Stablecoins are digital assets designed to reduce price volatility and provide stable value. They achieve this by being pegged to reserve assets, usually the US dollar, at a 1:1 ratio. Among the most popular stablecoins are USD Coin (USDC) and Tether (USDT). However, determining which one is safer requires investors to consider various factors such as the issuing institutions, regulatory oversight, transparency, and market liquidity. This article will explain USDC vs USDT in detail, exploring their respective advantages and potential risks to help readers make an informed decision.

USDC

USDC, a stablecoin, seeks to expedite and lower transaction costs compared to traditional payments. It also aims to mitigate the volatility often linked with cryptocurrencies like Bitcoin. As a novel cryptocurrency type, stablecoins are pegged at a 1:1 ratio to reserve assets, usually dollars. These coins’ values are generally bolstered by one or more reserve assets, commonly dollars, rendering them among the most prevalent and utilized cryptocurrencies of recent times.

USD Coin (USDC) is a digital dollar and a cryptocurrency pegged to the US dollar. Each USDC is backed by assets denominated in dollars, held in segregated accounts at regulated US financial institutions. USD Coin’s goal is to make crypto payments over the blockchain more reliable by reducing price fluctuations.

How Does USDC Work?

Cryptocurrencies are used for payments, decentralized services, and storing value. However, their volatility often limits daily utility. Even Bitcoin, with reduced volatility, fluctuates too much for everyday use. USDC allows token holders to redeem one USDC for one dollar anytime. This significantly reduces price speculation, maintaining a stable value for crypto assets. USDC operates on Ethereum, a decentralized, programmable blockchain. This enables developers to create numerous applications and tokens.

The CENTRE consortium, co-founded by Coinbase and Circle, launched USDC. Unlike other cryptocurrencies, USDC remains stable during transactions. It functions as an Ethereum token to facilitate blockchain payments and value transfers. This stability allows users to hold cryptocurrency in wallets. Users can send to others or interact with decentralized financial tools without worrying about value decreases. Assets valued in dollars support USDC. These assets ensure their fair value equals at least the dollars in circulation. These assets are held in separate accounts at regulated financial institutions in the United States. Users can purchase USDC on exchanges like Coinbase. They can store it in Ethereum-compatible wallets. Additionally, transferring dollars to USDC on Coinbase incurs no fees.

USDT

USDT, also known as Tether, is a digital currency issued by Tether Limited. It is pegged to fiat currency, specifically the US dollar. Tether (USDT) is a blockchain-based cryptocurrency. It offers a stable virtual currency free from extreme market fluctuations.

As the world’s first stablecoin, Tether holds a reserve of $1 USD for every USDT issued. Tether Limited ensures this reserve. USDT holders can exchange USDT for an equivalent amount of US dollars anytime. This dollar peg gives Tether the characteristics of a credit derivative currency. It serves as the Fed’s shadow in the cryptocurrency circle.

The native token on the Tether blockchain is known as Tether. It was established by the cryptocurrency exchange BitFinex. It circulates in the cryptocurrency world under the code USDT. One Tether (USDT) equals one USD.

Features of USDT Stability

Tether converts cash into digital currency, thereby anchoring or pegging the price to national currencies such as the dollar, euro, and yen. With real-world currency reserves backing Tethers (USDT), users can enjoy the benefits of digital, blockchain-based transactions without being affected by the volatility of most cryptocurrencies.

Transparency
Tether claims that its fiat reserves undergo regular audits to confirm that its accounts can effectively support the value circulating in Tethers (USDT). Balances are regularly updated and publicly accessible. Every transaction involving Tether is documented on the public blockchain ledger.

Blockchain Technology
Tether uses blockchain technology to leverage its security and transparency.

Widespread Integration
Big exchanges such as Bitfinex, ShapeShift, GoCoin, and other platforms utilize Tethers.

Security
Tether’s blockchain technology provides world-class security while meeting international compliance standards and regulations.

USDT

According to the Tether whitepaper, each Tether token is pegged to the dollar at a fixed ratio of 1:1. Tether achieves this by maintaining a 100% reserve fund supplied by Tether itself. When you exchange 1 USD for 1 USDT, Tether Limited takes that 1 USD and anchors it as a reserve fund tied to the dollar. Conversely, when you exchange 1 USDT back for 1 USD, Tether Limited destroys that 1 USDT in the smart contract.

This operational method ensures that the total amount of Tether issued matches the total amount of dollars held in reserve. Essentially, Tether acts as a provider of dollar tokens to the cryptocurrency world, similar to exchanging game currency for game coins.

By implementing this approach, Tether keeps the value of 1 USDT equal to 1 USD, thereby ensuring stability in markets where the prices of most virtual currencies fluctuate significantly. However, the main challenge lies in verifying whether Tether possesses adequate dollar reserves to facilitate smooth exchanges.

USDC vs USDT

USDT vs USDC ? They are both cryptocurrency stablecoins, with the main differences being:

Different Issuing Institutions
Tether Limited issues USDT, while Circle issues USDC. Both companies are well-known in the cryptocurrency field, but they have slightly different backgrounds and operating methods.

Different Regulatory Agencies
Official regulatory agencies do not regulate USDT, while financial regulatory agencies regulate USDC. This means that USDC issuance and operation must comply with the regulations of US financial regulatory agencies, making USDC more transparent and trustworthy.

Different Circulation
USDT’s circulation far exceeds that of USDC. This means that USDT has higher liquidity in the cryptocurrency market, but it also carries some risks.

About CipherBC

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