The way we manage our money is constantly evolving, and digital dollars are part of this change. These virtual currencies represent an innovative tool to protect our money from inflation and access a universe of new opportunities.
However, it's not all benefits; digital dollars also present challenges and risks that are very important to consider. This leads us to wonder, are they really worth it?
To answer this question, we have prepared the following article where we will analyze these digital currencies, their operation, their advantages and disadvantages, as well as showing you how you can easily buy them through your favorite platform, El Dorado P2P.
What are digital dollars and how do they work?
Digital dollars are an electronic representation of the traditional dollar, meaning that the value of these currencies try to maintain as close a parity as possible with the US dollar (USD).
This is achieved by different mechanisms, the most common of which are:
- Backed in cash or equivalents (such as treasury bonds or other liquid assets): For each unit of stablecoin that is issued, the issuing company undertakes to keep an equivalent amount in dollars.
- Back-up through overcollateralization of cryptocurrencies: Its operation is similar to the previous one, the difference is that smart contracts and cryptoassets are used for the minting of stablecoin. Thanks to overcolaterization, the currency's 1:1 parity is guaranteed during periods of high volatility.
- Algorithmic backup: This mechanism is the most difficult to design and has a greater chance of catastrophic failures (as happened with Terra USD in 2022). The premise of this mechanism is that an algorithm will determine the right time to create or delete a unit of the stablecoin or linked token, based on supply and demand.
Unlike the cash dollar, which is a physical, tangible asset that does not require an infrastructure for its use, the digital dollar is managed through electronic devices (smartphones, computers, etc.) generally requiring an internet connection.
Definition of digital dollars
- USDT (Tether USD): This is one of the first stablecoins linked to the dollar and is distinguished by being the most popular in the crypto world. Its issuance, security and auditing are supervised by the company Tether Limited. Only authorized institutions (exchanges, banks, etc.) can issue USDT, after meeting strict KYC/AML requirements. Users can purchase USDT through exchanges or other exchange platforms such as El Dorado P2P or Binance.
- COME ON: It is a digital dollar issued by the decentralized organization (DAO) called Sky (formerly MakerDAO). Unlike USDT, DAI is not backed by dollars, but instead employs the overcollateralization of cryptocurrencies.
Operation on blockchain platforms such as Ethereum
The operation of USDT (Tether) tokens on blockchain platforms such as Ethereum is based on the ERC-20 standard, which allows direct integration with wallets, exchanges and smart contracts within that network.
Being backed 1:1 with the US dollar, USDT allows fast, secure transfers with affordable rates, without the need for traditional banks.
Thanks to blockchain technology, every movement of USDT is transparent, traceable and decentralized, improving user trust and facilitating its use in payments, savings or investment within the crypto ecosystem.
- 1:1 parity with the US dollar
The 1:1 parity with the US dollar means that each unit of USDT (Tether) is, in theory, equivalent to one real dollar. In other words, for every USDT in circulation, the issuing company claims to have equivalent backing in dollars or other liquid assets.
Thanks to this feature, USDT is used as a form of security of value, medium of exchange and digital alternative to the physical dollar, especially in countries with high inflation or exchange restrictions.
- Use in digital transactions and savings
USDT has become a key tool for digital transactions and savings, especially in contexts where access to the physical dollar is limited or unstable. As a digital currency with a stable value, it allows you to send and receive payments quickly and securely through blockchain platforms, without the need for banking intermediaries.
In addition, many users use it to protect their income from devaluation, converting their bolivars or other local currencies into USDT as a form of digital savings, accessible from anywhere and with greater liquidity than other traditional assets.
Advantages of buying digital dollars
There is the protection of the value of money, since they maintain a stable parity with the US dollar (1:1), allowing savings to be protected against devaluation. In addition, they are easy to purchase and transfer through digital platforms, without the need for banking intermediaries.
They also provide fast and secure access to international transactions, savings and greater liquidity for those looking for a reliable alternative to cash or unstable local currencies.
- Protection against inflation in unstable economies
In countries with unstable economies where the local currency is devalued, as in many Latin American countries, digital dollars are presented as a solution to preserve the value of your savings. It's a great way to acquire dollars, but with fewer obstacles or restrictions.
- Facility for international transactions
This is one of the most important benefits of digital dollars. Send or receive money through the traditional system (SWIFT) It is usually a slow process (it can take 2 to 5 business days), and it also usually has multiple charges (commission from the sending bank, receiving bank, intermediaries, etc.) and unfavorable exchange rates. On the other hand, when using digital dollars (USDT) the experience is totally different.
- Access to financial services without the need for a bank account
Digital dollars simplify access to banking for the unbanked, since you only need a smartphone and an internet connection to create a wallet.
More and more businesses and platforms are integrating this technology, making it easier to carry out everyday transactions and providing innovative financial opportunities (such as loans, stacking or yield farming) to generate passive income, such as our product El Dorado Wins.
- 24/7 availability and fast operations
Unlike traditional banking, the blockchain networks that manage digital dollars operate around the clock, 24 hours a day, 7 days a week, 365 days a year, without holidays.
This is advantageous in urgent or emergency situations. In addition, blockchain transactions (such as Tron, Arbitrum, etc.) are very fast and can be approved in just seconds or minutes, depending on network congestion.
Disadvantages and associated risks
One of the main ones is the lack of clear regulation in some countries, which can lead to legal or tax uncertainty. In addition, its use requires basic knowledge of digital wallets and security measures, since errors in a transaction (such as sending to the wrong address) are often irreversible.
There is also a risk of trusting unsafe or poorly transparent platforms. Therefore, it is essential to be well informed and to use reliable services to minimize any inconvenience.
