The stablecoins or stable cryptocurrencies arrived to change the way in which we mobilize and protect our money from the volatility of the rest of the cryptocurrencies. That is precisely one of the functions of USDT, a cryptocurrency that is always worth a dollar and that we invite you to learn about.
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SSurely you have heard the name of USDT in the listings of cryptocurrencies, and you have wondered What is USDT? Well, USDT is a stablecoin or stable cryptocurrency created by the company Tether.
Una stablecoin It is a cryptocurrency that maintains a fixed value with respect to a fiat currency high value, a cryptoactive or some commodity. And it is that regardless of which fiat currency or security has been chosen, a stablecoin will maintain a 1:1 relationship with it. That is the main difference between stablecoins and other cryptocurrencies whose volatility is part of their nature.
In the case of USDT, it has been created with a 1:1 parity with respect to the dollar. This means that 1 USDT will always have a value equal to or very close to 1 $ USD. further the name of USDT comes from uniting USD (financial symbol for the dollar) with T (for Theter). However, the implications of creating a stablecoin are many and Tether has created a large ecosystem around it. This has allowed them to not only evolve as a company, but to demonstrate the transformative potential of USDT at the same time.
Although USDT is the stablecoin with the most transactions, it also has some shadows: inconsistencies in its audits, auditors publicly resigning stating that it is impossible to determine the veracity of the accounts, bank in Taiwan where financial regulation is really weak, instant coin issuances, a tangle of companies behind them seeming to want to hide the trail, multiple lawsuits, unfavorable reports against them, enormously inflated volumes of operation tripling the capitalization of the coin... There are many reasons and in this document we will also leave you links to them at final.
USDT History
The idea that led to the creation of USDT began to develop in the minds of JR Willet in 2014. JR Willet is known in the world of cryptocurrencies as "The man who created the ICO«. In 2014 Willet worked in Mastercoin, a blockchain that served as a communications protocol that works on Bitcoin. With Mastercoin it was possible to create a series of layers over Bitcoin in which it was possible to execute other cryptocurrencies or Tokens. This was quite a revolution for Bitcoin and opened the doors for new applications and features.
In the development of Mastercoin, they were Brock Pierce y Craig Sellars. Both were members of the Mastercoin Foundation and they believed that the enormous potential of the project was enough to build something very ambitious. In that sense, in 2014 Pierce and Sellars introduced a new project called Realcoin which was launched using the protocol Omni Layer, the evolution of the well-known Mastercoin.
Using the Omni Layer, Pierce and Sellars were able to launch Realcoin through the Bitcoin blockchain. This was possible because Omni Layer allows operations with representations of assets. This means that tokens representing any type of asset can be generated, sent, exchanged, redeemed, paid dividends and bets. All this, working on a second layer built on Bitcoin and operated directly by the Omni protocol.
The appearance of Realcoin would be one of the biggest projects carried out on Omni at that time. However, Realcoin would later change its name. On November 20, 2014, the CEO of Tether, Reeve collins, ad that the project would be renamed "Tether«. At that time, he also indicated the creation of three coins: USTether (USDT), EuroTether (EURT) and YenTether (YENT).
In this way, Collins presented to the world the birth of three stablecoins, kicking off the history of USDT and its sister coins.
Start its adoption on trading platforms
The project began to rapidly gain popularity at the end of 2014. This is how in early 2015, Bitfinex you decide to add USDT and its sister cryptocurrencies to your platform. However, this situation was quickly clouded by the partnership between Bitfinex and Tether Holdings Limited. The truth is that Tether Limited, the company responsible for the token and based in Hong Kong, is a subsidiary of Tether Holdings Limited.
Despite this, USDT and its sister tokens began to gain increasing popularity. Amid its evolution, in June 2017 it was announced that USDT could be used on top of Litecoin's Omni layer. However, this project is currently abandoned due to the lack of interest in developing the protocol on Litecoin. Despite this, the advance would not stop there. A few months later, in September 2017, Tether ad that would launch ERC-20 tokens additional for US dollars and euros on the blockchain Ethereum.
Thanks to this, Tether was able to bring its tokens to the two largest blockchains (Bitcoin and Ethereum). Which boosted Tether's presence on trading platforms quickly. This to the point that today, USDT trading represents about 80% of all Bitcoin trading. Thus USDT has become one of the crypto world's most important cryptocurrencies. Which has led him to occupy a place among the ten great cryptocurrencies in the world.
At the moment, within Tether we can find:
- USDt, the token representing the US dollar.
- EURt, which represents the euro.
- CNHt, which stands for the Chinese yuan.
- MXNt, which represents the Mexican peso.
- GBP, which stands for the British pound.
- Gold, which represents gold.
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Why was this cryptocurrency created?
Now surely you are wondering how useful can be a cryptocurrency that is worth the same as the dollar. Especially if we have the dollar and electronic payment options that use that currency. Well, the truth is that a stablecoin like USDT makes a lot of sense if we consider the following:
- It does not limit you when making a transfer. USDT enjoys all the advantages of a normal cryptocurrency. This means that you can send USDT anywhere in the world without major problems and with low commissions.
- It allows exchanges to maintain a high degree of liquidity and protection against the high volatility of cryptocurrencies.
