Tether (USDT): The Stablecoin That Powers Crypto Liquidity
Tether, known by its ticker USDT, is the oldest and most widely used stablecoin in the world. It tracks the US dollar almost 1:1 and dominates stablecoin volume across centralized exchanges, DeFi protocols, and payment rails. Yet, while Tether brings unmatched liquidity, it’s not without controversy.
So, why is USDT still everywhere? And what does it actually run on?
Let’s break it down.
What Is Tether (USDT)?
Tether is a centralized stablecoin pegged to the US dollar. It was created to solve a fundamental problem: crypto traders needed a digital asset that held its value in fiat terms without constantly moving up and down.
Since its inception, USDT has become the base trading pair for most cryptocurrencies on major exchanges. And despite constant scrutiny, it remains the most traded crypto asset by volume — even more than Bitcoin.
How Tether Maintains Its Peg
Tether claims to back every USDT token with reserves. However, unlike some transparent alternatives, those reserves include more than just dollars sitting in a bank. According to their public reports, the reserves consist of:
Short-term Treasury bills
Cash and bank deposits
Commercial paper (historically)
Precious metals and other assets
These reserves are managed by Tether Limited, which issues and redeems USDT tokens through its own systems. When large players redeem USDT, tokens are burned. When new ones are minted, they enter circulation through partner platforms and exchanges.
Where USDT Lives
USDT isn’t just on one chain. It started on Bitcoin via Omni, but has since expanded across multiple blockchains, including:
Ethereum (ERC-20)
Tron (TRC-20)
Solana
Polygon
Avalanche
Arbitrum and Optimism
This multi-chain presence makes it extremely flexible and fast to move, depending on the network used.
Why USDT Dominates the Market
There’s a reason USDT is still the dominant stablecoin, even with competitors offering better transparency. Here’s what keeps it at the top:
Unmatched liquidity across major exchanges
Extremely high trading volume for crypto pairs
Long-term network effects and deep integration
Support for dozens of blockchains
Stable user experience despite public skepticism
Moreover, Tether has survived multiple legal challenges, crashes, and bear markets. That staying power has earned it a spot in nearly every trading stack.
Controversies and Criticism
Tether has been the target of serious allegations for years. Key concerns include:
Lack of real-time, third-party audits
Historically opaque breakdown of reserves
Heavy exposure to commercial paper in the past
Regulatory probes by U.S. and international authorities
Despite that, no major depegging has occurred, and redemptions continue to function. Still, the absence of regular audits keeps skepticism alive in the crypto space.
How USDT Is Used
Tether is used far beyond just exchanges. Its presence spans multiple segments of crypto:
High-frequency trading due to fast settlement
DeFi protocols like Curve, Aave, and Uniswap
Payment platforms operating globally in high-inflation regions
Remittance corridors where fiat conversion is expensive
OTC desks and crypto lending platforms
Importantly, USDT is also a go-to asset for holding value during volatility. Traders often rotate into USDT when the market pulls back.
Summary Checklist
USDT is the oldest and most used USD-pegged stablecoin
It’s backed by Tether’s reserves, including Treasuries and cash
It lives on multiple chains, with Ethereum and Tron being the most used
Tether dominates exchange volumes and crypto liquidity pools
It has faced transparency concerns but remains stable in practice
Used in DeFi, payments, trading, and remittances worldwide