What is USDT (Tether) And Why Use It in 2022?
Stablecoins have been around for a while and if you’re up to date, then you’ve heard of USDT and its groundbreaking volume. But what is USDT’s importance in your life and how can you make it work for you? This article explores
this question and more.
To understand USDT Let’s begin by understanding what a stable coin is.
What is a Stable Coin?
A stable coin is a type of cryptocurrency that’s pegged to other stores of value like fiat currency, other cryptocurrencies or even commodity money like gold. The idea is that the value of these other assets would support the value of the stable coin and reduce volatility.
How Stablecoins Work
Demand and supply dictate the value of cryptocurrencies such as Bitcoin. This means that if more people believe it’s valuable, then it is. On the other hand, if fewer people believe in its value, then, its value drops. Factors like the opinion of the media, a government’s opinion and even how the average person feels about the coin could influence its value in the market.
The volatility quality makes a cryptocurrency like Bitcoin a perfect fit as an investment asset but not as a medium of exchange for day to day transactions.
On the other hand, stable coins enjoy stability because they are pegged to assets that have relatively strong stability. This makes them better suited for day to day transactions and as a store of value.
Types of Stablecoins
a. Fiat-backed stablecoins: These stablecoins are tied to fiat currencies. When the currency’s value rises, so does the stablecoin.
b. Crypto-backed stablecoins: Stablecoins whose values are tied to cryptocurrencies
c. Asset-backed stablecoins: These coins are tied to other famous assets (including oil, gold, silver, etc.)
The primary thing to note is that a stablecoin’s value is driven by that of its underlying currency. So, if a stablecoin is tied to the dollar, its value can’t go higher than $1.
The most popular stable coins are backed by strong fiat currencies like USD, GBP and Euro. But there are a few others that are backed by other asset types. An example is MakerDAI that’s backed by a mix of decentralized crypto assets.
Like USDT, other US Dollar backed stable coins include Gemini Dollar (GUSD), TrueUSD and USDCoin.
What is USDT (Tether)?
USDT is a stable coin that’s pegged to the United States Dollar (USD). It has a 1:1 ratio with USD. This means that 1 USDT is approximately 1 USD.
The currency is managed by Tether Limited – a crypto company based in Hong Kong. Whenever Tether Limited creates a new USDT, the company saves $1 in a bank account.
This way, USDT investors can always convert the coin back to the dollar whenever they want.
USDT was created as a solution to volatility, a challenge many people face with cryptocurrencies. Volatility is the rate at which the price of a coin changes. So, using cryptocurrencies as a store of value or means of exchange can be risky. But volatility proves an advantage for traders and investors.
USDT doesn’t run on its own blockchain. It is hosted on the Ethereum blockchain. You can buy USDT in less than 5 minutes on Bingtellar.
Now, let’s get it to the technical stuff and move on to practical uses of USDT.
But Why Use USDT Instead of USD?
Just like cryptocurrency, Tether created USDT to be decentralised. So, no single individual or organisation controls it.
One of the advantages that USDT has over USD is that it cuts the access time and reduces the access period. Depending on the country you are in, getting USD might require going to your bank and spending valuable time filling forms. But with USDT, in as little as 5 minutes, you can exchange your local currency for it and execute the transaction you have in mind.
Another advantage that USDT has over USD is the fact that it cuts across barriers. Because USDT is a digital currency, organisations and individuals that support cryptocurrency accept it. While USD is limited to countries like the USA where it’s a legal tender, USDT has a much wider borderless reach.
Why Was USDT Created?
USDT was created in July 2014 as RealCoin. But, Tether Limited rebranded it in November of that year and changed its name. The coin officially started trading in February 2015.
USDT was primarily created to be a stable version of Bitcoin. While Bitcoin’s price can change at any time, USDT stays pretty much the same.
These days, investors use USDT to serve as a crypto equivalent of the dollar. So, instead of trading their coins against the actual dollar, they just trade against USDT instead. Since USDT is a cryptocurrency, transactions using it will be much cheaper.
Thanks to its stable price, USDT serves as a hedge. This means that it can be used to protect you against market volatility. Take this example:
a. You buy 1 Bitcoin today at $40,000
b. In three days, Bitcoin’s value rises to $50,000. You just got $10,000 richer!
c. But, coin prices start to drop and you decide to sell at $48,000
d. You can convert your Bitcoin to USDT. So, it’s much easier to buy the dip
e. USDT is better because your transaction will process quickly – unlike a Bitcoin-to-dollar transaction.
f. When you want to buy Bitcoin again, you can easily move your cash from USDT.
How Does USDT Work?
USDT is a bridge between fiat currency and cryptocurrency.
To get a better picture of this, let’s say Jane, a Nigerian isn’t happy with the way the Naira fluctuates. So she wants to keep her money in a form that won’t fluctuate. She also wants to be able to do it on an app from the comfort of her home and convert back to Naira anytime she wants.
She could also want a currency that allows her to pay her business supplier in South Africa or send some money to her niece in Japan. She wants to conveniently do all this in as little as 30 minutes without ever stepping into a bank.
By now, just looking at all the normal steps she would have to take, has probably given you a headache. But with USDT, all she has to do is buy USDT equivalent to the amount she wants to pay out, and send it to her suppliers. They can quickly exchange it for their local currency on an exchange and Jane can sleep peacefully knowing tat the value of the money she sent hasn’t reduced.
