💡 What is Tether (USDT)?
Tether (USDT) is a Stablecoin, a cryptocurrency pegged to a stable asset—specifically, the US Dollar. Each USDT is theoretically backed by 1 USD held in reserve, ensuring a 1:1 value ratio.
USDT is widely used on crypto exchanges to facilitate quick trades between volatile cryptocurrencies without exposure to price fluctuations. It eliminates the need for frequent conversions to fiat currencies like USD or EUR.
History of Tether
- Launched in 2014 as "Realcoin," rebranded to Tether later that year.
- First USDT issuance occurred in October 2014, with trading commencing in 2015.
Key Milestones
| Year | Event |
|---|---|
| 2014 | Launch as Realcoin, rebrand to Tether |
| 2015 | Official trading begins |
| 2021 | NYAG settlement ($42.5M) |
Founders
- Brock Pierce: Crypto investor and co-founder.
- Reeve Collins: First CEO.
- Craig Sellars: Technical co-founder.
- Current CEO: Paolo Ardoino.
Tether Variants
- EURT: Euro-pegged.
- CNHT: Chinese Yuan-pegged.
- MXNT: Mexican Peso-pegged.
- XAUt: Gold-backed (1 token = 1 oz LBMA-certified gold).
How Does Tether Work?
Stablecoin Mechanism
USDT is a centralized, collateralized Stablecoin backed by reserves including:
- Fiat currencies.
- Short-term securities (e.g., U.S. Treasury Bills).
- Other liquid assets.
Multi-Chain Availability
USDT operates as a cross-chain token on:
- Ethereum (ERC-20).
- Tron (TRC-20).
- Solana (SPL).
- (Omni Protocol on Bitcoin was discontinued).
Minting and Redemption
- Minting: Users deposit USD → Tether issues equivalent USDT (1:1).
- Redemption: Users return USDT → Tether burns tokens and refunds USD (1:1).
Reserve Management (Dec 2024)
| Asset Category | Amount (USD) |
|---|---|
| U.S. Treasury Bills | 94,471,651,607 |
| Reverse Repurchase Agreements | 17,179,075,788 |
| Money Market Funds | 6,506,444,067 |
| Total Reserves | 143,704,755,547 |
👉 Explore Tether’s latest transparency reports
Applications of Tether
Primary Use Cases
- Trading: Major trading pairs (BTC/USDT, ETH/USDT).
- Store of Value: Hedge against inflation (e.g., in Turkey).
- DeFi: Liquidity provision, lending collateral.
Buying and Storing Tether
Where to Buy
- Exchanges: Bitvavo, Bitpanda, Kraken.
Steps:
- Deposit fiat (EUR/USD).
- Convert to USDT.
Best Wallets
- Hardware: Ledger Nano S Plus, BitBox02.
- Why? Offline security for long-term holdings.
Tax Implications (Germany)
- Short-term gains (<1 year): Taxable.
- Long-term gains (>1 year): Tax-free.
Tether Staking
USDT itself does not support staking, but platforms offer:
- Yield farming via DeFi protocols.
- Lending for interest (e.g., Aave, Compound).
👉 Compare crypto lending rates
Risks and Criticisms
Pros vs. Cons
| Pros | Cons |
|---|---|
| Price stability | Reserve transparency |
| High liquidity | Regulatory scrutiny |
| DeFi integration | Centralization risks |
Transparency Concerns
- Past audits incomplete.
- 2021 NYAG settlement highlighted reserve mismanagement.
Our Verdict on Tether
Key Takeaways
- Dominant Stablecoin: Critical for crypto trading liquidity.
- Global Utility: Used in hyperinflationary economies.
- Controversies: Ongoing doubts about reserve backing.
FAQs About Tether (USDT)
1. What’s the purpose of Tether?
Tether provides stability in crypto markets by mirroring the USD, enabling risk-free asset parking.
2. How does Tether make money?
- Interest from reserve investments (e.g., Treasury Bills).
- Redemption fees.
3. Is Tether safe?
Generally stable but criticized for opaque reserves. Depegs are rare but possible.
4. What is a USDT depeg?
When USDT’s price deviates from $1 due to market distrust or liquidity issues.
5. Is USDT legal in Germany?
Yes, but short-term gains are taxable. MiCAR-licensed exchanges cannot list it.
Further Resources
- Official Site: tether.io
- Transparency Reports: tether.to/en/transparency
- Twitter: @tether_to