In the world of cryptocurrency, it's hard to find someone who hasn't heard of USDT, also known as Tether. But how secure is it really? What’s the best way to buy it? And did you know it has some surprisingly powerful uses?
This guide explores everything you need to know about Tether (USDT), from its basic mechanism to practical applications and important risk considerations.
What Is Tether (USDT)?
Tether, often referred to as "U" in crypto communities, is the most commonly used stablecoin for pricing and transactions. Under normal circumstances, 1 USDT is designed to equal 1 US dollar.
Tether Limited, the company behind USDT, launched the world's first stablecoin in 2014. A stablecoin is a type of cryptocurrency pegged to the value of a fiat currency, offering significantly lower volatility compared to traditional cryptocurrencies like Bitcoin or Ethereum.
Besides Tether’s USDT, other notable dollar-backed stablecoins include USDC (USD Coin), issued by Circle and Coinbase.
The most significant risk for any stablecoin is the possibility of "depegging"—a scenario where 1 stablecoin no longer equals 1 dollar. To minimize this risk, using widely adopted stablecoins like USDT and USDC is generally considered safer.
How Does USDT Work?
To maintain its 1:1 peg with the US dollar, Tether Limited claims to hold equivalent reserves in USD or highly liquid cash equivalents (such as U.S. Treasury bills) for every USDT in circulation.
The company regularly publishes reserve reports to provide transparency. As of Q1 2024, Tether reported holding over $6 billion in excess reserves, reinforcing confidence in USDT’s stability.
Common Uses for USDT
Trading Cryptocurrencies
USDT is most frequently used as a trading pair for other cryptocurrencies. While it's possible to trade directly with fiat currencies like TWD on some exchanges, using USDT often provides more trading options and deeper market liquidity.
According to data from CryptoCompare, more than 80% of all crypto trades are conducted using USDT.
Earning Interest Through USDT Savings
Many platforms allow you to earn interest on USDT holdings through savings or lending products. The concept is similar to a bank savings account: your deposited USDT may be lent to other users, and you earn interest in return.
During bull markets, borrowing demand increases, which can drive interest rates up—sometimes exceeding 25% APY. In slower markets, rates are generally lower.
Comparing Popular USDT Savings Rates (2024)
Interest rates fluctuate frequently. The numbers below are for reference (as of August 2024) and are subject to change:
| Platform | Interest Rate | Key Feature |
|---|---|---|
| Binance Earn | 1.75% | The world’s largest exchange by trading volume |
| OKX Simple Earn | 10% on first 1,000 USDT | Top 5 global exchange, serving 180+ countries |
| Bybit Savings | 7% on first 500 USDT | Top 3 exchange with over 15 million users |
| Pionex Savings | 1.81% | Built-in trading bots and tools |
Compared to traditional bank savings accounts that offer around 2% per year, USDT-based savings can be an attractive low-risk investment option—though it’s essential to understand each platform’s specific terms and conditions.
👉 Explore more earning strategies
How to Get Started
- Register using your email or phone number.
- Complete identity verification (KYC) using a passport, driver’s license, or national ID.
- Deposit funds into your account.
- Navigate to the savings or earn section and allocate your USDT.
Cross-Border Payments
USDT is increasingly used for international money transfers. While a small network fee (around $3 on average) usually applies, it is often cheaper and faster than traditional bank wire transfers, which involve intermediaries, exchange rate spreads, and processing delays.
A typical bank transfer can take up to 3 business days, while a USDT transfer is usually confirmed within minutes.
How to Buy USDT Safely
Through a Cryptocurrency Exchange
Using a licensed exchange is the most common and secure method for obtaining USDT.
Step-by-Step Process:
- Register and complete KYC on a compliant local exchange.
- Deposit fiat currency (e.g., TWD) via bank transfer.
- Buy USDT on the trading platform using a market or limit order.
Recommended exchanges in Taiwan include MAX Exchange and HOYA BIT.
