Every cryptocurrency token you can imagine has volatility, from Shiba Inu to Bitcoin. Cryptocurrencies can undergo ecstatic price rises as well as overnight price drops.
Stablecoins have evolved as a dependable alternative for investors to stay in the cryptocurrency ecosystem at considerably lower risk and avoid this price volatility. Stablecoins protect against the fluctuations to which other coins are subject because they are pegged to a real-world asset, typically fiat money.
Both USD Coin (USDC) and Tether (USDT), which are tied to the US dollar, have emerged as the top stablecoins,Understanding how each stablecoin works can be helpful when deciding which one is best for your needs. This article discusses the distinctions between USDC and USDT in further detail.
What Is a Stablecoin?
A cryptocurrency known as a stablecoin has its value supported by another asset, such as the US Dollar.
Early cryptocurrencies like Bitcoin and Ethereum could only be traded for fiat money or other cryptocurrencies for a very long period. There was no mechanism for cryptocurrency owners to exchange their tokens for a fiat-backed asset without altogether leaving the crypto ecosystem. Stablecoins came into play in this situation.
Cryptocurrency traders often use stable coins to keep an asset at a fixed price while still participating in the ecosystem. By design, they are less volatile digital currencies that allow 24-hour trading without needing to withdraw money from your bank. As long as the backing ratio holds, these tokens will keep their current value.
What Is USDT?
USDT, or simply “Tether,” stands for US Dollar Tether. In 2014, Tether Limited, a Hong Kong-based corporation, launched its first stable coin. In addition to providing great liquidity and, on paper, low volatility, it helped close the gap between cryptocurrencies and cash.
Tether, which has a market valuation of $76 billion and ranks fourth in the same list, is the most widely used stable cryptocurrency. Among other stable coins, it also has the most trading activity. Since 1 USDT theoretically equals $1, it is a stable coin with low price fluctuations.
Tether, however, is not without controversy. Tether falsely claimed to have the reserves necessary to support every token, but for the vast majority of the time, they did not. For investors, this is a risky situation.
What Is USDC?
In 2018, Coinbase and Circle developed the stablecoin known as USDC. Its price stays at $1, just as USDT or any other token backed by US dollars.
The Centre Consortium, which is in charge of the stablecoin’s technical and financial standards and ensures that a real 1-to-1 backing is transparent, controls the coin. For each USDC issued, $1 in US dollars and other currency equivalents are kept in reserve.
With an equal amount of USDC in reserve, there is now a 34.6 billion USDC supply in circulation. The USDC ecosystem can expand due to the issuance of USDC by authorised, regulated financial institutions that agree to Circle’s membership criteria.
Most significant cryptocurrency providers and exchanges provide USDC. Along with many other blockchains, including Algorand, Stellar, Binance Smart Chain, Hedera, Tron, Solana, and more, USD Coin can be sent and received by any wallet or exchange ERC-20 (Ethereum) compatible.
USDT vs USDC
While USDT is more often used for transactions and trading, USDC is frequently referred to as a safer stablecoin since the Centre complies with government audits and regulations and has more open fully-backed reserves.
Should I Invest in USDC or USDT in 2022?
Make sure the stablecoin you choose is supported on the network you’re interested in using if you’re interested in using a particular blockchain or DeFi protocol. Although the returns and usage for each may differ, USDC and USDT can be used for lending, staking, and providing liquidity for trading pairs.
|Creator||Tether Limited||Centre (By Circle & Coinbase)|
|BlockChain||Ethereum, Solana, Tezos, Kusama, Algorand, Avalanche, Tron, Polygon, EOS, Liquid||Ethereum, Tron, Hedera, Stellar, Algorand, Solana, Avalanche, Flow, Polygon|
|Price Peg||1 USDT: 1 USD||1 USDC: 1 USD|
How to Earn Interest on USDC and USDT?
DeFi provides services that are comparable to those that come with a bank account. Lending your tokens on various sites and receiving interest is one such method. You can gain from greater APY on less risky digital assets by including stablecoins in your investment portfolio.
Even though interest rates fluctuate frequently, you will typically make more money by lending your stablecoins than you would by holding your money in a traditional savings account. Compared to doing so with a conventional bank, you will also have a real choice over where you decide to put your money.
One tool where you may view the current APY on several coins is DeFi Rate. The top 10 lenders listed below provide interest rates for lending USD Coin that range from 2 to 9 per cent, with an average annual percentage yield (APY) of 4.4 per cent each month.
You may view the most current USDT lending rates using various tools, like Staking Rewards. The average annual percentage yield (APY) is 150.58 per cent, much higher than the USDC average.
Given the high potential rewards, risks are always involved; thus, it’s crucial to analyse each platform and financial instrument thoroughly.
USDC vs USDT: Final Thoughts
Two of the many stablecoins available in the current crypto ecosystem are USDC and USDT. Although USDT is the most actively traded cryptocurrency, its parent company, Tether, has resisted audits and inquiries and has mostly avoided discussing the topic of impending regulation. Despite the possibility of significant profits on your USDT investment, Tether’s support for the currency has long been in considerable doubt.
On the other side, USDC has carefully prepared for prospective government oversight of stablecoins. Your downside is still limited by the Centre Consortium’s compliance and regular audits, so you may continue to acquire and lend your USD Coin for a comfortable gain.