USDT (Tether)?
USDT, known as Tether, is a cryptocurrency stablecoin issued by Tether Limited Inc. launched in October 2014. USDT ties its value to the US dollar at a 1:1 ratio, making its price stable compared to the volatile cryptocurrency market.
How does it work?
Dollar peg: Tether Limited holds cash and cash equivalents (estimated at about $118.4 billion as of August 2024, including $5.3 billion in surplus reserves) as collateral for every USDT issued.
Supported networks: USDT can be minted across multiple blockchains, most notably Ethereum (ERC-20), Tron (TRC-20), and Bitcoin Omnicore, among other major networks.
Main uses:
1. Trading and hedging: Traders use it as a safe haven from the price volatility of Bitcoin and other cryptocurrencies.
2. International transfers: It facilitates sending money quickly and at low cost, without a banking intermediary.
3. Liquidity in exchanges: It accounts for over 70% of the trading volume among stablecoins.
Challenges and controversy:
Transparency and reserves: Despite announcements about quarterly reports, Tether has not undergone a full independent audit, raising questions about the ratio of actual cash assets versus commercial paper and secured and unsecured loans.
Fines and regulation: The U.S. Commodity Futures Trading Commission (CFTC) imposed a fine of $41.6 million on Tether in October 2021 for providing inaccurate information about covering $USDT with 100% cash.
