If you are holding crypto or involved in the market, you heard about “staking,” which is the process of earning interest on your cryptocurrency. Staking is lending USDT to others to make interest. This is a great way to add income to a portfolio to stabilize it and take advantage of times when volatility is extraordinarily low. USDT staking should be a part of everyone’s portfolio.
What is a USDT?
Tether, also called by its symbol USDT, is a stablecoin pegged to the US dollar and backed by “100% of Tether’s reserves.” Tether is owned by iFinex, a Hong Kong-registered company that owns a crypto exchange called BitFinex.
It was initially launched under “RealCoin” in July 2014 but rebranded as “Tether” in November of the same year. It started training in early 2015, based initially on the Bitcoin blockchain. It now supports various blockchains such as TRON, EOS, Algorand, Ethereum, Solana, OMG Network, and Bitcoin Cash, as well as Bitcoin’s Omni and Liquidity protocols.
By 2022, Tether had become the third largest cryptocurrency, only after Bitcoin and Ethereum. It is the largest stablecoin, with a market capitalization of nearly $83 billion. Almost 2/3 of exchanges out of Bitcoin are done using Tether as a medium.
How Does Staking Crypto Work?
Staking crypto refers to locking your digital tokens for a certain amount of time to help contribute to the performance and calculations on the native blockchain. As a reward for staking your tokens, you have the opportunity to earn interest.
Some networks allow you to stake via opening a node, which is part of the network that solves calculations to facilitate the network’s security and release coins. Some people choose to stake their crypto via a pool. A pool is a large group of people who allow their tokens to be used on a node to earn interest. There are plenty of places where you can do this.
Depending on the network, the barrier to opening up your node may be extraordinarily high. If that’s the case, then a pool makes the most sense.
Can You Stake USDT?
You don’t participate in USDT staking because it is a proof of work consensus, not a proof of stake. That being said, it is possible to earn a passive income “staking Tether”, which is better described as lending it out. This is a way to earn interest, as there is quite a lot of liquidity demand.
Unlike staking other coins, if you cannot earn interest by becoming a “node,” some people use the term lending out coins interchangeably with staking. Because of this, you may see this term from time to time. However, it does not act the same way with another coin, such as Ethereum.
What Are the Advantages of Staking USDT?
There are a host of reasons why you would want to stake your Tether, with some of the biggest ones being the following:
- Interest rate – One of the most significant advantages to staking Tether is that you can earn interest on your holdings. Remember that Tether is designed to be pegged to the US dollar, which means that your holdings act as a traditional savings account with better returns than a brick-and-mortar bank.
- Almost no volatility – As Tether is pegged, there is almost no volatility.
- Proven track record – Unlike many other cryptocurrencies, Tether has a proven track record of showing liquidity and ease of returns.
How to Stake USDT?
Staking Tether is a relatively straightforward process under most circumstances. While you can go about it multiple ways, it generally involves several basic steps.
Buy Tether
The first thing you have to do is buy Tether.
Choose the investment vehicle
You need to choose how you are going to stake your Tether and then deposit the Tether from your wallet into their wallet.
Withdrawal Tether
Your Tether will have a certain amount of time locked up.
Is Staking USDT Risk-Free?
Nothing in the financial world is risk-free. Tether will not be any different, but it is much more secure than staking other digital coins, as it is pegged to the US dollar. However, one of the most significant issues you could have is that the coin loses its peg. We have seen this recently, with the crash of Terra (LUNC) after its sibling stablecoin TerraUSD loss is pegged to the US dollar is a recent example of how things can unwind.
Tether did react to the heavy selling pressure in the aftermath of that debacle, and it even temporarily lost its peg to the greenback. However, it did hold up reasonably well, as it only lost about one cent. Furthermore, you would have to be concerned about the holdings of Tether because there’s nothing to say that its reserves would hold up. In other words, it’s not even necessarily up to the company itself as to whether or not to keep the peg. If some of its holdings were to become worthless, by its very definition, suddenly, it would not have the peg held.
Conclusion
Quite often, traders will hold Tether for one reason or another. Some crypto exchanges do not trade versus the US dollar, so you will sometimes be forced to have that coin. Lending it out, or “staking it,” as it is sometimes called, allows you to earn some interest on your holdings. What makes this even more attractive is that the coin is completely “stable,” pegged to the US dollar.
However, you must understand that holding US dollars is not the same. There is the possibility that Tether has some type of liquidity or financial problem, as it is backed by a mix of assets that could have issues.
Nonetheless, Tether has shown itself to be reliable so far and is the world’s standard for providing a stablecoin for the market and earning passive income. If your portfolio is sitting still, you are not making money. However, if you are earning passive income, you are growing your wealth in a relatively straightforward and stable manner.
