Tether tokens, including $USDT, are assets that move across the blockchain just as easily as other digital currencies. Tether tokens are referred to as stablecoins because they offer price stability as they are pegged to a fiat currency. This gives traders, merchants, and funds a low-volatility solution when exiting positions in the market. All Tether tokens are pegged at 1-to-1 with a matching fiat currency (e.g., 1 $USDT = 1 USD) and are backed 100% by Tether’s reserves.
Launched in 2014, Tether is a blockchain-enabled platform designed to facilitate the use of fiat currencies digitally. Tether works to disrupt the conventional financial system via a more modern approach to money. Tether has made headway by allowing customers to transact with traditional currencies across the blockchain without the inherent volatility and complexity typically associated with a digital currency. As the first blockchain-enabled platform to facilitate the digital use of conventional currencies (a familiar, stable accounting unit), Tether has democratized cross-border transactions across the blockchain.
Tether tokens ($USDT) are created by having multiple Tether private authorization keys sign and broadcast creation transactions on the specific blockchain. These new tokens are “authorized but not issued,” meaning that these $USDT are stored in Tether’s treasury and not in circulation until issued in response to market demand. Tether’s multi-signature (or multi-sig) model prevents a single person from issuing $USDT on their own, representing a single point of failure and a security risk.
Tether tokens ($USDT) are sometimes burned to reduce the number of outstanding tokens on a specific blockchain. These outstanding tokens could be from customers' redemption of their $USDT holdings for fiat currency. These redeemed and returned $USDT could be held by Tether’s treasury (thus out of circulation and not part of the total market capitalization), ready for future issuance only in response to new market demand.