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To outside observers, it may seem odd that stablecoins are some of the most popular cryptocurrencies. Why would people buy USD tokens rather than simply using fiat? What’s the point of buying an altcoin that promises never to increase in value?
However, anyone who’s dabbled in crypto trading knows how indispensable stablecoins are to digital asset markets. In the often volatile crypto industry, stablecoins provide relative security and exceptional liquidity.
While there are dozens of stablecoins to choose from, crypto investors have the most faith in USDT (aka Tether) and USDC. Current estimates suggest these tokens account for 80 percent of the total stablecoin market. Although USDT and USDC are perceived as the “safest” stablecoins, they aren’t interchangeable. Before making a purchase, new crypto traders need to understand the benefits and risks of USDT vs. USDC.
What Is A Stablecoin?
Before diving into the specifics of USDC vs. USDT, let’s review what a stablecoin is. Stablecoins are blockchain-based digital tokens that are tied to another real-world asset. Most often, stablecoins are tied to the US Dollar, but there are some stablecoins based on other fiat currencies like the Euro. Interestingly, a few altcoins track the price of precious metals like gold (e.g., PAXG).
So, what gives stablecoins any value?
There are two ways issuers could back their stablecoins. The standard way is to hold physical assets in reserves equivalent to every digital token an issuer mints. Theoretically, if everyone redeemed these stablecoins simultaneously, the issuer should have enough funds to satisfy every client.
There are also “algorithmic stablecoins” that aren’t backed by physical reserves. Instead, these stablecoins usually use advanced algorithmic programs to incentivize arbitrage traders to maintain a token’s peg.
USDC and USDT are the most famous reserve-backed stablecoins. Today, Dai is the most successful algorithmic stablecoin, but Terra’s failed UST is more widely known. In 2021, UST lost its peg to $1, which triggered one of the most dramatic falls in crypto market history.
|Stablecoin Type||What It Means|
|Fiat-Backed||These stablecoins are backed by / pegged directly with fiat money (like the USD).|
|Commodity-Backed||These stablecoins are backed by commodities like platinum, gold, silver, etc.|
|Cryptocurrency-Backed||The value of these stablecoins is generated using cryptocurrency as collateral.|
|Non-Collateralized||The value of these stablecoins is calculated using smart contract algorithms.|
What Is A USD Stablecoin?
Stablecoins could represent any traditional asset, but the most popular tokens maintain a 1:1 peg with the US Dollar. Unsurprisingly, these tokens are often listed as “USD stablecoins.”
USDC vs. USDT: Overview
USDC and USDT are both reserve-backed USD stablecoins, but they aren’t as similar as their price charts suggest. Indeed, each of these stablecoins has unique backstories that may influence which one you’d prefer to buy.
|Creator||Centre Consortium (by Coinbase and Circle)||Tether Limited|
|Auditor||Grant Thornton LLP||Freeh Sporkin & Sullivan LLP|
|Price Peg||1 USDC: 1 USD||1 USDT: 1 USD|
|Blockchains||Ethereum, Algorand, Avalanche, Flow, Hedera, Stellar, Solana and TRON||Bitcoin (Omini & Liquid), Ethereum, TRON, EOS, Algorand, Solana, OMG Network, and Bitcoin Cash (SLP).|
Data as of October 24, 2022
What Is USDC?
Created in 2018, USDC quickly became Tether’s top competitor for stablecoin supremacy. A big reason for USDC’s success has been its perceived reliability versus competing stablecoins.
The US crypto companies Coinbase and Circle created USDC via the CENTRE Consortium. To calm investors’ nerves, Circle works with the third-party accountant Grant Thornton LLP to release monthly attestations of their reserves.
What Is USDT?
USDT is the OG of USD stablecoins. Launched in 2014, Tether was the world’s first stablecoin and was initially only available on a Bitcoin sidechain. Like USDC, USDT is available on multiple blockchains, but it’s most commonly traded on Ethereum.
Although Hong Kong’s Tether Limited controls USDT, this company is closely associated with the British Virgin Islands-based exchange Bitfinex.
If you want more detailed info on USDT’s history, please read The Modest Wallet’s guide “How To Buy Tether.”
USDC vs. USDT: Stability
If you buy a stablecoin, you must feel comfortable that the issuer has the reserves to maintain the token’s peg. Historical price stability should be a primary concern when choosing between USDT vs. USDC.
When you look at a chart of USDC’s price action, you’ll notice it rarely deviates too far from one dollar. Indeed, according to Circle’s statistics, USDC has a standard deviation of $0.003 from 2020 – 2022.
Just keep in mind that USDC doesn’t have as long of a track record in the crypto industry as USDT.
