What is USDT? - also know as Tether [Stablecoins Explained] - Transcripts
What is USDT? What Is Tether? This is all stable coins explained simply.
Traditional cryptocurrencies are digital currencies that their value is based on supply and demand on a decentralized network.
Stablecoins, while still considered 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.
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So you've heard of Bitcoin and ethereum. Maybe even some all coins like dash or like coins. But have you heard of stable coins like U. S. D. T. Or also known as tether. In this video we're going to discuss stable coins in particular tether. So if you want to tether one oh one course this is going to be your number one resource. What's up everybody? My name is Artie with coin caso the number one Cryptocurrency exchange platform. For users in this video we're going to talk about tether and us backed stable coins.
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 considered a Cryptocurrency however are backed by fiat currencies like dollar pound euro and yen. The stable coin that we're going to discuss today is called tether. Also known as U. S. D. T. U. S. D. T. 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.
Us 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 the currency to another currency. A crypto currency. Peg 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 algorithmic lee 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 up tether limited actually has to get more currency in their portfolio to keep the price even with the U. S. Dollar. Now if you're wondering why were these stable coins even created, why do we need a Cryptocurrency that mimics the U. S. 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 6000. Like we recently saw you could alleviate that pain by buying into Bitcoin using U.
S. D. T. Or tether and trading while it moves to make money and instead of holding onto Bitcoin you can exchange it back into USd T. And wait for your next trading opportunity. It basically makes Cryptocurrency trading much faster instead of waiting for a fiat bank transaction to process us D. T. To Bitcoin or ethereum can be done instantly because it is a Cryptocurrency this is great for people that profit from Cryptocurrency arbitrage allowing them to make split second transactions from buying and selling cryptocurrencies across multiple exchange platforms like you can do on coin caso 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 skim 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 tether 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 currency 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 U. S. D. T. 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 stable 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. Subscribe to the YouTube channel. Go register at coin caso dot com and get started in Cryptocurrency trading. Thanks for watching everybody and we'll see you in the next video