Cryptocurrencies are widely known to be extremely volatile and unstable. However, its popularity keeps on increasing due to the advent of stablecoins. Stablecoins are a special kind of cryptocurrency that has a reasonably consistent price. Essentially, these coins allow you to trade in the crypto market without being at risk of frequent price fluctuations. So they present a relatively stable value, unlike regular cryptocurrencies.
Currently, there are two popular types of stablecoins in the crypto market, which are Tether USD (USDT) and USD coin (USDC). This brings us to the popular debate between “USDT Vs USDC”. Although both tokens are quite similar and are backed by the US dollar, we can still point out a few differences between them. This article compares the two stablecoins and provides you with a verdict on the best one to go for on Bitmama as a new crypto trader.
What is USDT?
Before we dive fully into the USDT Vs USDC debate, let’s learn a little about both stablecoins. Tether USD, popularly known as USDT, is among the first stablecoins to be launched in the crypto market. Ever since its inception, it has been the biggest stablecoin based on market capitalization. This coin was first established in late 2014 by an organization called Tether and this is how it became widely known as Tether USD. Sometimes, crypto traders use “Tether” and “USDT” interchangeably when describing this stablecoin.
The USDT was founded upon a simple model. Buyers can send funds to Tether, while they issue an equal amount of the USDT stablecoins. On the other hand, Tether will then give buyers the capacity to redeem USDT coins for US dollars on just a 1:1 basis. Although Tether claims to have enough reserves to support every USDT circulating, critic doubt the validity of this claim. The major purpose why the USDT was made is to sustain a price range close to $1 at all times.
What is USDC?
USD Coin, popularly known as USDC, is a stablecoin established in 2018 by Centre, an association set up by Circle and Coinbase. However, this stablecoin is generally associated with Circle, and the organization builds a wide range of payment solutions using the USDC.
USD Coin is one of the new stablecoins that gained a reputation by leveraging Tether’s lack of transparency. Other than this coin, other new stablecoins were introduced. Some of them include Pax Dollar, Gemini Dollar as well as True USD. So far, USD Coin has been the most successful of the bunch by far.
USDC is pretty similar to USDT in terms of design, as it was also built to trade close to $1. It is also and is supported by reserves regulated by its issuer. Buyers can simply send US dollars to an issuer of this token (Circle), while they provide the buyer with an equal amount of USDC coins. Circle also permits customers to redeem this coin for just US dollars on a 1:1 footing.
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USDT vs USDC: Which is better?
Now, let’s dive into the main USDT vs USDC debate. If you just want to keep USDT or USDC for a short time before completing your trade on an exchange platform, you can choose any of the coins. However, if you want to keep USDT or USDC so you can store its value over a long period, you have to consider some factors before making your decision. These factors include:
1. Longevity
USDT has been around for a longer time than USDC. USDT was first on the crypto market in October 2014 and was called Realcoin. USDC, on the other hand, was founded in September of 2018. So, if you are considering longevity, USDT has a better advantage.
2. De-pegging incidents
Both stablecoins have experienced de-pegging incidents in the past. During these incidents, their prices fell below the $1 target. In 2018, the price of USDT tanked as low as $0.92 because there were rumours that Tether didn’t have enough backing for its circulation. However, the coin eventually returned to its original $1 peg.
USDC has also had its fair share of price decline. The de-pegging incident occurred in March of 2023 when the Silicon Valley Bank abruptly collapsed because of a bank run. In response to the collapse, USDC traders sold off their coins, leading to a decline in the price of the stablecoin below $1. However, the coin climbed back to its stable price target of $1 a few days after the decline.
3. Redemptions
Tether offers its users a service for exchanging USDT tokens for USD. However, this offer won’t be beneficial to many USDT traders because of the condition attached to it. The minimum amount of USDT that customers can redeem to USD via Tether is a whopping 100,000 USDT ($100,000). Also, Tether will charge customers a verification fee of 150 USDT for the completion of the process.
On the other hand, USDC offers its users an easier and more direct way to redeem the coin in USD. This service is primarily offered by the founding company, Circle via one of their products. The minimum redeemable amount is $100 and this makes the service more accessible than that of USDT.
What Are The Similarities Between USDT vs USDC?
When it comes to USDT vs USDC, we’ve observed a few similarities between both coins. They include:
1. Transparency and reliability
USDT and USDC are both centralised stablecoins that demand the credibility of their issuers. Hence, Tether, the primary issuer of USDT, depends on the concise audits of BDO Italia to provide quarterly reports on the important stakes of its reserves and platform. Also, Circle, the company associated with USDC, provides its customers with monthly attestations for the coin on their transparency page. Their audit is done by Grant Thornton LLP. These prominent accounting corporations are crucial in affirming the legitimacy of both the USDT and USDC.
2. Fiat-backed tokens
Both digital tokens are completely fiat-backed and their ratio with the US dollar is pegged at 1:1. For this reason, they are considered stable in nature compared to other kinds of cryptocurrencies. Both coins are accepted on prominent crypto exchanges since they are supported by the US dollar.
3. Available on trusted blockchains
Essentially, both of these stablecoins are primarily powered by the popular Ethereum blockchain. Nevertheless, they are extending and are now supported on some other blockchain platforms such as Solana, TRON, and Algorand.
What Are the Differences Between USDT vs USDC?
Here is a list of the major differences between USDT and USDC:
1. Longevity
As stated earlier, the USDT stablecoin has existed on the crypto market far longer than the USDC. The former was established in 2014, while the latter was established in 2018.
2. Price Stability
Judging from how stable the prices of both coins have been in the past, we’ve concluded that USDC prices have been far more stable than USDT. Note that the stability problems encountered by the two stablecoins should not be mixed up with the normal volatility of other types of cryptocurrencies.
3. Market capitalisation
The market capitalisation of USDT is higher than USDC since it has a circulating supply of about $67.5 billion. Hence, USDT trades in high volumes every day compared to USDC. The market capitalisation of USDC is lower and its circulating supply is estimated to be $52 billion. For this reason, many traders prefer USDT over USDC.
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Are USDT and USDC the same?
Although USDT and USDC are both stablecoins and have very similar designs, with a target at $1 peg, they are completely different. Tether issues USDT while the other coin is issued by members of the popular CENTRE consortium, especially Circle.
Based on the information provided above, the judgment of the debate between USDT vs USDC is clear. USDC is not particularly better than the USDT coin, however, some traders prefer it because its prices have been safer in the past. Also, both tokens adopted a matching centralized stablecoin prototype.
Ultimately, USDT has the bigger market capitalization of all stablecoins and is the most used globally. Although USDC has come a long way since its creation, USDT remains the biggest stablecoin yet and is preferred by crypto enthusiasts and vendors for trading.
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