USDT (Tether)

USDT (Tether) is a stablecoin pegged to the US dollar: 1 USDT aims to be worth $1. It is issued by the company Tether and runs on several blockchains.

How it works

Tether mints new USDT when customers deposit dollars or other assets and burns it when they redeem. The price stays near $1 thanks to reserves (US Treasury bills, cash and other assets) and arbitrage: if USDT trades below a dollar, traders can buy it and redeem it for profit. The company publishes accountants' reports on its reserves, but these are snapshots on a date, not a full audit.

USDT launched in 2014 and became the most used stablecoin: exchanges quote prices in it, traders park money in it between trades, and people use it for transfers and P2P exchange. The same USDT exists on different networks, such as Ethereum (ERC-20) and Tron (TRC-20), with different fees.

There are risks too. You are trusting the issuer: the reserves need to be there, and Tether can freeze USDT on specific addresses at the request of authorities. In some countries and regions access to USDT on regulated platforms is restricted, so check the rules where you live.

Example with numbers

You sell 0.01 BTC at $60,000 and get 600 USDT. While you wait for a new entry, your balance stays around $600 instead of swinging with bitcoin. A week later BTC is at $55,000, and those 600 USDT buy about 0.0109 BTC.

Common mistake

A common mistake is treating USDT as risk-free money in a bank. It is a private company's token, its price can briefly drift from $1, and an address can be frozen. Do not keep all your savings in one stablecoin on one platform, and always check the network when sending: USDT on TRC-20 and on ERC-20 are different tokens on different blockchains.

Questions and answers

What is USDT in simple terms?

It is a digital dollar on a blockchain: a token worth about $1 that makes it easy to hold money and move it between exchanges and wallets.

What backs USDT?

According to the issuer, reserves: mostly short-term US Treasury bills, cash and other assets. You can only check this through reports the company itself publishes.

Which network should I use for USDT?

One that both the sender and the receiver support, with a fee you accept. The network must match on both sides, or the money can be lost.

USDT (Tether)

How it works

Questions and answers

Related terms

Read next