Tether (USDT) was the first stablecoin to emerge, pegged to the US dollar. Initially launched as Realcoin in 2014 by entrepreneur Reeve Collins, Bitcoin investor Brock Pierce, and developer Craig Sellers, USDT has grown to dominate the stablecoin market in terms of market capitalization. Issued by Tether Limited—owned by the operators of Bitfinex—USDT is now available across multiple blockchains, expanding beyond its original Bitcoin-based Omni Layer protocol to networks like TRON, Solana, Algorand, OMG, and EOS.
How Tether (USDT) Operates
Like other cryptocurrencies, Tether relies on blockchain technology, specifically the Omni Layer protocol. All transactions are recorded on both the Tether blockchain and its internal database, functioning similarly to Bitcoin. USDT can be used for payments where accepted or traded on major exchanges such as Binance, Kraken, and BitFinex. However, it cannot be purchased directly with USD; buyers must first acquire Bitcoin or Ethereum to exchange for USDT.
Pros and Cons of Investing in Tether
Pros
- Fiat Alternative: Simplifies transactions without traditional banking.
- Established Track Record: Active since 2014, with broad exchange support.
- Anonymity: Enables private transactions without third-party interference.
Cons
- Lack of Transparency: No public accountability for reserves or operations.
- Regulatory Scrutiny: Allegations of money laundering and market manipulation.
- Limited Divisibility: Restricts microtransactions.
👉 Why Tether remains a top stablecoin choice
Transaction Fees Comparison
Traditional SWIFT Transfers
- Average cost: **$30** (plus $20 surcharges).
- Additional fees for currency conversion.
Tether Transfers
- No fees between Tether wallets.
- Standard blockchain network costs apply.
ERC20 Network Fees
As an ERC20 token, USDT transfers on Ethereum face high gas fees due to network congestion. Post-London upgrade, priority tips incentivize faster processing. Below are withdrawal fees on popular platforms:
| Exchange | Fee (USDT) |
|----------------|-----------|
| Kraken | 20 |
| Binance | 24 |
| Crypto.com | 25 |
| Huobi | 36 |
| AAX | 8 |
| FTX Pro | Dynamic |
👉 How to minimize crypto withdrawal fees
FAQs
1. Is Tether (USDT) fully backed by USD?
Tether claims 1:1 USD backing, but audits remain limited, raising transparency concerns.
2. Why are ERC20 fees so high?
Ethereum’s block size limit and dApp demand cause congestion, prioritizing higher-tip transactions.
3. Can Tether be used for small payments?
No—its indivisibility restricts microtransactions compared to divisible cryptocurrencies.
4. Which exchanges offer the lowest USDT withdrawal fees?
AAX (8 USDT) and FTX App (free) are among the most cost-effective.
5. Is Tether legal?
While widely used, regulatory challenges persist due to its opaque reserves.
6. How does Tether differ from other stablecoins?
USDT pioneered the market but faces more skepticism than newer, audited alternatives like USDC.
Final Note: Always verify fees dynamically, as network conditions fluctuate. For large transfers, Tether’s low cost advantage shines—but transparency remains its critical hurdle.