Steemit Crypto Academy Week 6 Task: Stable coins- Tether (USDT) | lecture by @yohan2on

It feels so nice to be here again at the Steemit crypto academy in attendance of the week 6. I read the lecture from the crypto professor @yohan2on where he lectured on Stable coins, the lecture was a great one and I will be solving the task associated with the lecture to certify that I understood the lecture.

It is important that I talk about stable coins generally before I dive into the task proper. Stable coins are cryptocurrency that has their price pegged to an outside asset, which can be U.S dollar or Gold/Silver with the purpose of price stability. Cryptocurrencies are highly volatile, such that the market price tend to fluctuate from time to time thereby tending to reduce assets value if the price fall tremendously. Volatility is adrawback of cryptocurrencies which is worth worrying about.

In quest to take care of this high market price volatility, necessitated the invention of Stable coins. There are many of them available, for example; USDT, USDC, DAI, BUSD and many more. Stable coins utilizes some assets as collateral backing, some of which are; Fiat currency, Precious metals (Gold or silver) and sometimes pegged to other cryptocurrencies.

Tether (USDT) is one of the oldest stable coins which came into existence in the year 2014 and has maintained its stand up till this day. USDT is considered as the most valuable stable coin cryptocurrencies overall by market capitalization maintaining the rank number 4 and is pegged to the U.S dollar, such that 1USDT = $1 (1:1), It’s very rare to see the price of USDT shifting from $1. Tether was invented to take care of the cryptocurrencies price fluctuation, as it remains pegged to $1. We sometimes see fluctuation in the price of USDT but it’s always infinitesimal, as the price tend to be $0.99 – $1.01 and such occurrence are so rare as it maintain its pegging to $1 almost all times. USDT tokens are 100% backed by Tether's reserves, although it was originally built on Bitcoin blockchain and there has been other implementations including the ERC-20 which is the Ethereum blockchain and this makes it suitable for use in smart contracts and decentralized applications.

USDT is being used to quickly move money between exchanges to take advantage of the slightest opportunities especially when the price of cryptocurrencies differs on two exchanges or when a trader is so certain that he/she is selling off his crypto assets maybe for a quick use and in order to avoid further decrease in the value of that asset it can be converted to USDT, with this the trader will be certain that his assets’ value remains intact. I often use USDT for this purpose of money movement to be sure of the worth as no further fluctuation can be of threat to me.

At the beginning of this context, I noted that USDT is pegged to U.S dollar which gives it a price of $1 for 1USDT, this means it receives the backing from fiat currency and as such, it is a Fiat-collateralized stable coin.

I deem it fit to let you know a few things about a USDT lawsuit when the Bitfinex exchange was called out by the New York Attorney General for using Tether’s funds to cover up $850 million in funds missing from the mid of the year 2018 and this involved the issuer of USDT, Tether Limited. Bitfinex and Tether admitted no wrongdoing at all and agreed on the payment of $18.5 million as part of the settlement. At the moment, the claim that USDT was pegged to $1 is still intact and it’s free to use.

Exchanges provides the avenue to trade USDT pairs, it can be traded on Spot/Margin/Futures trading platform and the profits are easily realized as no further price fluctuation can tamper with the profits made from such trades. I will share some screenshot below that shows the numerous USDT trading pairs on Binance exchange and the price been pegged to $1. Screenshots taken from my Binance exchange account.

In conclusion, stable coins was invented to take care of cryptocurrencies price volatility drawback as it is pegged to certain commodities; Fiat currency, Gold or Silver and other Cryptos. Tether (USDT) is one of them pegged to U.S dollar and it has greatly takes care of cryptocurrency market volatility. Thanks to the Steemit professor @yohan2on for the great lecture. Thanks to everyone that read this.