Tether (USDT) consistently ranks among the top cryptocurrencies by market cap and regularly posts the highest daily trading volume in the entire crypto market. It's become an essential tool for traders worldwide.
While critics point to crypto's volatility as a weakness, stablecoins like Tether offer a different value proposition: the speed and accessibility of digital currency with the stability of the US dollar.
What Is Tether (USDT)?
Tether (USDT) is a widely used stablecoin, a type of cryptocurrency designed to maintain a fixed value by being pegged to a fiat currency, in this case the United States dollar. Unlike Bitcoin, whose price fluctuates based on supply and market demand, USDT is meant to stay close to $1 USD, providing stability in otherwise volatile markets.
Originally launched in 2014 under the name Realcoin, Tether was rebranded and built to act as a bridge between fiat money and digital assets. It enables traders, exchanges, and users to move value quickly, reliably, and with less exposure to cryptocurrency volatility.
Because of its stability and liquidity, USDT is often used as a “parking spot” in crypto trading, when the market is unstable, investors might convert volatile tokens into USDT to preserve value without leaving the crypto ecosystem entirely.
As of 2025, Tether is consistently ranked among the top 3 cryptocurrencies by market capitalization, and its daily trading volume often surpasses that of other major tokens.
In this article, we’ll dig into how USDT works, why people use it, the risks and controversies, and how to buy and use it responsibly.
Who Created Tether?
As mentioned above Tether was initially called Realcoin when it was launched in 2014 and was created by Bitcoin investor Brock Pierce, entrepreneur Reeve Collins and software developer, Craig Sellars. It later changed its name to USTether, eventually settling on USDT.
All three co-founders have profound experience within the crypto industry, each co-founding and actively involved in several cryptocurrency and blockchain projects.
The business has also created a number of other stablecoins solving the volatility problem across numerous markets, notably a Euro-pegged Tether coin (EURT), a Chinese Yuan-pegged Tether coin (CNHT), and a gold-pegged Tether coin (XAUT).
How Does USDT Work?
Reserve Backing & Peg Mechanism
To maintain its peg (i.e. USDT = 1 USD), Tether claims each USDT in circulation is backed by reserves. These reserves include cash, cash equivalents, repos, commercial paper, U.S. Treasury bills, and other short-term assets.
In recent attestations, Tether reports that about 81.5% of its reserves are in cash and U.S. Treasuries, with smaller portions in other assets.
When demand for USDT increases, Tether issues (mints) new tokens; when demand falls, tokens can be destroyed (burned) to reduce supply. This dynamic supply adjustment helps keep the exchange rate close to 1 USD.
Blockchain Infrastructure & Multi-Chain Support
Tether does not have its own dedicated blockchain. Instead, USDT operates as a token on various blockchains, including Ethereum (ERC-20), TRON (TRC-20), Solana, Algorand, EOS, and more. This multi-chain deployment enhances accessibility and interoperability.
Transactions are handled by the underlying networks: you need to send USDT on the same chain type, or bridges/wrapping mechanisms if moving across chains. Mistakes sending USDT on mismatched chains can lead to permanent loss.
Minting, Burning & Peg Maintenance
Tether monitors supply vs demand. If too many redemptions occur, USDT supply contracts; if demand surges, new tokens are minted. The reserve assets are used to maintain liquidity for redemptions and guarantee that each USDT has backing.
To preserve the peg, Tether also relies on arbitrage: if USDT drifts slightly above $1, there’s an incentive to redeem or sell, and if it dips below, it encourages buyers. Combined with market forces and reserve backing, this helps anchor the price.
Why Do People Use USDT?
- Users often convert volatile crypto into USDT during turbulent markets to protect value without exiting the digital asset ecosystem.
- USDT is accepted in a vast array of exchanges and trading pairs, making it a preferred medium of exchange.
- Because it behaves like USD but lives on the blockchain, USDT can move quickly across borders without traditional banking friction.
- Many decentralized finance platforms use USDT as a base asset for lending, yield farming, and stable lending markets.
