The development of blockchain technology became the foundation for the formation of different applications of cryptocurrencies and other digital assets in various areas of human life. Among all existing crypto-technologies development trends in the ecosystem, the so-called stablecoins have become particularly popular, with USDT and USDC being the favorites due to the impressive set of advantages of their practical use. But what is the difference between them, and what are their features?
This article will be your guide to the world of stablecoins and will explain what USDT and USDC are and the difference between them. You will also learn which of these stable assets is better for practical use and how to convert one coin into the other.
Key Takeaways
- USDT is the most popular crypto stable asset that has existed since 2014 and has the highest level of market capitalization on the cryptocurrency market.
- USD coin (USDC) is the second most popular stable coin on the market and, unlike USDT, uses different types of blockchain for its operation.
What is USDT?
Tether, in terms of technical implementation, is a blockchain-based cryptocurrency. Still, the USDT stablecoins don’t have their own blockchain, and their functioning is provided by using Bitcoin platforms (through an additional layer), Ethereum, and others.
Even though each token-issued coin corresponds to a dollar in the company’s crypto assets that issue it (in this case, for example, Tether), the company also offers stablecoin pegged to the euro, yen, and ounces of gold. At the time of writing, the USDT token is the most popular among all stablecoins. It accounts for approximately 61% of all operations that are carried out in the crypto market. USDC follows the leader, and BUSD closes the top three.
Simply put, USDT is an electronic dollar used in the digital world. It can be used to store capital, pay for goods and services, and to conclude transactions. The main difference from crypto is the stability of the exchange rate. There is no danger that after receiving the payment, the cryptocurrency exchange rate will fall sharply, and the recipient will lose part of the fiat money. Thanks to these properties, the scope of use of stablecoins is expanding significantly.
Tether used to be called Realcoin, and it was the name under which it was introduced to the cryptocurrency market and known to many. However, the company-developer rebranded it, changing not only the name, but also completely rethinking the underlying technology of the coin.
What is USDC?
Stablecoin USDC is a joint project of Circle (Circle Internet Financial) and the cryptocurrency of the exchange Coinbase and the second most popular coin on the stablecoin market. This project was developed by their joint organization Centre Consortium.
USDC is a stablecoin created on the Ethereum blockchain according to the ERC-20 standard. In fact, the coin is a tokenized U.S. dollar because it is completely tied to its value.
The main goal of the project is to create a token that will keep traders and investors safe from losing assets. It achieves this precisely by pegging it to the dollar. While most coins are subject to volatility, the crypto USD Coin has a constant rate of 1 USDC = 1 US dollar.
There are all types of wallets for these stablecoins: browser-based, electronic, hardware, mobile, paper, cold, and so on. Since USDC stablecoins are based on ERC-20, all wallets that support this standard will be suitable for its storage. You can also store the coin on the exchange, but this method is less secure than the others.
USDC and USDT: What’s the Difference Between Them?
USDT and USDC stablecoins are two of the most popular digital currencies in the cryptocurrency ecosystem, designed to completely replace fiat currencies. They help users interact with Web3, DeFi, and other blockchain-based applications without facing the volatility of other cryptocurrency tokens, such as Ethereum and Bitcoin.
As the most popular stablecoins with the highest market cap, they have their differences and features. Let’s look at them in a bit more detail.
1. Blockchain
One significant difference between these stable coins is their blockchain. Blockchain is a system in which transactions are recorded using an immutable cryptographic signature to eliminate or minimize the risk of hacking or cheating the system.
The availability of various blockchains offers a number of advantages, such as speed and convenience of transactions. While USDT tokens do not have their own single blockchain, but are created on existing cryptocurrency platforms, USDC and BUSD have multiple blockchains, allowing buyers to make transactions and transfers between them.
2. Security
One of the critical differences between USDC and USDT is that USDC is a fully collateralized Stablecoin, which means that it is backed by an appropriate amount of U.S. dollars held in reserve. This means that for every USDC in circulation, a corresponding U.S. dollar is held in a bank account that can be used to redeem the USDC if necessary. This gives the USDC transparency and accountability that some other stablecoins do not have.
What is Better USDT or USDC?
The level of trust in USDT and USDC is somewhere below the level of trust in the cryptocurrencies themselves. The constant issuance of billions of dollar-linked stablecoins with vague explanations undermines trust in the USDT and USDC team. The expression “Tether printer constantly makes brrr…” has exploded into memes epitomizing the frequent printing of stablecoins.
USDC and USDT are the subjects of constant controversy. There are questions about the legitimacy of their issuance process and whether these coins are fully secured as claimed, especially in the case of Tether, which has yet to fulfill its promised audit from 2017. These disputes have been ongoing for as long as they have existed.
USDC’s reserves are considered more transparent than Tether’s. Monthly audit reports and reserve composition make tracking USDC collateral minted by these institutions easier, while Tether’s assortment of reserves makes the audit report even more complex.
On the other hand, it’s also worth noting that the USDC stablecoin previously lost its peg to the U.S. dollar after Circle announced it wasting $3.3 billion in reserves at the bankrupt Silicon Valley Bank (SVB).
How to Convert USDT to USDC?
To date, many different services offer the ability to exchange some currencies for others with minimal fees. The crypto sphere is not an exception, and in it, you can find the same converters which exchange one crypto asset for another or a crypto asset for a stablecoin. Among other things, such services have the ability to directly convert one stablecoin to another without loss of commissions. Since both USDT and USDC are linked to the U.S. dollar and have the same price in direct relation, the conversion takes place without changing the absolute number of exchanged assets. For example, converting 100 USDT, you will get 100 USDC if the market rate of both coins is stable.
It is also worth noting that conversion between distinct stable currencies and crypto assets can also be done on any of the existing crypto exchanges, which is a very convenient way to adjust your crypto if necessary because the exchange offers a full range of services for crypto trading.
Conclusion
With multi-billion-dollar market capitalization, USDT and USDC are the most popular stable coins used today. While complex decentralized instruments are not yet ubiquitous, those coins are already taking root in the real-world economy. In the face of prohibitively high inflation, people in Venezuela are paying with stablecoins to buy groceries, and European traders are using them as a gateway to doing business with Asian trading venues. In one way or another, these financial instruments have become indispensable elements of both the crypto world and the entire global economy, gradually eliminating fiat currency.
