What are USDT stablecoins?
There are about 200 stablecoins in the world. Among the 3 thousand remaining cryptocurrencies, stablecoins have a specific feature - they are usually provided with real values. In other words, the value of each stablecoin is tied to the value of a specific underlying asset.
Stablecoins are designed to give the cryptocurrency industry more stability and balance, reducing extreme volatility indicators.
The types of stablecoin
There are 4 types of stablecoins (there may be other classifications):
- Stablecoins provided with fiat money
As a rule, they are based on the American dollar. Example: Tether (USDT), TrustToken (TUSD). Stablecoins based on the euro or Japanese yen are not popular in practice.
- Stablecoins provided with the main cryptocurrencies
These assets are usually tied to Bitcoin or Ethereum. They have a greater degree of decentralization, but less stability than fiat-based stablecoins. Examples: BitUSD, DAI.
- Stablecoins provided with physical values
An example is EL Petro. Stablecoin issued by the Venezuelan government and provided with the country's energy and mineral resources.
- Algorithmic stablecoins
Exotic assets operating on the principle of seigniorage. In simple words, new stablecoins are automatically issued when the demand for them increases. This keeps their cost stable. Example: Basecoin, Carbon.
While the financial world is still awaiting the release of stablecoins such as Libra (Facebook project) and JPM Coin (JP Morgan banking conglomerate project), Tether is by far the most famous and popular stablecoin. It has an exchange ticker USDT, and is tightly tied to the value of the American dollar in a 1:1 ratio.
USDT, or Tether, was created in 2015 by Tether Limited. The first issues of USDT amounted to more than 2 billion tokens. All of them are actually secured by dollars and bonds in the bank accounts of the parent company and its partners.
Tether is released on the Omni Layer platform, which exists as an add-on to the Bitcoin blockchain.
USDT is prominent on the shared cryptocurrency map. The stablecoin price is steadily at $ 1, while the USDT stablecoin capitalization is constantly growing - at the beginning of 2020 it exceeded $ 6 billion (2 times more than in 2018).
Advantages of USDT
- Reference stability. USDT stablecoins are stably quoted in the ratio of 1:1 to the US dollar. Tether is virtually unshakable when compared to the volatility of major cryptocurrencies
- Convenience and ease of perception. Since actually stablecoin has the same value as USD - there is no difference what to have in your account - dollars or Tether. Are you used to measuring everything in dollars? You will not notice that you switched to USDT.
- The high degree of protection. Since all the dollar reserves are held by the company that produces Tether, hacking the system is almost impossible. This nullifies the usefulness of hacker attacks.
- High speed of mutual settlements. Tether move between counterparty accounts so quickly that there is no need for clearing pauses.
- The cost reduction due to the blockchain ultimately leads to savings in commission and administrative costs for traders and investors, as key users of the system.
- An alternative to capital storage and hedging financial transactions
Considering the undeniable advantages of stablecoins and guided by the final benefit for its customers, Coin Market Solutions tokenized assets exchange has introduced Tether as the most reliable and stable unit in the mutual settlement system.