What Is USDT (Tether)?

What is USDT? It is a token issued by the company Tether that is designed to hold a value of one US dollar. Traders use it as a dollar substitute on crypto platforms, for moving value between venues, and as the quote currency in pairs such as BTC/USDT. It is not a bank deposit, and it is not issued or guaranteed by any government.

What is USDT backed by, and how does it hold $1?

Tether issues new USDT when approved customers deliver dollars, and redeems USDT for dollars when they hand tokens back. The company states that it holds reserves, largely short-term government debt and cash equivalents, at least equal to the tokens in circulation, and publishes periodic attestations prepared by an accounting firm. An attestation is a point-in-time check rather than a full audit, and the reserve mix changes over time.

The peg holds mainly through arbitrage. If USDT trades below $1 on a platform, large holders can buy it cheaply and redeem it with Tether at $1; if it trades above, they can create new tokens and sell them. Ordinary users usually cannot redeem directly, so for them the peg is only as good as the market's confidence in that process.

One token, several networks

USDT is issued natively on several blockchains. The token is the same asset everywhere, but each version lives only on its own chain and follows that chain's address format and fees.

Fees vary with network congestion and with each platform's own withdrawal charges, so compare them at the moment you send rather than relying on a remembered figure.

Sending USDT without losing it

1. Match the network. The receiving platform or wallet shows which networks it accepts. The sender must choose exactly the same one. USDT sent over Ethereum to an address that expects Tron may not arrive, and recovery, if possible at all, depends on the receiving platform.
2. Check the whole address. Copy-paste it, then compare the first and last several characters. Some scams "poison" your history with look-alike addresses so that you copy the wrong one.
3. Send a small test first when using a new address, then the balance.
4. Mind the fee. Illustrative example: withdrawing 500 USDT from a platform that charges a 1 USDT withdrawal fee, deducted from the amount, delivers 499 USDT. Some platforms add the fee on top instead, so read the confirmation screen.

On a platform or in your own wallet

USDT held in a platform account is an entry in that platform's ledger. Moving it between users of the same platform is often instant and free, because nothing happens on a blockchain. Withdrawing it creates a real on-chain transaction, with a network fee and the network choice described above. In a self-custody wallet you hold the key and can send the token anywhere on that chain, but you also need a small amount of the chain's native coin to pay fees: an Ethereum wallet holding only USDT cannot send it without some ETH, and a Tron wallet needs TRX or network resources.

Reading a transfer on a block explorer

Every on-chain USDT transfer has a transaction ID, sometimes called a hash. Pasting it into a block explorer for the right network shows the sending and receiving addresses, the amount, the fee, the time and the number of confirmations. If a platform says a withdrawal has been sent, the transaction ID lets you confirm it independently. If someone claims to have sent you USDT but cannot give a transaction ID that appears on the explorer, the payment has not been made. Checking the explorer is also how you notice a mismatched network: a transfer that exists on Ethereum will not appear on a Tron explorer, and the reverse.

What people use USDT for

• Trading pairs. Many crypto platforms price coins against USDT rather than dollars, so moving in and out of positions stays on-chain.
• Transfers between platforms. A stable asset avoids price moves while funds are in transit.
• Dollar exposure. In some countries people hold USDT as an alternative to a weak local currency, which brings its own legal and tax questions.

USDT is also, unfortunately, a favourite currency of fraudsters, because payments are fast and final. Almost every fake trading platform we describe in our scams guide asks for deposits in USDT.

The risks that come with a stablecoin

• De-pegging. Stablecoins have traded below $1 during periods of stress. A token can lose its peg if confidence in the reserves or the redemption process slips.
• Issuer control. Tether can freeze USDT held at particular addresses, for example at the request of law enforcement. Frozen tokens cannot be moved.
• Platform risk. USDT held on a platform is only as safe as the platform. If it fails, you are a creditor.
• Regulatory change. Rules for stablecoins are tightening in several regions, which can affect which platforms list a given token.

Other dollar stablecoins

USDT is not the only dollar-tracking token. Others are issued by different companies under different regulatory regimes, with different reserve arrangements and reporting. Some are backed by a mix of other crypto-assets held in smart contracts rather than by cash and government debt. The questions to ask are the same for each: who issues it, what backs it, who can redeem it, and who can freeze it.

USDT and forex traders

Readers coming from currency trading sometimes treat USDT as "the dollar". It is closer to a claim on a private company that promises dollars. For most purposes it behaves like one, and the difference only shows up when something goes wrong. For how the wider crypto system fits together, see how crypto works.

Sources

• Tether, transparency page and reserve attestation reports
• Tron and Ethereum token standard documentation (TRC20, ERC20)