What is the difference between USD and USDT?


The major difference between the USD & USDT is the concept of the decentralized market. The US Dollar is one of the leading currencies in the world. On the other hand, USDT is a blockchain-based Stable Coin that is used for trading for $1 USD.

05 November 2019, AtoZMarkets – There is no rejecting that cryptocurrencies are getting importance in the mass market. Low fees, decentralization and no intervenes of the third party make crypto attractive for integration into daily life. In the centralized institutions and banks, cross-border funds transfer becomes a complicated, costly & time-consuming process. Stable coins work as a bridge between the crypto market and the world of fiat currencies. The companies use some centralized authorities to back every coin with equivalence in USD.

What is USD?

The US Dollar is one of the leading currencies in the world. Every currency, asset and often cryptocurrency are denominated in USD value. For example, Bitcoin is valued in US Dollars first before looking at the value in local currency. However, the situation will not change soon as the value of Bitcoin will always be Bitcoin, regardless of its USD price.

Most cryptocurrency enthusiasts believe that the money issued by a bank or government has no actual value. Although the consumers feel that the US Dollars have actual worth, the currency itself is not backed by any tangible. However, the paper money and coins don’t have any value other than the honor of the bank and government. The value of the US Dollar is supported by the government of the United States. 

difference USD USDT

However, some cryptocurrencies take it upon themselves to peg their value to the US Dollar, as it makes transacting in cryptocurrency slightly easier for amateur users. This is why there are such currencies as USDT.

What is USDT?

USDT is a blockchain-based Stable Coin that is used for trading for $1 USD. However, the “Stable coin” is a cryptocurrency that has a stable value. There are a number of stable coins in circulation nowadays with several attempts to be stable.

Each stable coin has a unique mechanism. However, all of them generally work the same way. They hold some type of guarantee and manage the supply to trade the coin for no more or less than $1. For example, the Tether or TrueUSD is the concept to hold actual dollars in reserve, which are redeemable for the token. Moreover, in September, Tether announced to burn 400 million tokens.

Tether is a “price-stable cryptocurrency” and “pegged” directly to the US Dollar. The responsible company to create the Tether is responsible for issuing USDT in circulation. This process keeps the US Dollar value equivalent of all USDT at all times. Otherwise, they could not give any guarantee of the value of one USDT to be equal to US$1. Although this concept makes a sense on paper, things have not been very easy for USDT so far.

The company uses a Taiwanese bank to make transactions of the USDT. Unfortunately, that bank raised some issues and the company failed to convert USD to USDT and vice versa. That is why the users started to rely on third-party exchanged to continue the conversion process.

However, that brings a favor of USDT once again. The USDT on Kraken is now at US$1.03. As a result, the users get slightly more USDT for their USD deposits, rendering the “pegging of value.” The people who bought the Tether at US$0.93 are making good money from exchanging them at the current rate.

Read More: Is USDT bigger than Bitcoin?

What is the difference between USD and USDT?

#1 Stability

The main difference between USD & USDT is the bank’s acceptability. USDT is a crypto-token issued by a company that has a 1:1 peg to the USD. However, it has no means to make good on this and they explicitly reject any guarantees in their terms of service. The main investment concern for the USDT is the lack of usable banking partners, just like Bitfinex.

USDT is reasonably stable at around $1. Therefore, the temporary way to get out of crypto is to transfer the funds between exchanges.

#2 Flexibility to trade

USD is backed by the full faith in the US government, while the USDT is backed by nothing.

Traders can buy or sell BIT-USD on the open ledger that is backed by at least 1$ of bitshares. Traders can always buy at least 1$ of BTS with BIT-USD. Therefore, the USDT has always worth a minimum of 1$ sometimes 1.05$. This is the smartest coin with the safest bet. There are other examples of BIT-xxx to trade on open ledger like BIT-CNY. There are massive amounts of volume related to BIT-CNY.

The USD is more reliable and familiar to the traders and has more flexibility to trade. USD is the only currency that dominates the world. In the forex market, there are a lot of banks & financial institutions that make transactions of millions of dollars daily.

#3 Bank Account

USD are dollars that are held directly in a bank account.

USDT is coins issued by Tether, which some exchanges will accept. However, the money does not go into the exchange’s bank account and to the exchange. Some exchanges prefer USDT, as it is not “real cash.” Users can send it from point A to point B without beating money transmission rules.

#4 Usability 

USD and USDT are very different. USD is really a currency, while USDT is a cryptocurrency. Peoples can use the USDT on cryptocurrency exchanges only. On the other hand, they can use USD anywhere and anywhen.

Besides, the traders need to have a USDT wallet to withdraw USDT from the exchange account. However, they need to have a bank account to withdraw USD from a cryptocurrency exchange. Besides, there are a lot of investors and traders are fighting against USDT cause they think that it is a scam project.

#5 Withdrawing Dollar

Withdrawing dollars from USDT tends to require a lot of verification.  Holding them in an exchange is a different matter if the user is intended to end up with Bitcoin.

Trading USDT requires going on an altcoin exchange like Bittrex and withdrawing them to a USDT wallet. The main difference is the sovereignty over the funds. Cryptocurrencies are fiat without going through the verification process. However, many traders do not trust USDT because of its fluctuations. In early June, Bittrex blocks US Clients from trading 32 cryptos.

Conclusion

Stablecoins were formed to solve the top problems of cryptocurrencies, such as price volatility and interaction with the real world. Stable Coins companies make a partnership with the issuer to ensure that the price similarity. That also allows us to exchange crypto to USD easily. Another benefit of stablecoin is that they are customer friendly. There is less possibility of losing the funds because of the price changing. Moreover, it’s a convenient system for cross border payments.

What is your opinion on the difference between USD and USDT? Let us know in the comment section below.

    Share Your Opinion, Write a Comment