- In regions with unstable local currencies, USDT often provides a stable alternative for savings, payments, or transfers.
Is USDT Safe? Risks & Concerns
While USDT offers utility, it also attracts scrutiny and criticism.
Centralization & Counterparty Risk
Tether Limited acts as the central issuer. That means users must trust that the company actually holds sufficient reserves and will honor redemptions. This centralized model contrasts with fully decentralized cryptocurrencies.
Transparency & Reserve Audits
Tether publishes regular attestation reports, but has yet to provide a full independent audit by a Big Four firm in many periods.
In 2025, Tether announced it is in talks with a Big Four accounting firm to pursue a full audit.
Historical controversies include a fine by the New York Attorney General in 2021 over misrepresentation about reserve backing.
Regulatory & Legal Uncertainty
Stablecoins face evolving regulatory environments globally. Some jurisdictions may impose stricter rules, reserve requirements, or classification of USDT as a regulated instrument.
Reserve Composition & Liquidity Risk
Though cash and Treasury bills dominate reported reserves, some portion may be in less liquid assets. In times of mass redemptions, liquidity risk may strain backing.
Price Deviations & Peg Risk
While USDT is generally stable, in extreme market stress, the peg might deviate briefly. Arbitrage, reserve liquidity, and market confidence are key to restoring balance.
How to Buy, Sell & Use USDT
Buying USDT
You can acquire USDT on most major cryptocurrency exchanges (e.g. Binance, Coinbase, Kraken). Many platforms allow purchase via fiat currencies (bank transfer, card) or by trading other crypto for USDT.
In the Tap app, you can buy USDT and have it stored in your wallet, making it easier to manage alongside your other assets.
Storing USDT
Store USDT in wallets that support the relevant chain (ERC-20, TRC-20, etc.). Hardware wallets like Ledger or Trezor support ERC-20 USDT (via Ethereum).
Converting USDT to Fiat
On many exchanges, you can sell USDT for fiat (USD, GBP, EUR) and withdraw to your bank.
Using USDT for Payments or Transfers
Some platforms accept USDT as payment. You can also transfer USDT peer-to-peer across wallets quickly and globally, with network transaction fees (gas) depending on the chain used.
USDT Reserve Composition & Transparency
Tether provides quarterly transparency reports detailing reserve breakdowns, but falls short of full independent audits historically.
As of recent attestations, ~81.5% of reserves are held in cash & U.S. Treasuries, while smaller portions are in other assets.
Tether held over $127 billion in U.S. Treasuries as of Q2 2025.
Reserve composition evolves over time; Tether has reduced reliance on commercial paper and shifted toward safer instruments.
While attestations improve transparency, critics assert a full, external audit would bolster confidence.
USDT vs Other Stablecoins
While USDT remains dominant, several alternatives exist:
- USDC: Known for stricter auditing and regulatory compliance
- DAI: Decentralized, over-collateralized stablecoin
USDT held around 62–63% of the stablecoin market share as of 2025. It maintains dominance due to liquidity, widespread adoption, and support across exchanges and DeFi. However, users might opt for alternatives for perceived transparency or regulatory comfort.
Investment Considerations
USDT is not designed as a growth asset; its value is meant to remain stable. Its role is more of a utility token: liquidity provider, trading medium, and stability anchor.
That said, you can earn yield on USDT via lending platforms, DeFi protocols, or savings accounts, though returns may be modest and come with risk.
Consider that holding large amounts of USDT long-term yields little upside, and inflation or counterparty risk may erode value.
Always balance USDT exposure within a diversified strategy, rather than viewing it as an investment vehicle.
Conclusion
Tether (USDT) plays a critical role as the most widely used stablecoin in crypto, offering a digital dollar alternative that combines stability with blockchain utility. While its popularity and liquidity make it indispensable in trading and DeFi, it operates under risks tied to transparency, centralization, and regulatory shifts.
If using USDT, treat it as a tool for stability and liquidity, not speculative growth. Used wisely, USDT helps you move between crypto and fiat more fluidly, manage volatility, and access global financial systems with fewer intermediaries.
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