Tether (USDT) Complete Guide: A Complete Analysis of the Stable Assets of the Crypto World
Introducing Tether (USDT): A Strong Safe Haven in the Crypto World
Tether (USDT) is currently the most widely used stablecoin in the world. For those who are new to the term, stablecoin simply means 'stable cryptocurrency'. Unlike general cryptocurrencies that fluctuate by tens of percent a day, Tether is designed to maintain a value almost equal to 1 dollar at all times.
Why do we need this kind of coin? For example, let's say you bought 1 million won worth of Bitcoin and it suddenly dropped to 900,000 won. If you don't want to lose more, you can use Tether when you want to temporarily take refuge in a safe place. If you exchange it for Tether, the value of the dollar is preserved.
The biggest feature of Tether is its 'collateral system'. The company that issues Tether discloses that it actually stores 1 dollar worth of assets in the bank every time it issues 1 USDT. In theory, you can exchange Tether for dollars at any time. Of course, in reality, it is much more convenient to trade through an exchange.
• Fiat-collateralized: USDT, USDC, BUSD (actual dollar holdings)
• Cryptocurrency-collateralized: DAI, sUSD (using other cryptocurrencies as collateral)
• Algorithmic: UST, FRAX (supply controlled by algorithm)
• Central bank digital currency: CBDC (issued by each country's government)
The interesting history of Tether: From small experiments to global standards
There are many interesting stories when you look at the history of Tether. When it first appeared in 2014, it was called 'Realcoin'. At that time, the cryptocurrency market was not as big as it is now, and most people responded, ""Why do we need a cryptocurrency with the same value as the dollar?""
However, the founders' vision was clear. The Tether project, led by Brock Pierce and Craig Sellars, started with the goal of ""solving the problem of cryptocurrency volatility."" It began to grow in earnest after it was officially renamed Tether in 2015.
2017 was a turning point for Tether. As the cryptocurrency craze began, investors began looking for a safe haven to avoid volatility. From then on, Tether's trading volume began to explode. At the same time, there were many controversies, but it was also proof that its influence had grown.
What about now? As of 2024, Tether's market cap is over $90 billion, making it the third largest cryptocurrency after Bitcoin and Ethereum. With daily trading volumes reaching hundreds of billions of dollars, it has become an indispensable part of the cryptocurrency ecosystem.
How Tether Works: Understanding the Mechanism of Trust
Are you curious about how Tether maintains its value per dollar? It's simpler than you think. Tether operates on a ""reserve system."" For every new 1 USDT issued by a company called Tether Limited, it is required to hold an equivalent 1 dollar in assets.
But here's the important thing. At first, it was said to be ""100% dollar cash,"" but in reality, it holds various forms of dollar cash, US Treasury bonds, corporate bonds, and other cash assets. This part is often controversial, but Tether is trying to increase transparency by regularly releasing audit reports.
Technically, Tether is issued on multiple blockchains. It started with the Omni protocol of the Bitcoin blockchain, but now it can be used on various networks such as Ethereum, Tron (TRON), Binance Smart Chain, and Solana. Each network has different transaction speeds and fees, so you can choose the one that suits your needs.
• Ethereum (ERC-20): Most widely used, high compatibility, high fees
• Tron (TRC-20): Fast speed, low fees, high throughput
• Binance Chain (BEP-20): Optimized for the Binance ecosystem
• Solana (SPL): Ultra-fast transactions, very low fees
• Polygon (Polygon): Ethereum compatibility, low fees
Various uses of Tether: How to use it in real life
I'll give you some specific examples of how Tether can be used. The most common use is as a 'base currency in exchanges'. For example, if you bought Bitcoin when it was 50 million won and it seems like it will fall to 45 million won, you can exchange it for Tether. Then, since the dollar value is preserved, you can prevent additional losses.
Tether is also useful for overseas remittances. In particular, in regions such as Southeast Asia and South America, Tether remittances are often much faster and cheaper than bank remittances. When sending money to a friend in the Philippines, if you send it through a bank, it takes several days and the fees are high, but if you send it through Tether, it arrives in a few minutes and the fees are much lower.
Tether is also actively used in the DeFi (decentralized finance) field. You can deposit Tether on platforms such as Uniswap, Compound, and Aave and receive interest, or you can create liquidity pools with other tokens to earn profits. Of course, there are risks, so I recommend that you do your research before starting.
These days, some online shopping malls and services also accept Tether payments. In particular, cryptocurrency-related services and overseas shopping malls sometimes offer discounts if you pay with Tether. I think this usage will expand even more in the future.
| Usage | Advantages | Caution | Recommendation |
|---|---|---|---|
| Exchange base currency | Fast transaction, high liquidity | Exchange risk | ⭐⭐⭐⭐⭐ |
| Overseas remittance | Low fees, fast speed | Requires recipient wallet | ⭐⭐⭐⭐ |
| DeFi Investment | High yield possible | Smart contract risk | ⭐⭐⭐ |
| Online payment | Anonymity, fast payment | Limited use | ⭐⭐ |
Tether exchange: Where and how to trade?
