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USDC vs USDT: Why USDC is preferred to USDT?
Volatility is a distinct characteristic in cryptos like Bitcoin or Ethereum. One moment, the value could be skyrocketing, and the next second, it is singing a different tale. Though cryptocurrencies may offer intriguing innovations that are changing the financial realm, the issue of volatility is scaring off some potential traditional investors. Fluctuations are nipped in the bud by the concept of stablecoins.
Stablecoins are cryptos that are pegged to a fiat currency or another item of value. An example that comes to mind is the popular USDT. Though USDT has the first mover’s advantage, its involvement in different controversial cases shines the spotlight on its competitors like USDC.
Climbing up the ladder has been rapid for USDC because it offers the legitimacy that some competitors do not.
USDC: What is it?
USDC is the short form for USD Coin, and it was released in 2018 by different leaders in the crypto world: Coinbase and Circle. As a stablecoin, USD Coin is free from intense volatility that plagues other sets of cryptocurrencies. Since it is pegged to the dollar, 1 USD translates to 1 USDC, thus reducing volatility to a minimum. In a bear market, 1 USDC is equal to 1 USD, and the same can be said for the bull market, which may see numerous cryptocurrencies skyrocketing to their all-time highs.
Stablecoins like USDC are stable because they are backed by a reserve like liquid cash, treasury bills, and other quasi currencies.
The second generation of stablecoins like USDC has moved from storing their reserves in solely liquid cash to near-money assets.
USDC stands out from the league of stablecoins because it was created and backed by legitimate firms. In 2018, Coinbase and Circle decided to officially launch a stablecoin to solve the issues noticed in existing ones. During their partnership, both giants created a consortium of companies called Centre.
According to Coinmarketcap, USDC currently occupies the eighth position on the list of cryptocurrencies with the highest market caps. At the time of writing this, its market cap was sitting at $27.46 billion.
USDC is gaining ground in countries with poorly valued fiat currencies. In some countries, citizens have lost trust in the domestic currency due to its fast-descending value. As a result, many of them end up buying USDC to offer them some stability.
Investors who want to transfer their funds between exchanges without converting their holdings to Fiat currencies also fancy stablecoins.
Why is it preferred to USDT?
Controversy seems to trial USDT, making some investors lose trust in the Tether stablecoin. In addition, tether has been in legal battles with different regional governments. That’s because some believe that the value of reserves that allegedly backs USDT was manipulated.
On the other hand, USDC has erected a pedestal of legitimacy for itself, and this seems to be attracting investors to like bees to a hive.
While USDT has the first-mover advantage, USDC boasts of support from two leaders in the crypto and payment worlds, Coinbase and Circle. These companies interact with the regulators regularly to ensure that they do not break a guideline or law.
Apart from its claim of being backed by global regulators, USDC stands out because of its transparent tendencies. Its competitor, USDT, can’t say the same for itself. Though USDT may claim to have a reserve to back every Tether out there, it has refused to use reputable third-party audit firms to confirm this.
USDC inculcated transparency into its operations and uses one of the best audit firms, Grant Thornton LLP, to audit its reserves.