Compared with USDC, USDT hasn’t maintained its peg as well throughout its history. To be fair, Tether has become “more stable” in recent years. USDT has also been around much longer than USDC.
In the aftermath of Terra UST’s collapse in 2022, Tether Limited proved it could handle billions of dollars of redemptions without deviating far from the $1 peg.
So, while it’s true USDT has de-pegged further and more often than USDC, it has always recovered. That’s no guarantee that USDT couldn’t collapse at some point, but it also highlights the resilience and popularity of this stablecoin.
USDC vs. USDT: Volume
Stablecoins are designed to provide enhanced liquidity to the crypto markets. Unsurprisingly, top-tier stablecoins like USDC and USDT have extremely high daily volumes — often surpassing tokens like Bitcoin and Ether. As a trader or investor, you’d want to see high volume with your stablecoins to ensure you can make fast & secure swaps.
Even though USDC has grown to become the second most popular stablecoin, it’s still not as actively traded as USDT. According to CoinMarketCap’s stats, the average daily trading volume for USDC is about $6 billion. While that’s a staggering figure, USDC is typically behind USDT, Bitcoin, and Ether in daily volume.
Currently, USDC has a market cap of ~ $53 billion.
USDT is often the most actively traded cryptocurrency. CoinMarketCap now estimates that USDT has a 24-hour trading volume of about $48 billion. Despite all of the controversies surrounding Tether Limited, it’s clear that many DeFi ecosystems rely heavily on USDT.
However, it’s worth mentioning that USDT’s market cap has been steadily declining as critics raise concerns over Tether Limited’s reserves. While USDC has been attracting more buyers, USDT has steadily lost market share with a current valuation of $67.5 billion. Some crypto pundits believe it’s only a matter of time before USDC overtakes USDT in market cap.
USDC vs. USDT: Key Similarities
On the surface, USDC and USDT are virtually indistinguishable. As long as nothing catastrophic happens to Tether Limited or Circle, you should be able to swap these tokens at an even value. And it’s not just their USD peg that makes USDC and USDT similar projects.
Pegged To 1 USD
The most glaring similarity between USDC and USDT is that they track the US Dollar. When you buy USDC or USDT, it should maintain the same value as the greenback. While Tether Limited and Circle have begun releasing stablecoins for other fiat currencies, USDC and USDT remain their most popular products.
Tether Limited and Circle back all their digital dollars with literal dollars in a bank account. Well, in reality, these companies are holding USD and “cash equivalents” in their reserves (e.g., bonds, precious metals, or commercial paper). It’s these physical holdings that give USDC and USDT their value.
Compatible With Multiple Blockchains
Although USDT and USDC are most popular on Ethereum, they are now available on multiple blockchains. While there are slight differences in which blockchains USDT and USDC are on, it’s getting easier to use them throughout Web3. For instance, you can now find USDT and USDC on Solana, Avalanche, and Algorand.
Well-Known & Popular Stablecoins
USDC and USDT remain the two most widely traded and talked-about stablecoins. Even though USDT currently sits in the top spot, both tokens enjoy widespread adoption in the crypto industry.
USDC vs. USDT: Key Differences
Even though USDC and USDT share many features, there are a few areas where they diverge. Considering the differences between USDC vs. USDT could help traders choose which stablecoin they feel more comfortable with.
Anyone who purchases USDT must feel comfortable buying tokens from a non-US-based company. Officially, Tether Limited is in Hong Kong, and it’s deeply intertwined with the exchange Bitfinex.
By contrast, the US-based companies Coinbase and Circle created USDC. Many American investors feel more comfortable knowing Circle and Coinbase are within the US government’s jurisdiction.
Transparency hasn’t been Tether’s strong suit. Although there are still questions surrounding Circle’s operations, Tether Limited has faced intense scrutiny for withholding data on its reserves.
Since Tether isn’t in the USA, it doesn’t have to abide by stringent policies for audits and attestations. To date, Tether has yet to issue a formal third-party audit of its reserves. However, you can find reports on Tether’s website that suggest it holds 85 percent of its funds in “cash, cash equivalents, short-term debt, and commercial paper.”
Due to Tether’s perceived lack of transparency, Circle tends to look “more reputable” by comparison. Not only is Circle in the USA, but it also publishes monthly attestations via Grant Thornton LLP. Anyone could download and review these reports on the CENTRE Consortium or Circle’s websites.
History In Crypto Industry
In terms of longevity, Tether takes the lead over USDC. Indeed, it’s doubtful that USDC would be here today if it weren’t for USDT. The concept of a “stablecoin” didn’t exist before USDT hit the crypto market in 2014. Circle released USDC in 2018.
