The stablecoin have become an integral part of the crypto market. In particular, stablecoin like USDT and USDC are gaining increasing attention from investors due to their value stability and effective risk management. But what are the differences between USDT and USDC? This article will delve into the uses, risks, and other topics of interest related to stablecoin.
On the blog of the exchange Bitget an interesting post on the topic has been published. Read below.
What are stablecoin?
Stablecoins are a type of cryptocurrency. Virtual currencies generated by algorithms or mechanisms based on Proof-of-Stake are subject to volatility and do not have the ability to store value. For this reason, they are not suitable to replace centralized currencies and are often considered as speculative assets. The concept on which stablecoins are based is to create a decentralized currency based on a digital ledger equipped with a mechanism that keeps its value stable. Some consider stablecoins as tokens guaranteed by centralized assets, whose value is directly linked to that of these assets.
USDT (Tether) and USDC (USD Coin) are the most popular stablecoins on the market. Both are pegged to the US dollar with a 1:1 ratio, which means their value is equivalent to that of a US dollar. USDT was created by Tether Limited, while USDC is the result of the collaboration between Coinbase and Circle. USDT and USDC are not only the best-known stablecoins, but they are also the most important in terms of market capitalization and trading volume. These extraordinary stablecoins bridge the gap between cryptocurrencies and fiat currencies, allowing investors to operate in US dollars and avoid the volatility associated with regular criptovalute. Additionally, cryptocurrency enthusiasts can use USDT or USDC to make fast and reliable transactions on the blockchains.
What are the main differences between USDT and USDC?
So, what distinguishes USDC and USDT?
Although these stablecoin have many points in common, starting with the name, they also present significant and crucial differences for the cryptocurrency market.
First of all, the issue of transparency and credibility.
USDT is entirely issued and controlled by Tether Limited, therefore there are no third-party or centralized authorities that influence its management. Conversely, USDC has been subject to continuous regulation and supervision by US authorities and banks since its inception. This supervision has strengthened the confidence of traditional investors and institutions and the demand for USDC.
Secondly, in terms of maintaining price stability, the two coins differ significantly despite both being stablecoins. USDT is based on a reserve system, where each token is backed by financial reserves in US dollars or other assets controlled by the company. USDC, on the other hand, uses a “capital control” system, where each token is backed by US dollar assets held in bank accounts. The USDC system is therefore more transparent and allows for more precise accounting, which is why reports on assets or proof of reserves for USDC are often seen.
Finally, these stablecoins are issued on different blockchains. USDC is an ERC-20 token issued on the Ethereum blockchain, while USDT is issued on various blockchains, including Ethereum (ERC-20) and Tron.
Overall, USDC is considered safer and more reliable compared to USDT in terms of credibility and transparency. The collateral of USDC is made public regularly, and the companies that manage it, Circle and Coinbase, boast an excellent reputation in the crypto sector. It should be noted, however, that USDT, in the past, has had to respond to several accusations for its lack of transparency and stability.
Which stablecoin is safer for users?
In terms of popularity and trading volume, USDT, created at the beginning of 2014, is more widely used. However, in terms of security, USDC is a better option. Security is crucial in any transaction, especially in the cryptocurrency sector, where it is always a priority to protect users’ assets from potential losses.
From the point of view of security and reliability, USDT has encountered several problems due to the opacity of the reserve structure of Tether. As already mentioned, USDT is entirely controlled by its parent company, Tether Limited, raising concerns about its transparency and security.
On the contrary, USDC has a clearer and more transparent guarantee system, which in some cases makes it more interesting for users. USDC publishes monthly audit reports to confirm the full coverage of its dollar reserves. In addition, the collateral of USDC is made public regularly and the companies that manage it, Circle and Coinbase, boast an excellent reputation in the crypto sector. It should be noted, however, that USDT, in the past, has had to respond to several accusations for its lack of transparency and stability.
Therefore, USDC is considered safer than USDT thanks to the good coordination of operations and the transparency of the support system.
Before using any cryptocurrency, it is essential to analyze and evaluate all potential risks. When choosing between Tether and USD Coin, conduct your research and choose the most suitable and reliable stablecoin based on your needs.