In this guide, USDC vs. USDT, we are going to distinguish between these two stablecoins and what are the key differences between them.
Let’s start at the basics and work our way up for those who are new to the market of cryptocurrency. Let’s first explain what Stablecoin is and what the purpose may be for its users not to mention which stablecoin is better between USDC and USDT.
What is a Stablecoin?
Stablecoin creators design cryptocurrencies to maintain a stable value by linking them to an external reference. By addressing the high unpredictability of cryptocurrencies like Bitcoin (BTC), stablecoins make themselves more suitable for everyday transactions. When choosing a stablecoin, consider the various variants, such as USDC and USDT, which are prominent examples in this context.
The Importance of a Stablecoin
The importance of a Stablecoin is that it reduces the risk of the unpredictability of cryptocurrency, making it more suitable for common transactions. It also serves as a medium of exchange and the currency must remain relatively stable which helps buyers and sellers avoid risk by not having to speculate on price changes during their routine transactions although all this volatility can be great for traders, it turns routine transactions like purchases into risky speculation for the buyer and seller and most merchants don’t want to end up taking a loss if the price of a cryptocurrency plunges after they get paid in it.
In the early stages of the market, investors benchmarked cryptocurrency prices against those of Bitcoin and Ethereum, which limited profit opportunities to selling digital assets for fiat money and transferring the proceeds through a cryptocurrency exchange to a bank account.
Since then, traders have had to be able to trade into a safe asset in order to maintain a stable value on-chain. As a result, stablecoins have grown rapidly and are now being used in a wide range of business applications.
The Most Popular use for USDC and USDT Stablecoins
USDC and USDT, with their consistent growth in value and reduced volatility, have found widespread adoption in the crypto ecosystem.
Among their various use cases, facilitating seamless transactions stands out as the most popular. Let’s explore their essential role in more detail
A Medium of Exchange
The “real world” and the blockchain world are connected by stablecoins. They enable users to transact in fiat money anonymously and without a middleman during periods of severe volatility. Stablecoins are useful for regular goods and services because they essentially offer the same advantages as Bitcoin but at a more stable and consistent price.
Across the Border
USDC and USDT uses their capacity to transfer money across banks and borders at a fraction of the cost and time compared to traditional methods, and is one of their most favorable benefits with blockchain technology, Stablecoins effectively facilitates cross-border transactions.
Trading
Traders frequently employ stablecoins to hedge their investments or trade in and out of positions without converting to fiat money, while also leveraging them as trading partners for other cryptocurrencies.
Types of Stablecoins
Stablecoins come in various forms, each with its unique approach to maintaining stability. Fiat-Collateralized Stablecoins are backed by reserves of fiat currency, such as the U.S. dollar, providing a tangible anchor for their value. Commodity-Collateralized Stablecoins are pegged to the price of a commodity, like gold, offering a tangible link to the physical market. Algorithmic Stablecoins, on the other hand, utilize complex formulas to regulate supply and maintain equilibrium, ensuring a stable value for users.
Fiat-Collateralized Stablecoins
Stablecoins that have a reserve of fiat money, such as the US dollar, use it as collateral. The issuers of stablecoins, such as USDC (USD Coin) and USDT (Tether), hold corresponding reserves of fiat money, specifically US dollars, to back their digital currencies.
Algorithmic Stablecoins
Algorithmic stablecoins are cryptocurrencies that maintain a stable value through smart contracts. These blockchain-based contracts automatically execute the buying and selling of reserve currencies to ensure that coins remain at their intended value. Cardano’s native stablecoin, DJED, serves as an excellent example of algorithmic coins in action. While these coins are the most decentralized among their peers, they are also the most vulnerable.
Commodity-Backed Stablecoins
These stablecoins derive the majority of their value from the prices of commodities such as silver and gold. Secure locations hold the physical commodities, which serve as reserve assets. For example, Pax Gold (PAXG) explicitly represents ownership of actual gold, with each token backed by one fine troy ounce of gold.
Read More: Best Crypto Staking Platforms
Advantages and Disadvantages of USDC and USDT Stablecoin
Stablecoins offer stability and convenience but come with risks related to centralization, regulation, and technical complexities and this is what investors need to take into account before choosing the right stablecoin for their needs.
