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BlogIntroduction to stablecoins: Tether
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4 min read
Posted on04.10.2023
BitcoinCrypto paymentsEthereum

In a world of digital assets where volatility can reach extreme levels, stablecoins like Tether provide stability and protection from dramatic price fluctuations. But what is the secret to this stability, and why does Tether hold its position, just behind Bitcoin and Ethereum?

 

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What is Tether?

Tether (USDT) is a steblecoin, a digital currency tied to the value of a fiat asset, in this case the US dollar. The basic idea behind stablecoins is to reduce the volatility that characterises most cryptocurrencies. Each Tether is backed by reserves equivalent to its issuance, allowing it to maintain a stable price of one dollar per one USDT.

 

Tether is often used in cryptocurrency transactions as an alternative to the dollar, allowing users to avoid the complexities associated with traditional banking systems. This has made Tether popular among traders and investors looking for a way to hold the value of their assets in a volatile market.

 

Operating principles and unique features of Tether

The main principle of Tether's operation is based on the concept of providing cryptocurrency with reserve assets that correlate to the volume of tokens issued. This means that for every USDT issued, an equivalent amount of USD or other liquid assets such as bonds, cash or short-term securities must be held in the company's reserves.

 

Another important feature of Tether is its use on the blockchains of several cryptocurrency networks, including Bitcoin, Ethereum and others. This makes USDT a versatile tool that can be used across different ecosystems without the need to convert to and from fiat currency.

 

Thus, Tether allows you to take advantage of blockchain technology while remaining within the traditional financial system. This attracts not only crypto-enthusiasts, but also those seeking to minimise the risks associated with the high volatility of cryptocurrencies.

 

How to use Tether?

 

1. Trading and investing. 

One of the key applications of Tether is cryptocurrency trading. Thanks to the stability of the exchange rate, traders can quickly move funds between assets, minimising the risks associated with market volatility.

 

2. Cross-border transfers and payments.

Tether is also widely used for international transfers and payments. Its link to the dollar makes it convenient for transactions between countries with different currencies, minimising financial losses.

 

3. Risk hedging.

Tether is actively used for risk hedging. During periods of instability in the cryptocurrency market, investors can transfer their assets into USDT, preserving their value.

 

4. Application in DeFi.

Tether holds an important place in the decentralised finance (DeFi) ecosystem. Its stable price allows USDT to be used in various DeFi protocols for lending, staking and other transactions.

 

How to store Tether?

Hardware wallets are the most secure option for storing Tether. They allow you to keep your private keys offline, which protects them from hacker attacks.

 

Software wallets also offer a high level of security, especially if they support two-factor authentication and data encryption. However, when using software wallets, it is important to be careful not to install applications from unreliable sources.

 

Other types of Tether

In addition to USDT, Tether Limited issues other stablecoins tied to different assets. For example, Tether Gold (XAUT) is backed by gold, EURT is linked to the euro, and CNHT is linked to the Chinese yuan. It is quite possible that other Tether formats will appear in the future.

 

Today, however, Tether has already become an integral part of the digital landscape due to its stability and versatility. This cryptocurrency is truly unique: its holders don't have to worry about the constant ups and downs of quotations, enjoying the predictability of their investments.