Certainly, the emergence of stablecoins has provided investors with another alternative to volatile crypto assets. Notably, the stablecoins community enjoyed remarkable growth in the early periods of 2022. The growth, according to reports, manifested after more investors migrated their investments from the volatile crypto sphere to the stablecoins industry. However, the sphere suffered a heavy setback following the crash of Terra stablecoins in May. This development consequently led to the loss of over 40 billion USD. Despite the setback, scores of stablecoins, including Tether USDT and USDC (USD Coin), still enjoy massive adoption from investors across the globe. Over time, the USDT and USDC has continued to lead the stablecoin market. This development has brought about a USDT vs USDC debate, particularly among actors in the sphere.
Worth noting that these assets are pegged to fiat currencies, a development that guarantees their stability and edge over cryptocurrencies. Accordingly, this article intends to aid the debate by doing a balanced USDT vs USDC analysis in a bid to expose investors to their rudiments, deficiencies, functionalities, similarities, and differences.
USDT vs USDC: Overview
USDT
To better carry out the USDT vs USDC debate, this piece will now do an overview of the former. Firstly issued in 2014, the USDT asset paves the way for investors to easily transact and amass passive interests in DeFi protocols. Similarly, it serves as a payment denominated in value with US Dollars, thus giving investors fewer worries about market volatility. As designed, a single Tether USDT token is equivalent to $1.
Reportedly, the USDT became designed by a Hong-Kong based firm, identified as iFinex. Notably, the asset currently backs varieties of projects, including liquid protocols. Today, the asset appears listed on many exchanges, paving the way for investors to trade with other existing cryptocurrencies. According to reports, there are over 74 billion USDT tokens on numerous blockchain projects.
Worth noting that USDT remains the first and most popular stablecoin in the market. As of today, it ranks as the third biggest virtual asset after Bitcoin and Ethereum. Similarly, it also ranks as the largest stablecoin, possessing a market cap of over $83 billion.
USDC
Furthering the USDT vs USDC debate, it is now imperative to briefly explain the latter. Just like the USDT, the USDC is a stablecoin. Founded in 2018 by Coinbase and Circle, the USDC remains denominated or fixed to U.S dollars. Notably, the USDC serves as another payment or trading alternative to investors. Reportedly, traders can send or receive the asset via any wallet or exchange that is ERC-20 activated.
As designed, a mechanism called Centre Consortium governs the stablecoin. This mechanism monitors all the monetary and technical standards of the coin.The asset can be issued by permitted financial institutions. However, these institutions are mandated to meet several standards, thereby becoming members of the Circle framework. Worth noting that there are over 34 billion USDC in circulation. Similarly, there are the same amount of tokens in its reserve. This, as believed, is possible because the design of the coin allows for the reservation of $1 of USDC for every of its tokens created.
USDT vs USDC: Similarities
There are a few similarities in the USDT vs USDC comparison. It is well known that both are stablecoins pegged to the U.S dollar, and they serve as payment means. This implies that the value of the two tokens separately is equivalent of a dollar. With their peg, the two tokens maintain a strong advantage over cryptocurrency volatility. They offer users a direct value of the traditional dollar of the United States.
Another notable similarity that has drawn a parallel ground in the USDT vs USDC contest is their reserve. It’s imperative to note that the two tokens under view remains over-collateralized with assets equivalent to the number of tokens in circulation. Simply, they are not an algorithm stablecoin that depends on the demand and supply of another cryptocurrency to maintain their peg.
USDT and USDC run on Ethereum
Also, the two tokens are based on the Ethereum blockchain. Therefore amounts to another notable similarity between them. Though, USDT has an extension on the Tron Network and Avalanche alongside its base on Ethereum. In fact, the USDT gained popularity while it base on the TRC-20. However, following the collapse of UST, the developers of USDT decided to move about $1 billion of the stablecoin to Ethereum. Also, the firm committed about $20 million to Avalanche blockchain to avoid any case of a possible collapse.
