Definition
USDT is a stablecoin whose price is intended to stay close to one US dollar at all times. It represents a digital token that exists on blockchains while aiming to mirror the value of traditional fiat currency. As a stablecoin, it is designed to reduce the price volatility seen in many other cryptocurrencies. USDT is commonly used as a crypto-native way to hold and transfer dollar-denominated value.
The value of USDT is meant to be maintained through a peg to the US dollar, supported by reserves held by its issuer. This peg is intended to keep the market price of each token close to one USD, although actual trading prices can move slightly above or below that level. USDT is often grouped with other stablecoins such as USDC, DAI, and TUSD, which share the general goal of providing relatively price-stable crypto assets.
Context and Usage
In the context of decentralized finance (DeFi), USDT functions as a base asset for trading pairs, lending markets, and liquidity pools. Its role as a stablecoin makes it a common reference unit when expressing prices, balances, and returns in dollar terms. Because it is designed to track the US dollar, it is frequently used as a bridge between traditional money and on-chain assets.
The concept of USDT is closely tied to the idea of a peg, where the token’s value is targeted to remain aligned with a specific currency. While USDT, USDC, DAI, and TUSD all fall under the stablecoin category, they can differ in how their pegs are maintained and what types of reserves or mechanisms support them. As a concept, USDT illustrates how digital tokens can be structured to behave more like familiar fiat currencies within crypto markets.