Daily Trading Volume
To date, USDT remains the most actively traded cryptocurrency, with an average daily trading volume of $48 billion. While USDC is still one of the most actively traded cryptos, it pales in comparison at roughly $6 billion per day.
However, please bear in mind that USDC’s market cap has been rising as USDT’s has been shrinking. Some crypto analysts believe USDC may soon overtake USDT as the top stablecoin, especially if Tether Limited doesn’t address its transparency issues.
USDC vs. USDT: Safety & Transparency
USDT doesn’t have the best reputation for transparency or safety — especially when compared with USDC. Indeed, many crypto pundits believe USDC’s market cap went up in 2022 due to USDT’s perceived lack of safety.
Famously, New York’s Attorney General’s Office charged Tether Limited with using its reserves to cover an $850 million loss. Tether never admitted any wrongdoing in this case, but it settled with the NY AG Office for $18.5 million.
There are also more questions surrounding Tether’s reserves versus USDC. While people can find reports and statistics on Tether’s website, many are still waiting for a legit third-party audit. By contrast, Grant Thornton LLP publishes third-party attestations on USDC’s reserves each month. Also, Circle has connections with financial institutions like BlackRock and adheres to stringent US regulatory requirements.
To its credit, Tether Limited has emerged from all of its challenges and remains a dominant force in cryptocurrency. Just be aware that Tether Limited has a greater “perception problem” versus USDC.
USDC vs. USDT: Regulation
Like safety and transparency, regulation is one area where USDC outshines USDT. Although Tether’s team has repeatedly said it’s “regulated” under FinCEN, many questions surround Tether’s regulatory status. While Tether Limited is “registered” with FinCEN, there’s no evidence it has to meet any regulatory standards for its bookkeeping.
By contrast, Circle is a “licensed money transmitter” in the USA. In addition to publishing monthly attestations, Circle must submit financial statements to the SEC for review yearly. People can view all of these attestations and audits on Circle’s website.
USDC vs. USDT: Ability To Earn Interest
Besides crypto trading, people invest in stablecoins to earn a yield on DeFi or centralized finance (CeFi) platforms. Since USDC and USDT are so actively traded, they tend to offer the highest APYs in the crypto industry.
The rates you could receive for lending USDC and USDT vary depending on the protocol you’re using and the demand for these tokens. However, you’ll usually find that USDT’s rates are slightly higher due to its greater trading volume and higher perceived risk.
Speaking of risk, please remember that interest-bearing strategies are far from a “safe bet.” Recently, CeFi platforms like Celsius and Voyager filed for bankruptcy, and dozens of DeFi platforms have faced significant hacks.
Be sure to research any stablecoin yield accounts you’re looking into before depositing funds.
USDC vs. USDT: How To Buy Them
Thanks to their widespread use in Web3, it’s not hard to buy USDC and USDT on major centralized crypto exchanges. You could also find USDC and USDT on many popular decentralized exchanges (DEXs).
How To Buy USDC
Virtually every major cryptocurrency exchange supports ERC-20 USDC tokens. From Coinbase and Crypto.com to Gemini and Binance.us, you should be able to purchase USDC tokens with fiat or crypto. Simply create an account on your favorite exchange, deposit money with an ACH or wire transfer, and use that cash to buy USDC.
For those who already have crypto on a private wallet like MetaMask, you could use DEXs like Uniswap to trade your digital tokens for USDC. Remember to factor in the gas fees for whatever blockchain your DEX is built on.
How to Buy USDT
Even though USDT is more actively traded in DeFi, it’s not as readily available as USDC on centralized crypto exchanges. Some US-based businesses prefer to avoid the regulatory and transparency issues surrounding Tether Limited. Please double-check that the centralized exchange you’re interested in supports USDT before creating an account.
A few major crypto exchanges selling USDT include KuCoin, Binance.us, and Coinbase. Sign up for the crypto exchange that meets your expectations and set up a wire transfer or ACH deposit. You may be able to buy USDT with a credit or debit card, depending on the platform you’re on.
Like USDC, you can find USDT on many hot DEXs. You can easily pick up USDT on sites like Uniswap, SushiSwap, and 1Inch.
USDC vs. USDT: Alternatives
USDC and USDT dominate the stablecoin industry, but there are alternative options if you don’t like these tokens. Just keep in mind that alternatives to USDC and USDT have lower liquidity.
Created by developer Rune Christensen, Dai is the oldest algorithmic stablecoin built on Ethereum. Dai has a 1:1 value with the USD, but it doesn’t have a centralized authority that holds fiat reserves in a vault. Instead, Dai is a part of the Maker Protocol that allows anyone to deposit crypto collateral and mint Dai loans. At the start, MakerDAO only accepted ETH as collateral, but it now takes other Ethereum-based tokens like USDC.
