Get Familiar with USDT [Tether] – How It Works and Its Advantages?
Tether Company created USDT, a stablecoin. It is a cryptocurrency that preserves fixed value against high-value fiat currency or commodity or a cryptoactive. Tether created 1:1 parity against USD. It means 1 USDT has a value that is close to or equal to 1 USD. USDT name is derived from – Uniting USD [dollar symbol] with T [Tether]. There are multiple purposes for creating stablecoin and Tether has designed a huge ecosystem across it. It helped Tether Company evolve and demonstrate the potential of USDT.
Today, in the trading world, USDT represents 80% of every Bitcoin trade. So, USDT has become a crucial cryptocurrency in the crypto world. It has established its position amongst the world’s top ten great cryptocurrencies.
Using USDT is simple but you will need USDT tokens. You can buy it from Tether’s official website but a KYC process that includes sharing your genuine data is essential. Another way is to buy through exchanges, where you will have to share personal information [KYC process].
To deal with transactions a wallet is needed to hold the USDT tokens. You can buy a USDT wallet from ZenGo X. You can buy, trade, transfer, store as well as earn on USDT using this platform ZenGo X.
How USDT tokens and money flow is managed?
The technical characteristics of how the money flows between USDT tokens and fiat currencies are unique. You can categorize the process into five stages because each has a specific responsibility.
- In Tether Limited Company’s account, the user will deposit a specific amount in US dollars.
- The company will generate and credit USDT tokens in the user’s account. It will be in the ratio of 1:1 in terms of the dollar’s user deposited.
- The user’s account is activated and he/she can use the stablecoins like any other cryptocurrencies.
- To exchange USDT tokens into dollars or any other currencies, the user has to deposit them in Company’s account.
- The Tether Company will destroy USDT tokens and transfer fiat currency to the user’s bank account or if it is cryptocurrency then in their specific wallet.
Pros of USDT
- The price of USDT is stable because its value is closely equivalent to $1.
- Transactions are cheap. Sending funds from USDT to USDT is free but to convert USDT into fiat currency or cryptocurrency incurs a small charge.
- You can integrate USDT easily into an exchange platform, so generally, every exchange platform offers pair for trading.
- Traders can instantly exchange more volatile cryptocurrencies like BTC into stable USDT. Thus, traders can protect their cryptocurrency investment.
Cons
- USDT has been experiencing value issues about its maintaining 1:1 collateral with the dollar.
- Tether Company is involved in some scandals and suffered a huge loss.
- It is not an anonymous currency because your data is shared with Tether during the KYC process.
- Unlike BTC, USDT is not decentralized because Tether controls it.
- There is no transparency in its implementation of Omni protocol.
Fortunately, Tether has managed to stay popular because it maintains to stay at or near $1.