Benefits of Stablecoin:
- ✅ Because Stablecoins are pegged to stable assets such as the U.S. dollar, it makes life easier when transferring funds between crypto exchanges and bank accounts that is why there is such a hype on USDC vs USDT.
- ✅ Users can move money back into U.S. dollar assets without needing additional conversions.
- ✅ Provide a haven for funds providing a loyal and reliable place for your funds to go between your crypto investments
- ✅ Some stablecoins pay interest, allowing their users to earn passive income while holding them.
- ✅ They fuel the growth of DeFi by allowing users to engage in lending, borrowing, and yield farming. Simultaneously, they mitigate risk stemming from price volatility.
- ✅ They facilitate efficient cross-border payments, lower transaction costs, and promote financial inclusion
Disadvantages of Stablecoin:
- ❌ They conducts regular audits of the reserve assets to ensure the stability of stablecoin, a lack of transparency or unsuccessful audits can erode trust and raise doubts about their stability.
- ❌ Stablecoins design prioritizes stability over speculative gains, making them less appealing to traders and investors seeking higher returns, as the predictable value that it provides may not align with their expectations.
- ❌ Banking regulations require complex compliance which can significantly impact stablecoin operations and as a result, Stablecoins that involve fiat currencies may be subject to regulatory scrutiny by authorities.
Additionally, stablecoin issuers must navigate risks associated with the reserve management, collateralization, and security, while also leveraging the benefits of convenience and resilience.
What is Tether (USDT)?
Tether, a cryptocurrency with a value tied to the US dollar, was established in 2014 by iFinex, the company that owns it.
As of 2024, USDT has become the third-largest cryptocurrency, rivaling its competitors Bitcoin (BTC) and Ethereum (ETH), with the majority of trades performed in other cryptocurrencies in terms of volume. The symbol for Tether, USDT, reflects its fluctuations in value, which are directly tied to the US dollar.
Source: Cyrptonomist
Closely linked to Bitfinex, USDT has encountered legal issues as well as accusations of improper fund management. USDC, which was founded by Circle, is closely associated with Coinbase and has recently seen comparable legal challenges as well as SEC regulations.
USDT Stability
Because of its reliability, USDT is a well-liked option for safe transactions and as a link between other cryptocurrencies.
To preserve stability, Tether (USDT), the biggest stablecoin by market capitalization, strives for a 1:1 ratio with the US dollar. Core appeals emphasize the stability of USDT, which distinguishes it from volatile cryptocurrencies like Bitcoin that are prone to wild price swings. Instead, USDT focuses on delivering consistency and predictability, striving to maintain its value close to $1.
Innovative uses for USDT have emerged in addition to its increasing popularity in the cryptocurrency market, such as adoption in decentralized finance and cross-border payments.
USDT Volume
The industry’s backbone, USDT, enables swaps between the dollar-tied stablecoin and highly volatile cryptocurrencies, facilitating seamless transactions. Its main competitor, Circle’s USDC, has recently been catching up to USDT in terms of market cap. However, for now, USDT vs USDC, USDT remains the dominant force in the stablecoin space.
Based on some research the predictions for the value of USDT are due to increase by 5% in the next month and the stability of the USDT remains a crucial part for traders and investors looking for the best reliable bridge between crypto assets and traditional fiat currencies.
As Tether continues to evolve, adapt, and maintain its position as the stablecoin of choice in the ever-changing crypto landscape, its role in 2024 will likely be pivotal for the broader digital financial ecosystem.
Pros & Cons:
- USDC trades at around $1
- Trusted and stable cryptocurrency
- It is available in the majority of exchanges
- Easy to buy and sell
- Lack of transparency to the public
- USDT is not divisible
What is USD Coin (USDC)?
In 2018, Circle, a company that partnered with Coinbase, launched the stablecoin USD Coin (USDC) through its partnership with Centre. As a result, Circle creates a range of payment options that utilize USDC, making it the company most closely associated with the stablecoin.
Source: Phemex Academy
USDC Stability
When a transaction is initiated to purchase one USD Coin using fiat money, The USDC created a new coin, ensuring a 1:1 peg to the US dollar and as a result, the corresponding fiat money is deposited and held at one US Dollar, Herby establishing a direct link between the two currencies. Conversely, if you exchange a USD Coin for fiat money, once the fiat money is returned to your bank account, the USD Coin is burned.