Meanwhile, USDC is based on about eight different blockchains, which include Tron, Avalanche, and Ethereum, like the USDT. Other blockchain includes Solana, Flow, Algorand, Stella, and Hedera, though its planning migration into other blockchain in the future. USDC appears bridged to many ecosystems like Fantom, Polygon, Near, and the Cosmos network.
USDT vs USDC: Deficiencies
The USDT appears as the biggest and safest stablecoin in circulation. It’s commonly believed in the cryptocurrency space that the USDT project appears too big to fail. At the moment, the USDT is enjoying an advantage in terms of popularity above the USDC. Nonetheless, people now see USDC as a competent rival against USDT. While those with skeptical view about USDT sees USDC as a direct alternative.
In addition, the USDC appears generally viewed as less controversial compared to USDT. This amount to one of the few reasons why those who think the latter is a worthy rival in the USDT Vs USDC contention. Overtimes, there have been concerns about the reserve of the USDT tokens. The heat surrounding the unclear situation gained more ground when the token lost its peg and slipped to 0.8865 against the US dollar. USDT murky balance sheet and lack of public audit have raised questions about the token. Regulators have often fined Tether for submitting misleading information about its reserve.
USDT vs USDC: Regulators’ angle
When the firm revealed the breakdown of its balance, regulators criticized Tether for possessing a fully supported dollar reserve. Later, some reports surfaced that vindicated the firm of some allegations by regulators. Still, the impression of the misleading statements of the stablecoin account lingers in the minds of numerous investors. USDC, on the other hand, has enjoyed a good relationship with regulators. At any time, stablecoin has never been questioned by regulators due to its balances. Therefore, giving investors a peaceful impression about the longevity of the project.
In this contest, it’s safe to say that the USDC offers more transparency to the running of the project compared to USDT. This factor has heavily contributed to the growth of USDC in the stablecoin market. Now, investors are gradually considering it ahead of USDT. Doubts about USDT further gained ground when it lost its peg during the crypto crisis. Within that period, USDC capitalized on that plunge and gained more ground among investors.
Position Of The Two Tokens against their deficiencies
Meanwhile, the general analysis will be on the deficiency of the two tokens. In this section of the USDT Vs USDC comparison, it’s imperative to note that investing in the two tokens doesn’t amount to price appreciation. This implies that the price will always remain equivalent to the US dollar value because it’s pegged to it. Though, a price fall is possible if the token loses its peg. Therefore, it must be considered risky, and investors must conduct their research before committing their investment to the tokens.
Also, firms behind the USDC and USDT tokens have not been truthful with the total value of their reserve. This dishonesty can implicate the future of the token. It can be destructive if these firms issue more tokens than the value of their reserve. Such much could cost the tokens to lose their pegs and put investors into trouble by losing their funds.
Regarding the state of their reserve, regulators can be so harsh about it, though in the interest of investors. Still, regulatory troubles can spell doom for the future of the tokens, at the end, the investors will be at the receiving end. So, firms issuing the USDT and USDC must be transparent about the state of their reserve to protect the future of the token.
Are USDT and USDC immune to inflation?
Additionally, the USDT and USDC are not immune to the price inflation of the U.S dollar. Since they share the same value with the U.S dollar, whenever inflation hits the price of the U.S dollar, the two tokens will also suffer. Though, it could be a blessing in disguise for investors from a country whose currency is lesser in value to the U.S dollar. When their local currency lessen against the dollar, these investors will get a good return on investment through their USDT and USDC token.
Conclusion
In conclusion, the USDT is more established than USDC, though the two are the leading stablecoins in the cryptocurrency space. Lately, the USDC is closing on the gap of domination of the USDT. Since they are well established with good backings, it won’t be easy to give a verdict on the best between the two. Therefore, this comparison of USDT Vs USDC stands described as even, and investors can always make a decision after doing a thorough due deligence.
Read More