Understanding the Difference Between USDC and USDT Stablecoins

If you’re an avid crypto trader, the chances are that you’ve experienced incredibly successful trades on occasions, but in the next minute, you’re counting huge losses. That’s simply the uncertainty that crypto volatility presents. That changes with stablecoins; unlike other cryptocurrencies – such as Bitcoin, Binance Coin, and Shiba Inu – stablecoins provide a more reliable option for crypto holders to trade without exposure to high risks. Stablecoins are more resistant to frequent fluctuations associated with other coins, as they are backed by real-world fiat currencies.

USD Coin (USDC) and USD Tether (USDT) are two leading stablecoins used in crypto trading. Both are connected to the US Dollar and offer the stability crypto users need to trade without worrying about high volatility. In fact, their consistency and stability make them market leaders, appearing in virtually all cryptocurrency transactions, wallets, and applications.

You might ask yourself: “What are USDC and USDT stablecoins, and which one best fits your trading needs?” This article provides valuable insights into USDC and USDT. However, it would be best to first know what a stablecoin is to understand the two coins better.

What is a Stablecoin?

In simple terms: a stablecoin is a type of cryptocurrency whose value is connected to fiat (government-issued) currency, such as the USD, EUR, GBP, etc. That said, you can store your coin funds without worrying about fluctuations in your coin’s fiat value – its price value remains constant.

In the past, traders could only exchange Bitcoin and other cryptocurrencies for other crypto tokens and fiat currencies. The only caveat was that one couldn’t convert their coins or move to a fiat-backed asset without exiting the cryptocurrency platform. That’s where stablecoins come into play.

The price of a USDC or USDT coin remains relatively stable because each is tied to the USD. In theory, crypto holders can contact their token provider and exchange their tokens for a fiat currency without leaving the crypto ecosystem. That alleviates volatility, and you can exchange stablecoins 24/7 without involving your bank. Additionally, you can always hold them in their current value, so long as the backing ratio remains a true 1-to-1.

There are Other Stablecoins Besides USDC and USDT

Perhaps you’re learning about USDC and USDT for the first time here, but in a multi-billion-dollar market, they are not the only stablecoins. Just like there are multiple cryptocurrencies, there are also stablecoins.

For example, Binance boasts its own stablecoin known as BUSD, while Ethereum has Dai (DAI), and each of these stablecoins is designed to work on their respective platforms. Like the USDC or USDT, BUSD and DAI are equal to $1 USD, but that doesn’t mean they are entirely interchangeable. The choice of token you wish to purchase is highly hinged on the blockchain or application you prefer to use.

What is USDC?

USD Coin or USDC was initially designed as an Ethereum-exclusive ERC-20 stablecoin by Coinbase and Circle in 2018. Today, it’s available in other variations, including the BSC (BEP-20) variant, Solana, Algorand, Polygon, etc. It uses the Ethereum network for token transfers and storage, which is good news if you use other ERC-20 tokens.

USDC is regulated and governed by Center Consortium – a financial institution tasked with the governance of the technical and financial standards of the stablecoin and ensures transparency in transactions involving exchanges with a true 1:1 backing. Therefore, for every USDC created, the Federal Reserve holds $1 in the form of US Dollars and other financial assets.

A total of 34.7 billion USDC is currently in circulation in the crypto world, with an equivalent dollar amount held in reserve. Only select financial institutions that meet Circle’s membership-eligibility requirements can issue USDC to ensure its expansion in the digital asset ecosystem.

How can I use USDC?

USDC is the only stablecoin supported by the Coinbase system, which is recommended for users in the US. You can convert it for other cryptocurrencies or cash out the token balance in your bank account. This dynamic ensures that the USDC price is locked at $1 USD, alleviating any issues or risks related to price volatility. Besides, USDC is also viable in any dApp based on the ERC-20 standard.

What is USDT?

USDT or Tether was the earliest stablecoins issued in 2014 by Hong Kong-based company Tether Limited. The idea behind USDT was to bridge the gap between cryptocurrency and fiat currency, a goal that Tether achieved successfully. For the first time, Tether allowed crypto holders access to platform-specific, blockchain-based US dollars that had high liquidity as other cryptocurrencies (Bitcoin, Ethereum, and other crypto assets) but eliminated their price volatility.

With high liquidity and low volatility, USDT offered traders an opportunity to transfer crypto-dollars to anyone at a low cost, with increased transparency and speed. That opened unlimited possibilities for conducting all sorts of crypto-dollar transactions, including remittances, payments, and more.

As the earliest fiat-currency-backed crypto token, Tether quickly established its niche in the stablecoin ecosystem, thanks to the hundreds of cryptocurrency trading that began pairing against USDT. Even so, the early days of USDT were marred by illegal activities. For example, a security breach of Tether’s network in 2017 resulted in the theft of 30 million dollars worth of tokens. As a result, Bitfinex (Tether’s parent company) was accused of illegally soliciting $850,000 from Tether to offset the debt.

Tether Limited has since removed vulnerabilities within its system, and today, 74.7 billion USDT tokens – twice the volume of USDC tokens – are in circulation on major crypto networks, including Algorand, Bitcoin, Ethereum, Tron, and many more.

How can I use USDT?

Unlike USDC, Tether can’t be used on the Coinbase system, which limits people who prefer using the service. The upside to USDT is that it’s the most popular stablecoin with the highest circulation volume, making it the only USD-backed coin you can use for exchanges to facilitate purchases or conversions to other cryptocurrencies.

There are several benefits of using USDT. For instance, you can not only transact quickly and cheaply, but you can also earn interest on decentralized finance protocols. Besides, it allows businesses to accept cryptocurrency payments as USDT tokens valued using the USD standard. That eliminates the need to accept payments in the form of cryptocurrencies, which exposes them to high volatility risks.

Takeaway

USDT and USDC stablecoins provide a more secure means of crypto transfers and exchanges, as they are backed by the USD. While you can only use the latter on the Coinbase platform, the former is the market’s most popular trading pair as it can be exchanged, transferred, or stored in various networks, including Ethereum, Bitcoin, Tron, and many more.

So, which one is better than the other? It’s not easy to state outright which stablecoin is better between the two because it really depends on your trading/financial goals and the circumstances of each coin when being used. USDT is more widespread while USDC is more trustable, considering it’s audited more frequently and has recorded no questionable activities since it entered the market in 2018.

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