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. In this article you will find and understand the differences between USD and USDT and how to buy each of them.

Updated on 03 August 2021, AtoZMarkets – There is no rejecting that cryptocurrencies are getting importance in the mass market. Low fees, decentralization, and no intervene of the third party make crypto attractive for integration into daily life. In centralized institutions and banks, cross-border funds transfer becomes a complicated, costly & time-consuming process. Stable coins, such as USDT 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. This is the reason because more and more USD users have been interested in virtual currencies such as USDT. 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 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 exchanges to continue the conversion process.

However, that brings a favor of USDT once again. The USDT on Kraken is now at US$1.02. 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?

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.

It is no secret that for the global financial markets the USD is the flagship currency and the one that moves the global economic direction. That is why global financial policies depend on their stability. However, the USDT does not have such an impact on economies.

In summary, we can say that the USD is less stable than USDT.

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 been 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 an 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.

The USD is the currency that moves the world, while the USDT moves only a small part of the virtual world that dominates Bitcoin. This is why buying USD is easier while buying USDT can be a bit more complex.

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.

USD has always had a defined and regulated banking system, while USDT operates without any financial regulation. This is why you can buy USD in an exchange house or a bank, while to buy USD you must use a so-called virtual wallet or tether wallet.

Usability

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

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 who are fighting against USDT because they think that it is a scam project.

We can then say that the USD is universal, while the USDT is not, and therefore requires a USDT wallet.

Withdrawal of USD Dollar 

Withdrawing USD 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. In early June, Bittrex blocks US Clients from trading 32 cryptos.

When an investor has an account in USD, he only has to present his documentation and the financial institution must deliver his funds. At the level of cryptocurrencies such as USDT, this process is a little slower and sometimes difficult.

How to Convert USDT to USD

In theory, the Tether (USDT) is a cryptocurrency with a fixed exchange rate of one USD dollar. Although many identify it by the stock symbol USDT (USD ₮), this network is also capable of issuing virtual currencies anchored to other traditional currencies.

How can we identify them? It’s simple, just add the symbol ₮ (or simply T) next to the ticket of the currencies that are offered. For example, we have the dollar Tether (USDT), but also the euro Tether (EUR ₮) and the yen Tether.

A common way to obtain USDT is to use the cryptocurrencies that you already have available on an exchange platform. Once there, you can open trade to exchange your BTC, for example, for USDT.

It is also possible to use an Ethereum wallet called MyEtherWallet that supports USDT by virtue of being an ERC20 token. Also, Tether has its own USDT wallet available only through its web platform. Finally, if you want to look for a little more security, you can use a hardware wallet like the Ledger Nano.

We must always consider in mind that the USDT or Tether being an exchange mechanism, rather than an investment, and having the same value as the dollar, it is not offered in brokers through underlying markets.

Best USDT Wallets in 2021

Do you know what a Tether wallet is? Have you ever buy to exchange USDT? Do you know what the USDT price is? To solve all these questions continue reading this article.

A Tether wallet is a unique code that will allow us to store, send and receive cryptocurrencies. The most important characteristic of a Tether wallet is that it allows us to save the public and private keys linked to our wallet, which will allow us to receive and send cryptocurrencies.

Digital wallets

We can say that the types of digital wallets (software) that currently exist are:

  • Web wallet
  • Desktop wallet:
  • Mobile wallet or wallet app

Currently, there are multiple exchanges where you can make all your transactions in Tether or USDT.As of the edition date, these are the exchanges with the highest volume of transactions with USDT: 

  • CryptoWallet: It is known but customer service must improve
  • Coinbase: Coinbase charges a flat fee of 2% of the total amount of a dollar loan transaction either on the platform itself or at a subsidiary.
  • MyEtherWallet: It is an open-source platform
  • eToroX: Comes with strong growth powered by eToro
  • Coinomi Wallet: This cryptocurrency platform has a secure App
  • Ledger Nano X: One of the most widespread physical wallet ledger
  • Kraken: One of the most established exchanges.
  • Binance Wallet: The largest exchange in the crypto universe but with some regulatory issues currently.

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.

The article was first published on 05th November 2019 and updated by Mónica Pérez on 3rd August 2021

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