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Crypto University

What is Tether and How USDT works?

So you’ve heard of Bitcoin and Etherium maybe even some altcoins like – or Litecoin that have you heard of stable coins like USDT or also known as tether in this video. We’re going to discuss stable coins in particular tether. So if you want to tether 101 course, this is going to be your number one resource.

What’s up, everybody? My name is Artie with coinCaso. The number one crypto currency exchange platform. For users in this video. We’re going to talk about tether and US backed stablecoins. I’m going to try to explain this in plain English for everybody to understand traditional cryptocurrencies are digital currencies that their value is based on supply and demand on a decentralized network stable coins while still consider a cryptocurrency. However are backed by Fiat currencies like Dollar pound Euro and Yen the stablecoin that we’re going to discuss today is called tether also known as USDT was first released by a company called tether Limited in October 2014 the concept of a stable coin and tethers view on this is that every tether coin is physically backed by one u.s. Dollar tether is actually built on the Bitcoin blockchain. So every transaction that has ever been made can be found on that ledger now how is this possible you might ask? Let’s look at the structure.

There are actually two ways to Peg a currency to another currency a crypto. Currency uses an algorithmic Peg. So for example, let’s make up a token. The Bitcoin is awesome token. It is supposed to represent one Bitcoin the more people buy it the price should theoretically go up but if it was algorithmically pegged to the Bitcoin, basically what would happen is as the price goes up the number of coins would actually be reduced to drop the price back down to what Bitcoin is worth on the other hand if selling started to occur and the price started to decrease more coins would be created causing the price to go back up and leveling out with Bitcoin. Now this would happen thousands of times per second to keep the coin as closely as possible to bitcoin with tether. However, it is backed by a fiat currency. So the more trading that occurs and the more that the price goes He’s up tether limited actually has to get more currency in their portfolio to keep the price even with the US dollar now, if you’re wondering why were these stable coins even created? Why do we need a cryptocurrency that mimics the US dollar they were actually created to shelter people from the volatility of cryptocurrencies.

For example, if you want to buy and sell Bitcoin to make some profit but on one day it’s worth $10,000 and the next week. It’s worth 6,000. We recently saw you can alleviate that Pain by buying into Bitcoin using USDT or tether and training while it moves to make money and instead of holding on to bitcoin. You can exchange it back into USDT and wait for your next trading opportunity. It basically makes crypto currency trading much faster instead of waiting for a Fiat Bank transaction to process USDT to bitcoin or etherium can be done instantly because it is a cryptocurrency. See, this is great for people that profit from crypto currency Arbitrage allowing them to make split-second transactions from buying and selling cryptocurrencies across multiple exchange platforms. Like you can do on coinCaso the cool thing about our dashboard is we show a live ticker of the prices of different cryptocurrencies across different exchange platforms. So if you have an opportunity and you see a big price difference between two exchange platforms, you can quickly buy and sell and Off the top that is arbitrage.

Unfortunately, there are several issues in regards to stable coins firstly is that it’s very hard to audit these companies to actually find out if they have on hand the money to cover the equivalent coins in circulation. For example, in 2017. Many people were selling Tethered to cash out the company. However was having trouble executing every single transaction. Thus raising a little yellow flag saying, hey does this Company actually have the amount of and see to back all the tether in circulation. The other issue with stable coins. Is that the company that started it has to have the cash on hand for client withdrawals. Now if you know anything about large quantities of money, it’s better to invest them and make a percentage on that money instead of holding it letting it sit there create dust because then it’s not doing anything for you. And the last issue that I can see with stable coins is its usefulness in the long term. Basically what I mean is that they were created. To help solve the volatility issues that we see in cryptocurrencies, but as cryptocurrencies become more and more adapted that volatility will go away and they will stable out therefore it allows people to hold onto their Bitcoins instead of cashing out and transferring it into something more stable like you sdt in the meantime. However, this is a very good option for people wanting to day trade while keeping their assets safe. But unless the United States government actually adopt a Coin as their own I don’t see stable coins lasting 20 years, but definitely for the next five, and that’s it guys.

That’s all you need to know to get started with stable coins. I hope you guys enjoyed this video, please don’t forget to like the Facebook page.