USDT

Key points

• USDT is the stablecoin issued by Tether and pegged to the US dollar, with the highest trading volume in the market.
• It is present on practically every relevant blockchain and exchange, making it a common entry point for new users.
• Because it concentrates so much liquidity, it is widely used as a trading pair and as a settlement layer between platforms.

What is USDT?

USDT, also called Tether, is a stablecoin that seeks to maintain a value of approximately one dollar. It is the most widely used in the world by trading volume and serves as a liquidity benchmark across much of the market. Like other collateralized stablecoins, it exists to represent the dollar in an on-chain environment, enabling transfers and settlement without the volatility of other assets.

How it works

The issuer creates new units when it receives funds and removes them from circulation upon redemption, maintaining, according to its reports, reserves that back the total amount issued. The peg to the dollar is sustained by this mechanism and by arbitrage: when the price drifts away from one dollar, traders buy or redeem to profit from the difference, pushing the price back.

USDT circulates across multiple networks, each with its own cost and speed. The same amount can be transferred more cheaply on one network and faster on another, and moving the asset between different networks requires a bridge or intermediary. This broad presence is what sustains its high liquidity.

As an asset issued by a company, USDT is also subject to controls by the issuer, including the possibility of freezing addresses when required by authorities.

Why it matters

Because it concentrates liquidity, USDT tends to be the easiest asset to trade and convert in many markets. For a company operating international payments, it functions as a widely accepted settlement layer, which can then be converted into local currency via a crypto off-ramp. This broad acceptance reduces friction when moving value between different markets, since there is almost always a liquid market willing to trade the asset for another currency or stablecoin.

Risks and limitations

USDT has faced questions about the composition and transparency of its reserves, which fuels ongoing debate about the soundness of its backing. Add to this the risk of address freezing by the issuer, dependence on the network used, and the concentration of trust in a single issuer, all common to centralized stablecoins.