Since Dai has no central authority, it’s the most decentralized and experimental stablecoins.
To learn more about how Maker Protocol works, you may want to check out our review on the best crypto lending platforms.
Binance USD (BUSD)
As the largest crypto exchange on earth, Binance has plenty of credibility in the crypto industry. Therefore, it’s no surprise Binance has one of the most popular USD stablecoins: BUSD. To back this stablecoin, Binance claims to hold an equivalent amount of cash and cash equivalents in US banks. The company also works with NY-based fintech company Paxos for its monthly attestations.
BUSD is available as an ERC-20 and BEP-20 token, making it well-suited for people who enjoy using the Binance Smart Chain. Read our full Binance review to learn more.
Gemini Dollar (GUSD)
Gemini isn’t as big as Binance, but it has built up a reputation as one of the most compliance-focused crypto exchanges. Based in NYC, Gemini is one of the few crypto exchanges that can legally operate in the Empire State. In addition to its crypto trading services, Gemini now issues an Ethereum-based USD stablecoin called GUSD.
Since Gemini has such a high reputation for compliance, some investors feel more comfortable with the reliability of GUSD’s reserves. For transparency, Gemini submits to regular audits with the third-party firm BPM LLP. Read our full Gemini review to learn more.
FAQ USDC vs. USDT
For those who’ve never dealt with stablecoins, choosing between USDC and USDT can be a struggle. If you’re still confused about which stablecoin to invest in, these FAQs should make your choice easier.
Which Stablecoin Is Better, USDC or USDT?
USDC and USDT have unique strengths and weaknesses, so choosing the “better” stablecoin will depend on your criteria. Currently, more people perceive USDC as the “safer” stablecoin because it’s based in the USA and releases regular attestations. However, USDT is older, larger, and more liquid in DeFi.
Picking the “best” stablecoin will largely depend on what you’re using these tokens for and how much you trust the organizations behind these projects.
Is USDC Safe?
Circle and Coinbase are two of the most well-regulated crypto companies in the USA. That doesn’t necessarily mean USDC is “safe,” but many investors trust the legitimacy of these organizations. Also, Circle publishes third-party attestations and a yearly SEC financial statement review on its website for transparency.
Just remember that USDC isn’t federally-backed, so it doesn’t qualify for protections like FDIC.
Are USDC and USDT Always $1?
USDC and USDT should always trade for $1 per token. The price may fluctuate if there’s a lot of trading volume, but the peg should never deviate more than a penny.
Is USD The Same As USDT?
USDT has no relation to the US government. Instead, USDT is a blockchain-based token issued by the company Tether Limited.
By contrast, USD is the official fiat currency of the USA. Only USD would qualify for protections like FDIC if you were to deposit it into a reputable bank.
What’s The Future Of Stablecoins?
Soon after Terra’s UST stablecoin collapsed, dozens of governments called for stringent regulation of the stablecoin industry. Many countries are also working on government-issued “Central Bank Digital Currencies” (aka CBDCs) that might compete with privately-issued stablecoins.
It’s difficult to say how stablecoins will change in the future, but it’s safe to assume regulators will introduce new policies. Many governments see stablecoins as a threat to national fiat currencies, which means more crackdowns aren’t off the cards. Anyone investing in stablecoins must stay up-to-date on the latest developments in global crypto policies.
Why Are USD Stablecoins Popular?
The US Dollar remains the world’s top fiat currency, making USD stablecoins an attractive option worldwide. Not only are USD stablecoins more liquid than other currencies, but they also tend to offer the best yield in DeFi and CeFi lending.
Which Stablecoin Is Cheaper: USDT or USDC?
There shouldn’t be a price discrepancy between USDT and USDC. Both of these stablecoins are pegged 1:1 with the US dollar.
The future of stablecoins is uncertain, but there’s no question USDT and USDC are the key tokens (and targets!) in this industry. Due to their longevity and reserve-backed status, USDC and USDT have become the most actively traded stablecoins amongst crypto enthusiasts.
Just remember that a stablecoin’s “price stability” doesn’t make it any “safer” than other crypto assets. Many significant issues surround stablecoin issuers and protocols, including potential government regulation. Please consider these risks before deciding whether to add stablecoins to your investment strategy.
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Eric Esposito is a freelance writer, editor, and cryptocurrency enthusiast. Although it took him a few years to grasp the Bitcoin revolution, Eric has become a crypto convert and long-term “hodler.” Besides crypto investing, Eric is interested in helping others understand how to safely stack sats with passive income opportunities.