Stablecoins continue to play a key role in crypto, offering much-needed stability amid extreme price volatility. USDT and USDC are the most popular stablecoins as of May 2024. While they are both pegged to USD, they have different characteristics, which we will discuss in this article.
Understanding Stablecoins
Stablecoins are cryptocurrencies developed to minimize the risks associated with price volatility. They are pegged to stable assets like gold and fiat currencies to ensure they maintain their intended value. Stablecoins are ideal for making payments since they rarely suffer price fluctuations.
Stablecoins pegged to fiat currencies are known as fiat-backed. They are the most popular. USDT and USDC are fiat-backed stablecoins. You can use them in the decentralized finance sector or buy other digital tokens on centralized exchanges.
As the stablecoins market expands, several regulators across the world are starting to show interest in these cryptocurrencies to ensure they’re compliant with stipulated financial laws. Regulators’ concerns over stablecoins have heightened in recent months following a series of depegging events, where these digital tokens become volatile due to a lack of sufficient reserves.
Exploring USDT
Launched in 2014, USDT is one of the oldest stablecoins in the market today. It was created by a Chinese company, Tether. As mentioned, USDT’s value is pegged to USD. That means holders can easily redeem their tokens for USD whenever they wish to exit the crypto space.
As of May 2024, Tether has issued USDT on over ten blockchains, including Tron and Ethereum, thus making it accessible to crypto users. One aspect that makes USDT a top stablecoin is its massive liquidity. Moreover, the stablecoin is supported by almost all the leading centralized cryptocurrency exchanges.
Although USDT is the most popular stablecoin among crypto users, it has had its share of controversy since its launch. For example, US regulators have accused Tether of not holding enough reserves to back each circulating USDT token. Also, there have been concerns over the firm’s audits, with some crypto analysts believing that Tether hasn’t been transparent on the assets that back USDT.
Despite the scrutiny, USDT has continued to witness massive adoption, especially among traditional investors who want to cross over to crypto.
Exploring USDC
Rolled out in 2018, USDC is a product of Circle and Coinbase. Its reserve contains cash deposits and short-term US Treasurys. The founders of the stablecoin formed a consortium called Centre to manage their crypto asset.
To ensure USDC continues to be a reliable stablecoin, Centre has embraced transparency, publishing regular audits carried out by established third-party auditors.
Initially launched on Ethereum, USDC now lives on 15 more top blockchains, including Polygon, Solana, Near, Flow, Base, Celo, and Arbitrum, among others.
USDC depegged in early 2023 after one of the banks that Centre stored cash reserves failed. Despite the incident, the stablecoin retains the second position, only behind USDT.
Use Cases of USDC and USDT
USDC and USDT have several use cases. For example, since their prices are stable, these crypto assets are used by businesses to process international payments. Also, lending protocols like Aave and Compound support the two stablecoins as collateral, allowing holders to borrow funds.
Centralized exchanges like Coinbase and Binance use USDT and USDC to create trading pairs, offering liquidity and a seamless trading experience. Lastly, asset managers and hedge funds have added the two stablecoins to their portfolios to shield them against price volatility.
Differences Between USDT and USDC
Here are the key differences between the two leading stablecoins:
Issuing Entity: USDC is issued by Centre, while Tether issues USDT.
Year of Launch: USDC entered the market in 2018, while USDT was launched in 2014.
Audit: Centre publishes regular audits for USDC, while Tether rarely does.
Reserve Assets: USDC is backed by cash deposits and US Treasurys, while USDT is backed by cash and precious metals.
The Future of Stablecoins
As long as other top cryptocurrencies like Bitcoin and Ethereum continue to experience high volatility, then stablecoins are here to stay. However, you should keep an eye on regulators, as they are likely to go after non-compliant stablecoin issuers soon.
SureTradeGroup.com is not responsible for the content, accuracy, quality, advertising, products or any other content posted on the site. Some of the content on this site is paid content that is not written or posted by our writers or editors and the opinions expressed do not reflect the opinions of this website. Any disagreement you may have with brands or companies mentioned in articles will need to be taken care of directly with those specific brands and companies. The responsibility of anyone who may click links in our articles and ultimately sign up for that product or service is their own. Forex, Stocks, Cryptocurrencies, NFTs and Dogital Tokens are all a high-risk asset, investing in them can lead to losses. Readers should do their own research before taking any action.