Cryptocurrencies like USDT, or Tether, exist in order to make our cryptocurrency investments easier to manage, easier to handle and overall safer. You might look as USDT and wonder what the point in investing is, when it’s value always seems to follow the trend of the US Dollar. There’s a good reason for this – that’s exactly what it’s designed to do.
USDT is a stablecoin, this is a type of cryptocurrency designed on the blockchain, but not as an investment token, instead, it’s a token designed to facilitate the safe investment of other tokens. This is because many cryptocurrencies are only up for sale against other cryptocurrencies, so to buy an altcoin you might be able to purchase Bitcoin first, because that altcoin isn’t able to be traded against FIAT currency. Doing this is a long process and also means the Bitcoin is subject to price fluctuations, so buy the time you buy the altcoin, you might have already lost money in your Bitcoin investment, so suddenly the altcoin becomes a less viable option.
So, with this in mind, let’s explore stablecoins a little future, according to Investopedia, there are two major types of stablecoin:
“Fiat-collateralized stablecoins maintain a fiat currency reserve, like the U.S. dollar, as collateral to issue a suitable number of cryptocoins. Other forms of collateral can include precious metals like gold or silver, as well as commodities like oil, but most of the present-day fiat-collateralized stablecoins use dollar reserves. Such reserves are maintained by independent custodians and are regularly audited for adherence to the necessary compliance. Tether (USDT) and TrueUSD are popular cryptocoins that have a value equivalent to that of a single U.S. dollar, and are backed by dollar deposits.”
The second is a crypto-collateralized stablecoin, this is one that is in line with and tethered to another cryptocurrency. The key thing to remember is that in order for this ‘tether’ to exist, an equal number of stable coins and their relative cryptocurrency tokens need to exist, it’s a one for one process, which is exactly why price stability is able to exist.
So, if you’re wondering why you should buy Tether, or indeed another stable coin, it’s because these cryptocurrencies give you access to faster and safer cryptocurrency investments, through giving you access to a means of stable money transfer on the blockchain.