Tether can be traded on a variety of exchanges. It's safe to say that almost all major exchanges support it. Domestic exchanges such as Upbit, Bithumb, Coinone, and Korbit all trade USDT. There are even more overseas exchanges. Binance, Coinbase, Kraken, FTX (currently bankrupt), OKX, etc. It's hard to count them all.
There are a few important points to consider when choosing an exchange. The first is liquidity. Tether usually has sufficient liquidity, but it's still better to choose an exchange with a lot of trading volume. The second is the network it supports. As I mentioned earlier, Tether is issued on multiple blockchains, so you need to check which network it supports.
Personally, I recommend a domestic exchange for beginners. Upbit offers Korean customer support, and you can conveniently buy Tether directly in Korean won. If you want to trade more diversely, you can also consider an overseas exchange like Binance. However, overseas exchanges are sensitive to regulatory changes, so always check the latest information.
• Check Trading Volume and Liquidity
• Supported Tether networks (ERC-20, TRC-20, etc.)
• Transaction fees and withdrawal fees
• Security level (2FA, cold wallet storage ratio)
• Customer support quality (Korean support)
• Regulatory compliance status (financial authorities approval/reporting)
Active Tether Community: A Place to Share Information
The Tether community is more active than you might think. Of course, it's not as passionate as the Bitcoin or Ethereum communities, but there's a lot of practical information being shared. In particular, information on DeFi investment and trading strategies is useful.
In Korea, Tether-related information is mainly shared on Naver Cafe, Telegram channels, and Discord servers. You can get information on how to use Tether or its yield from communities like ""Cryptocurrency Investment Cafe"" and ""DeFi Korea."" In foreign countries, you can quickly get the latest news by following the r/Tether subreddit on Reddit or the #USDT hashtag on Twitter.
There are some things to pay particular attention to in the community. Every time Tether's transparency report is released, there is an active discussion in the community. In addition, there is a lot of information that is immediately helpful in practice, such as yield information when a Tether pool is created in a new DeFi protocol or changes in gas fees for each network.
However, it is prohibited to blindly trust information from the community. In particular, there is always a trap in sweet talk like ""no risk, high yield."" The information is for reference only, and the final decision is yours.
Tether Wallet: The Key to Safe Storage
It is really important to keep your Tether safe. It is safer to move it to a personal wallet and store it than to keep it on an exchange. Since Tether is issued on various blockchains, you need to choose a wallet that is suitable for each network.
For Ethereum-based Tether (ERC-20), MetaMask is the most popular. It is easy to use and integrates well with most DeFi services. For Tron-based Tether (TRC-20), we recommend a dedicated wallet such as TronLink or TronWallet.
If you want more secure storage, consider a hardware wallet. Hardware wallets like Ledger or Trezor are completely isolated from the internet, so there is almost no risk of hacking. If you plan to store a large amount of Tether for a long period of time, a hardware wallet is the best choice.
There are also some precautions when using a wallet. First, it is important to check the network accurately. If you send ERC-20 Tether to a TRC-20 address, you can lose it forever. Also, never store your private key or seed phrase online; write it down on a piece of paper and store it in a safe place.
• Store your private key/seed phrase offline (write it down on a piece of paper)
• Check the network address accurately (don't confuse ERC-20 ↔ TRC-20)
• Beware of phishing sites (check the official website URL)
• Regular wallet software updates
• Backup files are stored in multiple locations
• Large amounts are divided into small amounts and transferred for testing
Risks you must know when investing in Tether
Just because Tether is stable doesn't mean it's completely risk-free. There are some risks you must know before investing. The biggest concern is the 'transparency issue'. There are ongoing questions about whether Tether actually holds the same amount of dollars as the issuance.
In fact, Tether has been embroiled in controversy several times. In 2021, it paid a fine of $18.5 million as part of a settlement with the New York Attorney General's Office. Also, some investors' confidence was shaken when it was revealed that it was not 100% dollar cash but comprised of various types of assets.
Another risk is 'regulatory risk'. Since governments around the world are strengthening regulations on stablecoins, there can be major changes at any time. In particular, the United States is moving to apply bank-level regulations to stablecoin issuers, so we need to watch closely.
There is also technical risk. If there is a problem with the blockchain network where Tether is issued, Tether transactions may also be affected. In addition, risks such as smart contract bugs or hacking cannot be completely ruled out.
• Issuer risk: Tether Limited's bankruptcy or regulatory sanctions
• Transparency risk: Composition and quality of actual collateral assets
• Regulatory risk: Strengthening of stablecoin regulations by each country's government
• Technical risk: Blockchain network failure or hacking
• Liquidity risk: Difficulty in exchanging money in extreme situations
• Defegging risk: From a fixed price of $1