USDT: The Hidden Backbone of Cryptocurrencies – Who Is Behind It and Why Is It Considered Stable?
It is the most famous stablecoin in the world, used as a means to protect capital from the fluctuations of the crypto market. Behind this currency stands Tether Limited, a private company based in Hong Kong, managed by the same entity that operates the popular trading platform Bitfinex.
Why is USDT considered a "stablecoin"?
Because it is backed by the US dollar: meaning that every 1 USDT is supposed to be matched by 1 dollar held in the company's reserves (either in cash or in easily convertible financial instruments). This is what makes it used as a "safe haven" during periods of market volatility and widely relied upon in day-to-day trading.
How is it used practically?
- Quickly transferring money between exchanges.
- Hedging against the volatility of Bitcoin and Ethereum.
- Payment and cross-border transfers without banks.
Future USDT projects:
- Launching new stablecoins linked to national currencies such as the euro and yuan.
- Developing international payment systems that rely directly on Tether USDt.
- Expanding into the decentralized finance (DeFi) sector more broadly.
Important questions:
- Is the reserve real and genuine? USDT has faced controversy over the transparency of its reserves, but the company has begun publishing periodic audit reports.
- Can it collapse? Theoretically, any stablecoin not backed by a central bank is at risk, but Tether has maintained its stability since 2014.
