Tether vs Bitcoin – What Are The Differences?

Cryptocurrency might have begun with Bitcoin, but it certainly doesn’t end with it. Although Bitcoin is the world’s first (and most popular) cryptocurrency, the emergence of altcoins has transformed the market and tempted many traders to adopt new methods of exchange.

Now that the market has diversified, investors are faced with a huge amount of choice when it comes to picking a cryptocurrency. In fact, there are more than 5,000 live registered cryptos with a total market capitalisation of around $273,000,000,000! 

Bitcoin might be at the top of this list, but in third place is Tether (USDT). Tether comes third because its market cap is lower than that of Bitcoin, although its circulating supply and 24-hour trading volume are both significantly higher. 

We’re all familiar with Bitcoin, but if you’re in need of an introduction to Tether (USDT), read on. This article will explain the differences between Bitcoin and Tether and explore why both are such popular choices with cryptocurrency investors. 

How does Bitcoin work?

First launched in 2009, Bitcoin was established as a way of making online payments without the intervention of third-party regulators. Whereas standard bank transfers can incur large charges and take between 1 and 4 business days, Bitcoin transactions are almost instantaneous and charge very small fees. 

In fact, these fees aren’t even required – traders can decide whether or not to add extra charges themselves. This is because Bitcoin miners can choose which transactions to process (up to 1MB in each blockchain), so fees are simply an incentive for them to approve a particular payment more quickly.   

Bitcoin transactions are also a lot more transparent. Every individual Bitcoin takes the form of a file with a value attached, which is registered as a transaction every time you make or receive payments. Within the blockchain, these files store encrypted records which identify both the sender and the recipient of the Bitcoin. 

How does Tether work?

Unlike Bitcoin, Tether is a stablecoin. This means that its value is pegged to the US dollar, with 1 USDT equating to $1. For every Tether token that’s issued, the idea is that there would be another $1 in reserve. 

Tether tokens can be bought by paying the underlying fiat money (in this case, the dollar) into a Tether wallet. Because 1 USDT = $1, many cryptocurrency traders view Tether as a ‘digital dollar’. This is because it can be easily exchanged for its equivalent value in fiat money. 

What are the key differences between Tether and Bitcoin? 

Tether is a stablecoin, Bitcoin is decentralised

As a stablecoin, Tether is intrinsically tied to a fiat currency (the US dollar). Bitcoin, on the other hand, is totally decentralised in an attempt to place financial power back in the hands of the public, rather than regulators or banks. That can make Bitcoin more volatile, as seen in 2017-18.

Tether tokens can be created, Bitcoins cannot

The maximum number of Bitcoins that can ever exist is capped at 21 million. There are currently around 18.5 million in circulation, with 2.5 million left to be mined – though this number is expected to change as often as every 10 minutes. 

New Tether tokens, however, can be issued at any point. This has landed the company which owns Tether – Tether Holdings Limited – in hot water in the past, amid accusations that they were issuing huge numbers of new tokens without the necessary financial backing. 

Bitcoin rewards halve every 4 years

As the world edges closer to its maximum number of Bitcoins, ‘ Bitcoin halving’ is used to decrease the number of new coins that are generated. This means that every four years, the reward for mining Bitcoins is slashed by 50%. The current reward is 12.5 Bitcoins per block, with the last halving having occurred in May 2020. 

Because Tether is a stablecoin, however, no measures are required to limit the number of tokens available. 

If you’ve ever wondered what the differences are between Bitcoin and Tether, this post has hopefully helped you understand that not all cryptos are created equal. 

Disclaimer. This press release is paid and provided by a third-party source. This press release is for informational purposes only and should not be viewed as an endorsement by CoinIdol. We take no responsibility and give no guarantees, warranties or representations, implied or otherwise, for the content or accuracy. Readers should do their own research before investing funds in any company.