A flurry of new stablecoins, including USD Coin, attempted to take advantage of worries regarding Tether’s lack of transparency. Stablecoins like True USD, Gemini Dollar, and Paxos Standard Token (now known as Pax Dollar) were also part of this stablecoin wave. By far the most successful of the group thus far is the USDT Coin.
In the world of cryptocurrencies, USDC is a ground-breaking invention that provides stability, transparency, and accessibility unlike any other system.
USDC Volume
Circle releases monthly attestations, showcasing that they have sufficient reserves to cover all USDC tokens, thereby earning a reputation as one of the safer stablecoins available today. Users must be aware that USDC is a centralized stablecoin, and that its value depends on Circle’s and other USDC issuers’ continued ability to exchange USDC for US dollars.
It has been noted that approximately $3.48 billion worth of USDC has been traded across various exchanges and platforms. It’s a significant indicator of liquidity and market activity for this stablecoin. Keep in mind that trading volumes can fluctuate based on market demand, investor sentiment, and other factors.
Pros & Cons:
- Low price volatility
- Instant payments
- Trades as close to $1
- Transparency
- Has Transaction fees
- No price appreciation
Comparing USDC vs. USDT
Source: CoinGecko
In the cryptocurrency market, USDT vs USDC are large competitors but both play crucial roles by lowering volatility exposure and supplying stability. For the purpose of generating passive revenue, USDC and USDT can both be staked on supported platforms. Although USDT has a greater estimated average staked return and USDC has a bigger staked volume.
Your decision is based on how you feel about utility, safety, and transparency.
| Comparing | USDT | USDC |
| Availability | 2014 | 2018 |
| Target Price | $1 | $1 |
| Transparency | Quarterly Audits | Monthly Audits |
| Supported Blockchain Platforms | Ethereum, EOS, Liquid, OMG Network, Alorand, Solana, Avalanche, Polygon, Tezos and Near Protocol | Ethereum, Algorand, Solana, Stellar, Avalanche, Flow, Hedera Hashgraph, Arbitrum, Base, Celo, Near, Noble, Optimism, Polkadot and Polygon |
| Market presence & Capitalization | Has been the largest stablecoin by market capitalization since its launch. Its longer market presence has contributed to its popularity. | USDC has gained traction and is recognized as a trustworthy alternative, thanks to its simpler receive structure that appeals to investors seeking stability. |
| Auditors | BDO Italia is Tether’s independent auditor. | Deloitte is Circle’s independent auditor |
Why are there so many USD Stablecoins?
With regards to USDC vs USDT, both Stablecoins serve an extremely crucial role in the cryptocurrency ecosystem and continue to grow where they aim to provide a stable alternative to their counterparts such as Bitcoin which experiences a high fluctuation in price and that is why there are so many today.
Stablecoins are designed to mitigate the high volatility of cryptocurrencies, enabling traders to safeguard their fiat values without cashing out of the market. This allows users to enjoy the convenience of making purchases without worrying about budgeting drama, as they can continue to pay for goods and services without incurring losses.
Furthermore, stablecoins have become more practical than traditional country-issued currencies because they can be used globally, 24/7, without relying on banks or other intermediaries.
How to Choose the Right Stablecoin
When is it finally time to choose the right Stablecoin, According to the information you’ve received above, Choosing between USDT and USDC all depends on your individual needs and perspectives.
Understanding USDC and USDT stablecoins empowers individuals to make informed decisions about their respective advantages in various scenarios. By recognizing both the similarities and nuances between these two stablecoins, users can leverage the benefits of each digital currency based on their specific requirements and preferences.
Below we have given you some staple information when going ahead and making a decision on which stablecoin to use that will benefit you and your needs.
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Background and History of Stablecoin
Tether (USDT) launched in 2014 as one of the first stablecoins. Since then, it has held the title of the largest stablecoin by market capitalization. They hold an equivalent amount of USD int the reserve to back each USDT token, ensuring that the price remains closest to $1. In contrast, USD Coin (USDC) entered the scene in 2018 with a similar goal of maintaining a value close to $1. With the support of the short-term treasury reserves it is able to achieve this. USDC stands out for its safety features, including regular audits and simpler reserves.
