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Which Stablecoin Is Better To Use, USDC Or USDT?


Key Takeaways

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  • Both USDC and USDT are US dollar-backed stablecoins and have a wide user adoption in the crypto industry.
  • The key differences between USDC and USDT are based on their use cases, divisibility, reserve management, and transparency.

Volatility is the word we use to describe the inherent nature of cryptocurrencies. But, not stablecoins. Despite being a subcategory of cryptocurrencies, stablecoins stay far away from volatility. Stablecoins do not experience extreme price fluctuations, making them have an edge over other cryptocurrencies.

USDC and USDT are the two top stablecoins that made it to the list of top 10 cryptocurrencies with huge market cap value and user adoption. Both USDC and USDT are backed by the US dollar fiat currency. While USDC is the safest and transparent stablecoin, USDT has faced some controversies regarding its reserves in the past. However, they didn’t stop USDT in maintaining its position as the largest stablecoin by a market capitalization of $86 billion.

You might wonder, if both are stablecoins and are backed by the US dollar, how are they different? We will explore the USDC vs. USDT in the present article and find out their key differences in detail.

USDC in Brief

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USDC stablecoin was originally created by a Centre Consortium formed by Circle, a fintech company, Coinbase crypto exchange, and Bitmain, a Bitcoin mining company. When the Centre Consortium shut down, Circle took the complete responsibility of the USDC stablecoin issuance and governance.

The value of USDC is pegged to 1 US dollar and hence 1 USDC is always equal to 1 US dollar, making it a stablecoin.The consortium developed USDC tokens based on the ERC-20 token standard but it’s also compatible with multiple blockchain networks. Apart from offering transfer of funds to and from anywhere across the world, USDC also offers several use cases such as risk-hedging, lending, multi-chain functionality, and more.

USDT in Brief

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USDT is the pioneering stablecoin that was developed by Tether Limited in 2014 to eliminate the “volatile nature” cryptocurrencies while still being able to leverage the underlying technical advantages. It was the first stablecoin to combine the best parts of both fiat currencies and cryptocurrencies, paving a way for users to hold their funds in crypto without the fear of losing the value due to volatility.

The value of USDT is also pinned to that of 1 US dollar and backed by assets held in its reserves. Today, every popular crypto exchange platform offers trading services by including USDT in their trading pairs. In addition to enabling faster transfers at low prices and without the fear of price volatility, USDT also allows users to take part in DeFi activities such as yield farming, staking, lending, and more

USDC Vs USDT: Key Differences

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Both USDC and USDT are stablecoins and are backed by the leading fiat currency, US dollar. Despite having numerous similarities such as both of them are accepted by major crypto exchanges and enable decentralized finance activities, they also share clear differences in their functionality. Let us discuss them here.

Market Cap and Trading Volume

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The obvious difference between USDC and USDT is their market capitalization value and trading volume. While USDT is the top 3rd cryptocurrency with a market capitalization of over $86 billion, USDC is at 6th position with more than $24 billion in market cap. Coming to the trading volume, USDT again comes first with more than $48 billion in trading volume compared to the $5 billion trading volume of USDC.

Price Stability

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Price stability is the integral nature of stablecoins, without which they will not remain stablecoins. Since both of them are US dollar backed stablecoins, their price will always be equal to 1 US dollar. Tether or USDT witnessed some slight price fluctuations in 2017 and 2018 and lost its US dollar peg for a brief period. However, it is now stable without any changes in its value. USDC price has had a bit more extreme fluctuations in the past but it also corrected its value and is trading at $1.

Divisibility

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Another key difference between USDC and USDT is the divisibility of value. USD Coin or USDC is divisible similar to its underlying currency US dollar. On the other hand, USDT is not divisible. Divisibility has always been important in the world of finance, enabling flexibility in making fund transfers. USDT has limited functionalities because of its lack of divisibility.

Transparency

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USDT had experienced some controversies in the past when it was hesitant to release its audit reports and showing its reserves. After a series of incidents, USDT is now gaining the trust of its users by taking steps towards transparency and by publishing daily updates regarding its reserves. On the other hand, USDC has always been transparent and compliant with regulatory policies. Circle ensures that USDC’s reserves are audited manually, making it the most trusted and transparent stablecoin.

Conclusion

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Both USDC and USDT are the widely used stablecoins in the crypto industry. Even though they share many similarities, being the US dollar-based stablecoins, they also share numerous differences when it comes to their functionality, value divisibility, user adoption, and other use cases.

If using a stablecoin across any platform to access a wide range of trading and DeFi activities, then USDT is the right choice for you. However, if safety and transparency is your priority, along with having the advantages of stablecoins, then you can use USDC tokens. We hope this guide helped you understand key differences between two popular stablecoins USDC and USDT.

Frequently Asked Questions (FAQs)

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USDC is considered as a better option when you reflect on safety, transparency, and regulatory compliance of the two stablecoins.

The developer and issuer of USDC, Circle primarily focuses on being compliant with the regulations of the US government. It undergoes regular audits and publishes audit reports, which makes USDC a safer stablecoin than USDT.

If you take regulatory compliance and auditing into consideration, USDC and BUSD are better options. However, USDT is the most popular and widely accepted stablecoin with a large market capitalization. Among the three, USDC stablecoin is considered the best and safest option for trading cryptocurrencies.

Sources


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