USDT: Unveiling the Truth Behind the King of Stablecoins

When it comes to stablecoins, you can’t avoid talking about USDT (Tether). This token, pegged 1:1 to the US dollar, has firmly secured its spot as the third-largest cryptocurrency by market cap, just behind BTC and ETH. But do you really understand how it works?

The Core Mechanism Is Simple

USDT is essentially a digital dollar: for every 1 USDT issued, Tether deposits an equivalent amount of assets (worth 1 USD) into a bank account as backing. This centralized collateral model makes USDT somewhat more “trustworthy” than stablecoins maintained solely by algorithms.

Currently, USDT is widely implemented across major blockchains like Ethereum, Tron, and Solana. This broad deployment enables fast cross-chain transfers and low fees—after all, everyone wants to use the cheapest chain for transactions.

Plenty of Controversy, But Its Dominance Remains

To be honest, USDT’s history is a bit messy. Tether originally claimed 100% cash reserves, but later had to admit that non-cash assets were also included. This led to a slew of legal disputes and crises of trust.

However, in early 2024, Cantor Fitzgerald CEO Howard Lutnick publicly vouched for Tether, saying the company does have those funds (with assets reaching $86 billion as of June 2023, covering $83 billion in USDT circulation), which somewhat eased market concerns.

Why Is It Still the Most Popular?

Just look at Brazil: 80% of local crypto transactions are settled in USDT. In DeFi, cross-border payments, and crypto-to-crypto trading, USDT remains the top choice.

FIN: The stablecoin boom is just beginning. Despite the controversies, USDT is still the most useful option. As long as there are no major issues, its dominance is unlikely to be shaken.