USDC and USDT are Cryptos pegged or backed by the same amount of the fiat currency, USD (U.S. Dollar). USDC and USDT are also known as stablecoins. Stablecoins are designed to decrease the volatility of cryptos. They minimize fluctuations and keep the value steady. Stablecoins can also be backed by assets other than cash, such as gold.
USD stablecoins have a fixed value, which enables traders a way to enter and exit positions in the volatile crypto ecosystem. USD stablecoins work as a store of value. USD-backed stablecoins are becoming the norm, just like how about 90% of forex trading involves the U.S. Dollar which is the reserve currency of the world.
Today, stablecoins have become very popular. The demand for stablecoins has shot up since 2021. In January 2022, the combined market cap of stablecoins exceeded $151 billion. In this article, we will discuss the two popular stablecoins, USDT and USDC.
A snapshot of USDT vs USDC
|Issuing organization||Tether||Circle and Coinbase|
|Market Capitalization||$ 67 billion||$ 50 billion|
|Value per coin||$ 1 USD||$ 1 USD|
|Auditing agency||Sporkin, Sullivan LLP, Freeh||Grant Thornton|
What is USDC?
Circle and Coinbase created USDC in 2018. Its price remains fixed at $1, like any other USD-backed token. Centre Consortium governs and oversees the financial and technical standards. Centre Consortium ensures that there is transparency of 1-to-1 backing. This means that for every USDC created, $1 of USD is held in reserve, either in the form of U.S. Dollars or other cash alternatives.
A USDC can be issued if it is approved by regulated financial institutions that fulfill the membership framework of Circle. This is how it allows the growth of the USDC ecosystem. USDC is available on most Crypto providers and major exchanges. The USD Coin can be sent and received by any ERC-20 compatible exchange or wallet. It is also supported by several other blockchains, including Binance Smart Chain, Solana, Algorand, Hedera, Stellar, and others.
USDC currently ranks 4th in market cap with a circulating supply of $52 billion. It has steadily increased its market cap and is only one place behind USDT. At the time of writing its 24-hour trading volume is $17.8 billion.
USD coins remain stable at around $1. There will be slight fluctuations in value like any other stablecoin, but they are quickly corrected to bring it close to $1.
What is USDT?
Hong Kong-based Tether Limited first issued USDT in 2014. It was introduced to bridge the gap between fiat currencies and Crypto. This was the first time any company offered its users a platform to trade a US Dollar-backed Crypto. It has many technical advantages to Ethereum and Bitcoin, such as high liquidity, but none of the volatility.
Tether tapped into the best of both worlds, creating a simple way to send crypto dollars to anyone with transparency, speed, and low cost. It opened up use cases for crypto in payments, remittances, and many more. A lot of Crypto trading pairs started listing against USDT upon its release. This gave USDT a first-mover advantage in the stablecoin market. USDT tokens are circulating on most major blockchains, including Ethereum, Bitcoin, Algorand, EOS, and more.
USDT currently ranks 3rd in the crypto market cap. It has a circulating supply of $67.5 billion. At the time of writing its 24-hour trading volume was $50.5 billion.
USDT’s dollar value usually sticks around $1. This is by design. There are slight ups and downs, but the market quickly corrects itself to around $1.
USDC vs USDT
The Blockchain Behind USDC vs. USDT
Users get various advantages with different blockchains. These advantages could be from utility to transaction speed. The blockchains circulating USDC are Solana, Ethereum, and Algorand. The blockchains circulating USDT are Ethereum, Algorand, OMG, SLP, Tron, USDT Bitcoin, and EOS.
Read more: Advantages And Disadvantages Of Different Types Of Blockchain
USD Savings Inspection
If questions like “ Is USDT safe” or “ Is USDC safe” are bothering you, these two stablecoins are audited by prestigious accounting firms.
Grant Thornton inspects USDC accounts. It is one of the top five accounting audit companies in the world. The USD savings accounts on USDC are checked and announced on the Circle website every month.
Freeh, Sporkin, and Sullivan LLP inspect USDT accounts. Investors have concerns with USDT because they are not informed about how often these accounts are audited.
Founders of USDC vs. USDT
USDC was created in 2018 by Coinbase and Circle, while USDT was created in 2014 by Tether Limited.
USDT vs USDC fees
Both these stablecoins can be bought and sold on Crypto exchanges just like any other coin. The transaction fee for these stablecoins vary from exchange to exchange.
Use of USDC and USDT
Stablecoins like USDC and USDT can be utilized for multiple purposes, like accessing yield in the blockchain market, storing value, and making payments. Below are some attractive use cases for stablecoins.
Using Defi for Lending
Decentralized finance, or Defi, refers to an ecosystem operating without a third party or central administration. It comprises blockchain-based financial applications and works on a peer-to-peer model. You can lend your stablecoins to a borrower and earn interest with Defi lending. This system benefits lenders and borrowers as it allows users to obtain lower-interest loans than the decentralized exchange. Lenders can also earn long-term interest on their stablecoins.
Trading crypto pairs means users can trade one crypto asset for another through an exchange. Users can compare the costs of various crypto assets through these pairs. For example, you will know how much USDT equals one BTC (Bitcoin) in a BTC/USDT crypto pair.
Users can provide liquidity on their stablecoins with automated market maker decentralized exchange, or AMM DEX. For example, users can provide liquidity using their USDC on their top pairs, such as ETH-USDC. They can also earn trading fees and other incentives.
You can also earn interest on usdc and usdt by lending your stablecoins for a fixed duration. You should check if your Crypto exchange has lending services.
So if you are asking yourself “should i use usdc or usdt” read further. Interestingly, most experts do not consider USDT the best stablecoin despite having a higher market cap and volume. The gaps in auditing and transparency of USDT are the reasons behind this.
USDC has greater transparency compared to USDT. Furthermore, USDC is comparable to USDT in terms of the blockchain and exchange rate. USDC is preferred for those who value transparency, whereas USDT is preferred for liquidity and investing in a higher volume Crypto.
USDC and USDT are both good options for investors who want to be a part of the stablecoin market as they comprise the majority of the stablecoin market cap along with BUSD (Binance USD). Vendors are also more comfortable using stablecoins as Visa has partnered with Circle. The future of these Cryptos is promising. Now is the time to jump on the stablecoin bandwagon.