The first and most popular digital form of US Dollar is the Tether (USDT) a stablecoin that sustains the trades and negotiations in the digital asset industry.
The USDT is pegged to the U.S. dollar, and it is unaffected by the market volatility that can dramatically impact the valuation of cryptocurrencies and digital assets, such as Bitcoin.
The USD Tether aims to provide a stable digital asset that maintains a stable valuation.
This is what makes USDT a stablecoin: its value is pegged to the price of the U.S. dollar. Therefore, Tether should always keep the same value as its peg; it provides steady, reliable liquidity to get in and out of other digital assets and the cryptocurrency world, and it allows trades without facing unpredictable losses (or gains) from volatile price changes. Tether’s 24-hour trading volume ranges from $60 to $89 billion and is the most liquid digital coin. The key point about Tether is that it is tied to a real-life commodity, the USD.
The Dollar Tether is one of the cornerstones of the digital asset economy, with daily trading volumes that can be double or triple that of . The Tether is a stablecoin but not just that, it is the dominant issuer of stablecoins. It is pegged to a stable asset, in this case, the U.S dollar.
Differently than traditional Cryptocurrencies such as Bitcoin and Ethereum, whose monetary value can fluctuate widely, the Tether is designed to maintain a price of $1 and is backed by large reserves of funds.
Investors use stablecoins as a source of collateral in a volatile world, and coins have become a preferred medium of exchange for payments, trading, lending, and other activities based on blockchain technology.
According to an article published by the New York Times, quoting the finance expert Hillary Allen “Tether is really the lifeblood of the crypto ecosystem”.
The USD Coin or USDC is another form of digital US dollar with its value tied to the U.S. dollar. USDC is another stablecoin, and as one USDC should always be equal in value to one dollar. USDC is currently the second largest stablecoin, with a market capitalization of $73 billion, behind the USDT – the largest stablecoin. Like USDT, USDC is backed by real assets, and referred to as a fiat-collateralized stablecoin.
To maintain its stable value equal to the US Dollar, the USDC is backed by cash and short-term U.S. government bonds as collateral. For every USDC token in circulation, $1 is held in collateral.