OTC (Over-the-Counter) Trading
OTC platforms facilitate direct trades between buyers and sellers. They offer more privacy and are useful for large orders that could impact market prices. However, they are generally less regulated, increasing potential risk.
P2P (Peer-to-Peer) Trading
P2P platforms connect buyers and sellers directly. Popular exchanges like Binance and OKX offer built-in P2P platforms with escrow services to enhance security. Nevertheless, users should always verify the reputation of their trading counterparty.
Which Exchange Offers the Best Value for USDT?
The best exchange often depends on current USDT pricing and fee structures. Below is a summary of popular Taiwanese exchanges (data as of August 2024):
| Exchange | Trading Fee | Withdrawal Fee | Advantage |
|---|---|---|---|
| MAX Exchange | 0.05%–0.15% | 15 TWD | Largest trading volume in Taiwan |
| BitoPro | 0.1%–0.2% | 15 TWD user-friendly interface | |
| HOYA BIT | 0.2%–1.2% (included) | 0–15 TWD | Offers up to 12% on time deposits |
It is advisable to compare real-time rates across platforms before purchasing.
Understanding the Risks of USDT
Issuer Insolvency
The collapse of TerraUSD (UST) in May 2022 is a cautionary tale. UST lost its peg and fell dramatically in value, leading to Terra's bankruptcy. The event highlighted the systemic risks associated with algorithmic and asset-backed stablecoins.
Depegging Events
In March 2023, USDC temporarily depegged after Circle announced exposure to the failed Silicon Valley Bank. USDC dropped to nearly $0.86 before recovering. Although USDT has not experienced a major depeg, the incident underscores the importance of monitoring reserve health and market sentiment.
Regulatory Changes
The proposed U.S. Stablecoin Act could impose new requirements on stablecoin issuers, potentially affecting USDT’s operational framework. Regulatory clarity remains an evolving issue.
Public Sentiment
Online communities often reflect mixed feelings:
- "If USDT collapses, the entire crypto space might follow."
- "I’ve been in crypto for three years, and my best performer was USDT, which appreciated by 10%."
- "All investments carry risk—even money in the bank isn’t 100% safe."
How to Avoid USDT-Related Scams
Scams involving USDT often mirror traditional financial fraud. Common tactics include:
- Fake investment platforms promising high, guaranteed returns.
- Phishing attacks impersonating exchange support teams.
- Social engineering through dating apps or social media.
- Too-good-to-be-true offers selling USDT below market rate.
Protect yourself by:
- Using well-known, regulated exchanges.
- Verifying platform authenticity via official websites and channels.
- Avoiding transactions with unverified individuals.
- Never sharing private keys or sensitive account details.
Frequently Asked Questions
Is USDT the same as USD?
No, USDT is a cryptocurrency token pegged to the US dollar. It is not legal tender and is not issued by a government or central bank.
Can USDT lose its value?
While designed to be stable, USDT can lose its peg under extreme circumstances, such as a loss of confidence in Tether’s reserves or major regulatory action.
What is the safest way to store USDT?
Using a reputable exchange or a self-custody hardware wallet offers a good balance between security and convenience. Always enable two-factor authentication.
How does USDT earn interest?
By lending your USDT through certified earn programs on major exchanges, you can earn interest similarly to a savings account—though with varying degrees of risk.
Is USDT mining possible?
No, USDT is not mined. It is issued by Tether Limited based on its dollar reserves.
Can I use USDT for everyday purchases?
Yes, a growing number of merchants and online platforms accept USDT. It is also used in remittances and cross-border trades.
Conclusion
Tether (USDT) remains the most widely used stablecoin in the cryptocurrency ecosystem and is likely to maintain that position through 2025. It offers utility for trading, saving, and transferring value—efficiently and at low cost.
That said, the crypto market is fast-moving and inherently risky. Always stay informed, use reputable platforms, and never invest more than you can afford to lose.