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Transparency and Backing
While it has a longer market presence and a higher capitalization, USDT has experienced transparency and legal issues in the past. One of the most preferred stablecoins, despite its challenges, remains widely regarded. The USDC’s rigorous audits and transparent backing instill confidence in users who prioritize safety and regulatory compliance, making it a safer option viewed as a result.
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Utility and Cases
Both USDT and USDC are functionally similar, aiming to maintain a stable value close to $1. You can use them for short-term trades or as a store of value. and if you consider the need for stability for trading, either one works. However, if you want a safer option for long-term storage, USDC may be preferable.
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Market Acceptance
Tether has widespread acceptance and high liquidity across various blockchain platforms due to being in the playing field the longest and as for USDC, they are newer but have gained popularity because of its regulatory compliance, otherwise, they both are acceptable.
Consider your specific needs and stay informed about the latest developments in the crypto market, as both stablecoins fulfill their respective roles, allowing you to make an informed decision that aligns with your goals.
How to Buy Stablecoin
In this section, we walk you through the process of buying stablecoins in 2024.
Step 1: Select the Stablecoin that you wish to Buy
Check if your chosen crypto exchange offers the stablecoin you’re looking for, as you can find ones pegged to the U.S. dollar, gold, or other cryptocurrencies, and compare options between USDC and USDT, among other stablecoins.
Some examples include:
- Dai – Various decentralized applications accept this value, which is within the dollar and has widespread recognition.
- USDC – Circle and Coinbase back this value, which is pegged to the US Dollar.
- USDT – The crypto market widely uses Tether which is backed by fiat currency.
- Frax – Frax is an algorithmic stablecoin but be aware that algorithmic stablecoins are still experimental technology.
- TrueUSD – Value is also pegged to the dollar and is a fiat-backed stablecoin.
- PAX Gold – This stablecoin is backed by precious metals such as gold.
Step 2: Open an Account
Once you have selected the exchange you want to use between USDC and USDT, you will need to sign up and create an account.
The registration process is usually fairly simple and you will need to provide all of your personal information such as full name, email address, and phone number and some exchanges will require identity verification when creating an account.
Step 3: Deposit Money
Load your budgeted funds into the exchange account and follow the instructions provided by the exchange to deposit your money securely, be sure the information is correct before loading funds.
Step 4: Buy Stablecoin
Fund your account and then proceed to the stablecoin trading section on the exchange, where you can purchase the stablecoin of your choice using the available funds.
Conclusion
USDC and USDT are two stablecoins with their own cryptocurrencies, USDT is more widely accepted option. Prioritize USDC, which offers better control and transparency, for a more reliable choice.
Now you know the key differences between USDT and USDC. If you’re feeling inspired to start buying stablecoins, or this guide has provided some extra insight to your existing knowledge, you may be pleased to know that Binance provide the ability to buy stablecoin assets.
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FAQs
Is USDT and USDC the same?
Stablecoins USDT and USDC are not the same, even though they are both backed by the same amount of fiat currency. It should be noted that USDT is the most traded cryptocurrency with the biggest 24-hour volume, while USDC was chosen as a store of value because of its transparency. USDT is issued by Tether, while USDC is issued by members of the CENTRE consortium, mainly Circle. Their acceptability, safety, utility, and dependability are different.
Is USDC safe?
Yes, USDC is often described as a safe and trustworthy stablecoin.
What is the most popular use for stablecoins?
Stablecoins such as USDC and USDT are essentially a medium of exchange, offer the same advantages as Bitcoin while keeping a steady price, which makes them useful for regular products and services.
What are the most popular cryptocurrencies besides Bitcoin?
The leading altcoins by the size of the market are Dogecoin, XRP, Solana, BNB, and Ethereum.
How many cryptocurrencies are there?
A sizable percentage of cryptocurrencies might not be very important. Some estimates have the total number of cryptocurrencies in existence at about 20,000, however, the majority of these are either discontinued or not in use.
Where can I buy USDC and USDT?
Most centralized cryptocurrency exchanges allow you to buy USDT. Many decentralized exchanges let you swap another cryptocurrency for USDT. Additionally, you can buy USDC on most centralized exchanges or redeem USD for USDC directly through Circle.