Bitcoin is the undisputed king of the crypto world as far as its market cap is concerned but it is outpaced by Tether (USDT) by a substantial margin in terms of trading volume.

Tether’s current 24-hour trading volume is at $58.8 billion while Bitcoin’s trading volume is just over $38 billion. This means USDT is currently the most traded cryptocurrency which is unsurprising because it is a stablecoin whose value is pegged to the US dollar, allowing it to play a vital role in the digital currency ecosystem. Just as the name suggests, its price remains stable even when the market goes through highly volatile phases.

USDT’s stablecoin status unlocks a lot of utility when conducting crypto transactions. For example, it provides a lot of liquidity that allows traders to sell their cryptocurrencies in exchange for Tether when prices start dropping thus avoiding the loss of value. You can even use this approach to make some gains by repurchasing more crypto using Tether when the market regains its bullishness. Investors who traded Bitcoin when it slipped below $60,000 in exchange for Tether and repurchased at $30,000 would have not only saved their investment from huge losses but also secured an opportunity for more gains.

Tether’s origins and history

Tether’s history goes back to 2012 when J.R Willet proposed the idea of using the Bitcoin protocol to develop new cryptocurrencies. The proposal led to the creation of a project called Mastercoin that sought to develop a second layer on Bitcoin’s blockchain. A few members of the project set off on a mission to make their own startup known as Realcoin which leveraged Bitcoin’s second layer technology which they rebranded to OMNI layer protocol. The project was renamed to Tether in 2014 when USDT came into existence. Every Tether token is backed by a combination of dollar reserves and cash equivalents in a 1:1 ratio.

Tether is found on multiple blockchains and for this reason, the coins on each blockchain may differ in some properties from those hosted on another blockchain. For example, the Tether tokens on the Ethereum blockchains are ERC20 tokens that can be staked in DeFi to make some passive gains, while the Tether on the Bitcoin OMNI Layer blockchain offers a higher level of security and immutability.

The ERC20 version is the most common version of the USDT tokens due to wider adoption by exchanges. It is so heavily used that its transactions overwhelmed the Ethereum network in 2019 slowing it down while also causing an increase in transaction cost.

USDT makes a lot of sense for online transactions

High volatility is a common phenomenon in the crypto market and while it might be a good thing for crypto traders, it makes them less appealing for regular transactions. For example, if you sell an item worth 1 Bitcoin and then the value of Bitcoin goes down in a matter of minutes or hours, the value of your money will drop meaning you cannot afford to buy back the same item at the same price. This is why many businesses avoid cryptocurrencies but stablecoins such as USDT bypass this problem because their value remains stable.

One could argue that USDT will lose value if the U.S dollar loses value, making it just as inflationary as the U.S dollar. While this is true, users can avoid the effects of this inflation by purchasing deflationary cryptocurrencies. The entire goal of USDT is to provide a means of easily exchanging value on blockchain platforms similar to how one would use the fiat dollar to transact in the physical world.