- Market volatility and possible fluctuations in value
Although digital dollars are designed to maintain a stable value, there is a risk that this may not always be the case. For example, in 2022, the token TerraUSD lost its parity with the dollar, reaching a value of $0.20 due to a vulnerability in its algorithm that was responsible for 1:1 parity.
On the other hand, the Bankruptcy of Silicon Valley Bank (in 2023) impacted USDT, causing its value to fall to $0.87, since part of its reserves (about 8%) were in that bank.
- Security risks on unregulated platforms
Platforms that are not subject to strict regulations and regular audits face greater exposure to risks, such as a lack of transparency. Although this situation is changing, there is still mistrust about the veracity of the information provided by digital dollar issuers.
A prominent case is that of USDT, whose company claims that its token is 100% backed. However, doubts still exist due to its controversial past. On the other hand, the likelihood of suffering cyberattacks and fraud is greater, especially in decentralized tokens. The lack of oversight makes them more vulnerable to acts of manipulation (rug pull) and hacks.
- Lack of clear regulation in some countries
This is an obvious reality in Latin America. These technologies have exceeded the ability of regulators to create clear legal frameworks, raising questions about the legality of certain transactions, as well as about tax obligations and consumer protection against fraud, scams or platform bankruptcy.
In some countries, there is skepticism due to their volatility and the facilitation of illegal activities.
- Possible transaction or conversion fees
Although fees are usually not an inconvenience, in a period of economic instability or network congestion, this can be a problem, although it is usually temporary.
A notable example occurred in 2024 on Ethereum, when a standard transaction cost up to $300 (about 377 Gwei) due to the high network activity. Fortunately, thanks to recent advances, commissions have fallen to less than $1.
How to withdraw digital dollars from El Dorado?
It's a simple and secure process. Once you have available balance in your wallet, you can access the sale or withdrawal option within the platform. From there, you choose the amount and preferred payment method, which can be a bank transfer in local currency or through one of the partner exchange offices.
The system will show you the rate for the day and the equivalent amount, and then you just have to confirm the operation. In a short time, you will receive the funds in your account. It is always advisable to check the data and review the conditions before confirming the withdrawal.
Steps to withdraw funds from the El Dorado platform
- Go to the “Wallet” tab (usually located under “Home”) and press “Send”.
- From the withdrawal options presented (P2P Market, QR Code, El Dorado Pay, External Wallet), select “External Wallet”.
- Choose the digital currency you want to withdraw (we recommend USDT).
- Select the network for the transaction (e.g. Tron, Arbitrum). We recommend the Arbitrum network, since your commissions are lower (approximately $0.30 USD).
- Specify the amount of digital dollars you want to withdraw.
- Press the “Next” button.
- Carefully paste the address of your external wallet. Make sure that the address is correct and corresponds to the selected network. Remember that cryptocurrency transactions are irreversible.
- Review all the details one last time and press “Submit”.
- Ready!. If you selected the Arbitrum network, the processing time is usually approximately 1 minute.
If you want to withdraw through the P2P market, we invite you to consult our guide about this process.
Withdrawal options: bank transfers, digital wallets, and more
The options for withdrawing digital dollars on platforms such as El Dorado are varied and designed to adapt to the needs of each user. Among the most common are bank transfers to local currency accounts, ideal for those who want to convert their funds quickly.
You can also withdraw through compatible digital wallets or make use of P2P platforms, where you sell your digital dollars directly to other users.
Some options even allow withdrawals to international accounts or through partner exchange offices. The key is to choose the most convenient method based on your location, urgency and available exchange rate.
Processing times and important considerations
Processing times may vary depending on the method chosen, but usually range from a few minutes to a maximum of 24 to 48 business hours.
If you use P2P platforms, the process may be faster, but it requires verifying the buyer's reputation. It is also essential to carefully review the destination data, confirm the current exchange rate and take into account possible fees associated with the withdrawal.
It is always advisable to use verified channels and maintain safety precautions.
Are digital dollars worth buying in Latin America?
Yes, due to the economic instability faced by many Latin American countries (such as Venezuela, Argentina and Brazil) as a result of high inflation and devaluation in their currencies, buying digital dollars is a great opportunity to preserve the value of money.
Stablecoins such as USDT are the most popular options because of their liquidity and reputation.
Economic and financial situation in Latin American countries
It is characterized by structural challenges such as high inflation, devaluation of local currencies, political instability and limited access to traditional banking services.
These conditions have led a large part of the population to seek alternatives to protect their purchasing power, facilitate transactions and save more securely.
In this context, digital assets, such as stable cryptocurrencies (stablecoins), have gained prominence as accessible and effective tools to face the limitations of the conventional financial system and overcome exchange rate barriers.
Adoption of cryptocurrencies and digital dollars in the region
It has grown rapidly in recent years, driven by the search for alternatives to inflation, the devaluation of local currencies and exchange restrictions.
Countries such as Venezuela, Argentina, Colombia and Mexico are among the most active in the use of stablecoins such as USDT, since they allow us to safeguard value, make cross-border payments and participate in digital economies without the need for traditional banks.
This phenomenon has also been boosted by access to digital platforms and a young, connected population that seeks more stable, faster and more accessible financial solutions.
Legal and Tax Considerations
They vary by country, as there is no unified regulation. In some cases, such as in Venezuela or Argentina, the use of digital assets is allowed, although under certain restrictions or with state surveillance. In other countries, there are still legal or regulatory gaps under development.
At the tax level, it is important to note that some jurisdictions require the declaration of digital assets and may apply capital gains taxes.
Therefore, it is recommended to operate on secure platforms and to be aware of local regulations to avoid penalties or tax complications.