- It offers a means to protect investments from traders within an exchange platform. For example, a trader can carry out cryptocurrency buying and selling and at the end of his trades he can convert his balance into USDT. In this way, it protects itself against the fluctuation of cryptocurrency prices until it operates again.
- It offers a secure payment platform in terms of volatility. This is due to the fact that the cryptocurrency always maintains its value of one dollar, which makes it ideal for payment systems where volatility is not desirable, but you want to use a cryptocurrency.
Technical characteristics of USDT
USDT is a quite particular cryptocurrency technically speaking. First, its operation is directed and orchestrated on the Omni protocol, that runs embedded on a blockchain. As a result, This cryptocurrency inherits the properties of the tokens of said blockchain and benefits from the capabilities it offers.
On the other hand, the Omni protocol can grant (create) and revoke (destroy) digital tokens represented as metadata embedded in the blockchain. USDT currently runs on Ethereum, EOS, TRON, Algorand, SLP, Avalanche, omni, Polygon, tezos, Solana, Polkadot, Bitcoin Cash, Statemine, OMG y Liquidity Network. It also allows users to transact and store links and other assets. All this means that USDT tokens cannot be mined and they are only created according to the needs of the ecosystem by Tether.
On the other hand, Tether takes transparency very seriously. The USDT transaction log is public and there is also the transparency website. All this in order to offer peace of mind to the community that uses stablecoin. This has led to the creation of the call Proof of Reserves. This system unites blockchain accounting with the accounting of your bank accounts to lead to what is known as "Tether Equivalence". It is this equivalence that ensures the 1: 1 collateralization ratio.
Money flow and tokens in USDT
One of the main technical characteristics of USDT is given by the way in which the flow of money between tokens and fiat currencies is managed. This is a process that broadly can be divided into five stages. These stages have specific functionality and are as follows:
- First, the user deposits a certain amount of dollars in the bank account of the Tether Limited company.
- Tether Limited then generates and credits the USDT tokens to the user's account. These are created in a 1:1 ratio with respect to the deposit made.
- Then, already with the active USDT funds, the user can use them like any cryptocurrency.
- In order for the user to exchange their USDT tokens, they must deposit them in Tether Limited accounts to exchange them for dollars.
- Finally, Tether Limited destroys the USDT tokens and sends fiat currency to the user's bank account. Users can also obtain other currencies or cryptocurrencies using other means of exchanges.
How to use this cryptocurrency?
The process to use USDT is quite simple, but it requires certain steps that are not necessary with other cryptocurrencies. First of all, to access the USDT tokens from their origin it is necessary to go to the official Tether website and register. This step requires a full KYC process in which you must identify yourself by revealing your real data. From name, contact forms and address, to financial data. This information is required if you want to "buy" this cryptocurrency from its official website. Another way to obtain Tether is by buying it on exchanges. At this point, the exchange will also ask you for a complete KYC with which you will reveal your identity to third parties.
To handle transactions you need A wallet or purse. At this point, you have options like Coinomi, Exodus o Atomic, but you can also use a hardware wallet. In any case, with this type of wallet you can use USDT without problems.
Advantages and disadvantages of USDT
Advantages of USDT
- Its price is stable. In the case of USDT, its value is 1 USDT equal to 1 $ USD.
- Your transactions are very cheap. For example, if you send money from one USDT account to another, there are no transaction fees. But if you want to transform USDT into other cryptocurrencies or fiat currencies, you will pay a small commission.
- It is a highly integrable currency. USDT is especially easy to integrate into exchanges. As a result, virtually all exchanges offer pairs to trade.
- It greatly facilitates the task of protecting the funds of traders and businesses interested in working with cryptocurrencies, as it allows you to quickly exchange more volatile cryptocurrencies like Bitcoin into a stable cryptocurrency.
Disadvantages of USDT
- There are doubts about whether the Tether company actually maintains a 1: 1 collateralization between the USDT tokens and their bank reserves. This is because it has never been possible to carry out a complete and public audit of this system. Due to this in 2017, USDT faced a difficult situation in which its value had well below the 1: 1 ratio with the dollar, falling to 0,9: 1. Likewise, the Tether company has been involved in several scandals such as the Bitfinex hacking scandal and even the one suffered by Tether itself, both with millions of losses.
- It has been used many times to perform fairly gray operations in crypto markets. These operations include price manipulation of other cryptocurrencies and even criminal acts. While these types of actions are not unique to USDT, the impact of this cryptocurrency more than multiplies such actions. It has even been accused of being a scam and a money laundering scheme, by not making it clear where its enormous market capitalization, which currently exceeds 68 billion dollars, has come from in such a short time.
- Tether is a company with many contradictions. First of all, it offers USDT as a 1: 1 backed cryptocurrency with the dollar, that appears on the main page of its website. However, in the legal and risk terms, it shows that they do not guarantee this claim 100%.
- It is not an anonymous currency. The fact that you have to make a bank deposit to create the tokens removes privacy and puts your data in the hands of a company.
- It is a cryptocurrency controlled by Tether, therefore it is not decentralized and its functions depend on this company.
- There is no clarity about its implementation. There is no repository on Github about its implementation in the Omni protocol. The only thing known are its smart contracts on Ethereum and EOS, the rest is not clear.