDT

Some of the key points working in the favor of USDT are as follows:

Transaction Times

USDT transactions take place within minutes. This is beneficial for everyone including traders who desire to trade instantly in minutes and not in days. On the other hand, USD deposits/withdrawals can take days to complete using conventional banking systems.

Value Stability

Other cryptocurrencies are known for their volatility when you decide to buy or sell them. That is not the case with Tether. Besides, many exchanges are open to taking USDT, not fiat currencies.

Transaction Charges

SWIFT transfers can be quite expensive. The fee can be very high when unsupported fiat currencies are involved. Transfers between Tether wallets involve zero fees.

You can take no position when trading or cash out and wait for the right opportunity. There is no need to risk your funds on the exchanges when waiting for the right time.

Cons of USDT

There are a few points working against USDT. These include the following:

Lack of Anonymity

Anonymity is at the core of cryptocurrencies. If you want to buy USDT, you will have to furnish documents proving your identity to open an account. Still, there are a few exchanges that allow you to open an account without confirming your identity.

Price Stability

The USDT value concept against USD seems to be ideal for maintaining price stability. However, the value of the fiat currency never remains fixed. So the concept behind Tether doesn’t always remain true. The volatility level has always been in the 2% and 3% bracket, but it never comes down to zero.

No Mining

If you want to mine Tether, there is no option. Only the company behind USDT can do so. This is most likely to maintain uniformity in value against the US dollar. Without central control, it will not be possible to maintain this stability.

How to Invest in USDT?

You can buy USDT just like other cryptocurrencies. You will have to create a digital wallet to store your cryptocurrencies. You can also purchase it directly from Tether Limited using US dollars. You can hold Tether in your wallet and sell it anytime you desire.

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