USDC vs USDT: Which Stablecoin Best to Use for Beginners?

Which Stablecoins to Choose?

Stablecoins are gaining popularity in trading as a convenient blend of traditional currencies and cryptocurrencies. They are backed by hard currencies such as the US dollar. This allows them to have both the price stability of traditional currencies, while also having the efficiency and openness of digital assets. 

But, there are many stablecoins for beginners available on the market, and it’s not so obvious which ones you should use. Here, we’ll analyze USDC vs USDT, the two most popular stablecoins, to see which one you should consider for your investment strategy. 

USDT — Most Popular Stablecoin in the World

Tether, or USDT, is on the rise of its popularity. Almost every exchange will have USDT as an option for trading. It’s also the third-largest cryptocurrency by market capitalization and in terms of total trading volume, doubling the daily trade value of Bitcoin, the second most popular. One of the key reasons for Tether’s popularity and dominance of the stablecoin market is that it was the first stablecoin, and it has enjoyed a huge first-mover advantage. 

Stablecoins, Tether, in particular, was designed to work in the following way: companies exchange USDT tokens for US dollars. Traders get a cryptocurrency pegged to the US dollar they can trade on crypto exchanges, and Tether (the company) keeps the US dollars in reserve. In theory, the USDT tokens can be converted back to US dollars with Tether at any time. 

A key problem has emerged in the last few years. The trustworthiness of the company has been brought into question. Tether is supposed to hold 1-to-1 hard currency reserves for its tokens. However, they have been unable to prove this convincingly, causing many to doubt whether Tether really holds adequate reserves. If this doubt is true, it means that there is more risk in holding USDT tokens than appears on the surface. 

Is USDC a Newcomer or a Promising Stablecoin?

USD Coin, or USDC, is another stablecoin that’s a key competitor to Tether. It’s relatively new to the scene and was founded by Coinbase and an organization named Circle. Like Tether, it’s also pegged to the US dollar and (theoretically) redeemable for US dollars anytime. USDC tokens are hosted on the Ethereum blockchain, as well as other blockchains, such as Stellar and Solana. 

USD Coin markets itself as a more open and transparent alternative to Tether. This advantage has thrust USDC up the rankings of cryptocurrencies, and it is now in the top 10 in the world by trading volume and the top 5 by market capitalization. But, it’s still far behind Tether in both measures. 

What Is the Main Difference Between USDT & USDC?

Tether and USD Coin are very similar in many ways. They are both backed by US Dollars and can be bought and sold online, even on an anonymous cryptocurrency exchange. The main differences between Tether and USD Coin involve trust and safety. Here, USD Coin has a number of advantages over Tether. 

The first is auditing. USD Coin is inspected and attested every month by top accounting firm Grant Thornton LLP. The reports are publicly available on the Centre website. It is also regulated and has the appropriate payment services licenses in relevant jurisdictions. Tether, on the other hand, has historically been vague when it comes to auditing and its regulatory position. 

The second is the reserves that back the currencies. USD Coin is backed with mostly cash, or assets equivalent to cash, such as government bonds. This makes the currency safer for investors and protected in the case that many investors need to cash in their tokens at the same time. Tether is backed mostly by assets such as “commercial paper,” which is not as safe as cash. 

What to Choose for a Beginner?

All things considered, USD Coin is currently the safest option for traders looking for a US dollar stablecoin. When you hold your money in a stablecoin, you are trusting that company completely with your funds. So, the most trusted option is best. Tether is still by far the most popular, but that may change soon as its trust issues become clearer to the market.

As USD Coin is widely available, there’s no reason not to choose it as your go-to USD stablecoin. 

Ashif Zama Author

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