The “stablecoins” are a special class of cryptocurrencies designed to counteract the high volatility experienced by the cryptocurrency market. One of the best-known cryptocurrencies within this category is USDT (Tether). However, this cryptocurrency causes some unknowns for new users, such as where did this cryptocurrency come from? What are its main characteristics? For this reason, we will learn more about this cryptocurrency in this article.
What is USDT?
USDT is a stablecoin created and developed by the Tether company. Its main objective is to mobilize money safely, protecting it from the well-known “volatility” that the cryptocurrency environment presents since, being a stablecoin, it will always maintain the fixed value of the FIAT currency or the value that it has adopted from the beginning. At its creation, the relationship with that value will generally be 1 to 1. Regarding the name of this cryptocurrency (USDT), we must highlight that it arises from the union of the financial symbol of the US dollar (USD) and the initials of the company that created it: Tether (T). Its name was associated with the US dollar because its value will always be equal to 1 USD.
USDT History
The project arose from the Mastercoin blockchain, which served as the main communications protocol, capable of running on Bitcoin and creating a series of “layers” that allowed other crypto assets to be executed. Building on the potential of Mastercoin, Brock Pierce, Craig Sellars, and Reeve Collins (members of the Mastercoin Foundation) launched Realcoin, a project that worked using the Omni Layer protocol and could work through the Bitcoin blockchain.
Thanks to the Omni Layer protocol, which was executed on a second layer of the Bitcoin blockchain, operations could be carried out with representations of any type of asset. At the end of 2014, specifically on November 20, Reeve Collins (CEO of Tether) announced that Realcoin would change its name to Tether, and three stablecoins were created: USDTether (USDT), EuroTether (EURT) and YenTether (YENT).
In September 2017, Tether launched additional ERC-20 tokens equivalent to US dollars and euros on the Ethereum blockchain; Tether was able to have a presence in the two largest and most recognized blockchains worldwide: Bitcoin and Ethereum, which boosted the presence of Tether on some trading platforms, which increased its popularity. Since then, USDT has become one of the most prominent cryptocurrencies in the sector, which is reflected in its representation (approx. 75%) in Bitcoin trading.
Main features of USDT
Since its creation, USDT has worked on a second layer of a chain of blocks, making use of the Omni Layer protocol, which allows it to benefit from the capabilities and properties of the tokens of said chain of blocks. Furthermore, this protocol can create or destroy digital tokens (NFTs) represented as metadata within the blockchain. It is important to note that USDT tokens cannot be (created) and will only be created if the Tether ecosystem deems it necessary.
A very important feature of USDT is that its transaction record is public, and it has a transparent website. In this way, the platform aims to offer greater peace of mind to the community using this stablecoin. Tether has created a system called Proof of Reserves, which allows the “Tether Equivalency” to be carried out through the “accounting cross” of the blockchain and its bank accounts. In this way, the system can ensure that the 1:1 ratio will be maintained, a fundamental characteristic of this stablecoin.
This equivalency (1:1) is achieved through your trust asset reserve; For example, for each USDT issued, it is claimed that there is an equivalent amount of US dollars in a bank account that “backs” said value. This reserve undergoes a series of periodic audits to ensure the system’s transparency and to verify its correspondence with the total number of USDT tokens in circulation.
Currently, USDT allows its users to carry out (securely) transactions and store links and other digital assets through all the platforms in which it has a presence: Bitcoin, Bitcoin Cash, Omni, Ethereum, Algorand, Statemine, TRON, Polygon, Tezos, Solana, Avalanche, Polkadot, OMG, EOS, Liquidity Network, SLP, among others.
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