How Does USDT Stay at $1?
So, we’ve explained that USDT is a stablecoin whose value is tied to the dollar. This means that the coin’s value can’t surpass $1 – although it might go lower than that price from time to time.
How is this possible?
Tether Limited – the company behind USDT – keeps $1 in the bank for every one USDT that is issued. This is what makes USDT so great, instead of buying Bitcoin for the actual dollar, you can use USDT as a representation of that dollar instead. So, while USDT’s value fluctuates, it holds at $1 for most of the time.
What is USDT Used For?
The main uses of USDT include:
1. Trading & Hedging
USDT’s primary use is to make cryptocurrency trading cheaper and easier. In fact, most Bitcoin trading is done using USDT. While many people invest in USDT, it’s mostly to help hedge against crypto volatility. When they think that coins will dip, they can easily move to USDT and save themselves.
USDT can also help with making transactions and payments – like every other cryptocurrency. Sending fiat money overseas is slow and expensive, even though the value remains the same. If you use crypto, volatility might affect the money’s value- even though transactions will be much faster. Stablecoins like USDT combine the benefits of fiat and crypto. Your transaction will process quickly, and the value won’t be affected by volatility. So, primarily, these are the groups of people who use USDT the most:
a. Foreign investors who need USD bank accounts
b. Crypto traders who want to maintain their accounts in crypto and not move to cash
c. Crypto traders looking to enjoy low trading fees
Who Uses USDT?
USDT is useful to different sets of people. However, the most popular groups are:
a. People looking to convert their money into dollars
b. Crypto traders looking to sell their coins
c. People trying to send dollars overseas without banks
d. Foreign investors without American bank accounts
e. Crypto traders trying to trade with lower fees
Benefits of USDT
USDT is a breath of fresh air for anyone who either trades crypto or deals with an unstable local currency. You might be asking why you should invest in USDT since its value is tied to the dollar. Here are some benefits to consider:
1. Quick Transactions Making deposits in the dollar usually takes up to 4 business days. It takes even longer if the transaction occurs on a weekend. With USDT, you can make transactions in minutes – great for traders
2. Cheap Transactions We all know how expensive international transfers are. USDT charges much less, and you can even make free transfers when you use Tether wallets.
3. Price Stability & Sidelining USDT’s value is stable. You don’t have to deal with volatility or price swings. If you’re a trader and would like to take a break from volatility, use USDT as a “get out of jail free” card. Thanks to its stability, USDT allows you to take a neutral spot in the market. It’s a great way to “cash out,” but still have your money ready to take advantage of opportunities.
4. Protection From Volatility Because USDT is a stable coin, it is way less volatile. You can hold USDT and not have to worry about price fluctuation which is common with most cryptocurrencies. Imagine you’re trading Tron and you make some profit but the price starts going down. Selling it for your local currency may take a while to process and because your currency fluctuates too, this isn’t the best option for you. The best thing would be to convert to a stable currency like USDT until the price of Tron stops dropping. This way, you save time and protect your profit.
5. Shields Against Inflation and Currency Devaluation People who live in countries with weak currencies or currencies with high inflation rates need help staying afloat. And what is USDT if not an inflation lifejacket? Since it has the same value as the US dollar, you have a better chance storing your money in USDT than leaving it in a devaluing currency. For example, people who bought USDT in January at 360 can sell it for more than 450 today because the Naira has lost value in that period. These people have been able to protect their money from this value loss.
Which Currencies Can Be Protected Using Tether?
USDT can be used to protect any currency. As long as you’re trying to convert your money to the dollar, USDT is a great way to go.
One of the best things about USDT is that you can buy as much as you want. Today, many countries have limits on how much dollars you can get from commercial banks. So, you could go to a bank and be told that you can’t get more than $5,000 a month if you convert money. If you’ve got $10,000 worth of your local currency, you could be stranded.
USDT fixes this. You can take your local currency and use it to buy USDT, and you won’t need to deal with the bank limits.
How to Convert Normal Money to USDT
Converting money to USDT is fairly easy. All you have to do is get your money to a local cryptocurrency exchange (like Bingtellar ) that supports USDT, and you’ll be able to make a conversion in minutes. Just open an account, deposit your cash, and you can make your conversion.
Is USDT Safe?
USDT has been around for a few years now. People have been using the coin to convert their cash to dollars and back, and there haven’t been many complaints about it. Through trillions of dollars in transactions and trades, USDT has stood firm as a great hedge for currency risk.
How to Buy and Sell USDT
You can buy and sell USDT on Bingtellar in the following simple steps:
1. Click on get started
2. Select either "Buy" or Sell" depending on your transaction need
3. Enter email address and Phone number
4. Select the cryptocurrency you want to trade
5. Enter the recipient’s account details
6. Enter the amount you want to trade in NGN, USD, USDT or BTC.
7. Select the continue option
8. A transaction reference ID would get generated, copy it and click “continue”
9. Bingtellar generates a unique crypto wallet address for just that transaction
10. Enter the recipient’s account details
11. Send the cryptocurrency to the copied wallet address.
12. Complete the transaction by clicking on the “I’m done”
13. The Fiat or crypto equivalent is automatically credited to the recipient’s account.”
Easy, fast and secure.
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