The stablecoin heavyweights – USDC vs USDT

The stablecoin heavyweights – USDC vs USDT

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Chris
Chris

An editor at Coincrop


07 Apr 2022 | 10 min read
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SDT and USDC are stablecoins that are tied to the USD. That is, for each one of the respective tokens issues, a corresponding $1 must be held in an asset. Stablecoins serve an essential purpose for realising cryptocurrency profits without the need to fiat bank accounts.

In this guide:

Disclaimer: All of the information written on Coin Crop is without influence and based on our analysis. No guarantee is offered concerning the accuracy of this information and therefore, any individual following up on it does as such completely at their own risk. Rates are correct at time of publication.

What is USD coin?

USD Coin (referred to as its ticker symbol USDC) is a stablecoin that is tied to the U.S. dollar on a one-to-one basis. Each unit of this cryptocurrency in circulation is matched to $1 that sits in a reserve – a mixture of short-term U.S. treasury bonds and cash.

The token was launched in 2018 as a partnership between Centre (Centre Consortium) and Coinbase. Initially, the token was listed on Coinbase but has since been integrated into many other exchanges such as SwissBorg and Binance.

The Centre consortium is the only entity that can mint and destroy USDC.

At the time of writing, USDC has a market capitalisation of $51 billion with a 24 hour trading volume of $3.4 billion.

How does USD coin work?

USDC token exists as an ERC-20 smart contract on the Ethereum blockchain with support on other blockchains such as Solana, Tron, Algorand and Stellar. Given it is an open-source project, the functionality is transparent and can be verified on the blockchain.

Regular audits are undertaken to make sure that the amount of USD held in reserve assets (cash and treasury notes) equals the circulating supply of USDC.

Although the USDC stablecoin is issued by third-party American companies, there are concerns with the asset acting as a centralised stablecoin. I.e. the Centre Consortium has significant control and can be make decisions that could affect asset holders.

USDC coin is tokenised in the following steps:

1) User sends US dollars to the coin issuer’s bank account

2) The issuer uses the USDC smart contract to mint the equivalent amount of tokens.

3) The newly created USDC tokens are sent to the user and the substituted US dollars are maintained in a reserve.

What is Tether?

Tether (known as its ticker symbol USDT) is another stablecoin that is tied to the U.S. dollar – again, on a one-to-one basis. It holds the accolade of being the first stablecoin (launched in 2014) and at the time of writing has a market capitalisation of $82 billion and a 24-hour trading volume of $71 billion.

USDT is the most traded stablecoin by a significant different from USDC. It operates predominantly on the Ethereum blockchain but can also be traded on other blockchains such as EOS, Ethereum, Algoand, OMG and Tron.

Interestingly, it was originally launched in July 2014 as ‘Realcoin’ functioning as a second-layer cryptocurrency running of top of Bitcoin’s blockchain and enabled by the Omni platform. It was later renamed to USTether before finally becoming USDT.

How does Tether work?

USDT is governed and issued by Tether Limited and is thus a centralised stablecoin. Unlike USDC, criticisms have persisted for several years with regard to Tether’s transparency and the backing of the token.

Over half of the backed assets are held in commercial paper (short-term corporate lending) with the remainder comprised of cash, reverse repo notes, treasury bills and fiduciary deposits.

The big USDC vs USDT fight

There has been much discussion of a ‘flippening’ in which the trading volume and market capitalisation of USDC exceeds USDT.

It is suggested that the main problem with Tether is that the 1:1 ratio is not secured with USD only but with other assets that are perceived as not as safe.

The Attorney General of New York State accused Bitfinex in 2019 of using Tether to hide $850 million since mid 2018. Tether was since convicted and forced to pay a fine.

Additionally, the uncertain relationship between Tether and Bitfinex is seen as problematic for many individuals.

USD Coin is perceived as a more serious alternative with rapid growth in recent months.

The best USD coin saving rates

Unlike the low rates of interest that are paid when depositing fiat dollars in traditional bank, it is possible to earn excellent rewards when lending your USD coin to centralised cryptocurrency institutions.

OrganizationTermsRatingAPY Rate
Midas InvestmentsFlexible

20.0%

AAXFixed (360 days)

14.5%

MyConstantFlexible

14.0%

MyConstantFlexible

14.0%

Blockchain.comFlexible

13.5%

The best Tether saving rates

As with the case of USD Coin, it is possible to earn good rates of interest when lending your Tether to cryptocurrency institutions.

OrganizationTermsRatingAPY Rate
OKExFixed (7 days)

70.0%

AAXFixed (7 days)

60.0%

Midas InvestmentsFlexible

20.0%

AAXFixed (14 days)

16.0%

AAXFixed (360 days)

14.5%

Common stablecoin FAQs

A stablecoin is a digital currency that is linked to an underlying asset such as a national currency or a precious metal such as gold. The main types of stablecoins include fiat-backed, cryptocurrency-backed and commodity-backed stablecoins.

Whilst USDT and USDC are the largest stablecoins by market capitalisation, other USD stablecoins exist such as Binance USD (BUSD), Dai (DAI), Paxos Standard (PAX), TrueUSD (TUSD) etc.

Stablecoins operate across different blockchains allowing access to different crypto assets. Whilst one token will always equal $1, the stablecoins different in their liquidity, perception and features.

Stablecoins offer the best of both worlds – that is providing the utility of a cryptocurrency but with the stability of fiat currency. The introduction of stablecoins reduces the volatility of the crypto market as it reduces the need for a centralised exchange. Prior to stablecoins, it was only possible to realize gains by selling crypto on a centralised exchange for fiat currency.

 


Chris

Chris

An editor at Coincrop
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Chris is a Crop Crop staff writer based in the UK, covering the best rates for cryptocurrency earning and borrowing products. When not at work, he's likely assembling lego models.


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