2020 was the year of stablecoins. The supply for stablecoin quietly surged from below $5 billion to $28 billion. And the market continues to see substantive growth.
As of January 2021, the current stablecoin supply is over $33 billion.
We would often hear that “crypto is the most volatile asset out there”. However, stablecoins like USDC and USDT gave a medium of exchange in which traders can find almost the same comfort as holding fiat.
What are Stable Coins?
These are cryptocurrency whose value is backed 1:1 by another asset, such as the US dollar, euro, yuan, or gold.
Stablecoins managed to create a degree of stability for traders and attract and give courage to more people to join the cryptocurrency world.
Now, let us dive into a proper comparison of the two stablecoins in question.
Launched in October 2018 by the Centre Consortium, the USDC is powered by Coinbase and Circle Internet Financial. It is built on the Ethereum blockchain as an ERC-20 token.
The company has taken a far more regulatory friendly approach compared to Tether Holdings. Having secured the required licensing to operate in respective jurisdictions.
Circle, Ltd verifies that USD Coin (USDC) is fully backed by US Dollars in segregated bank accounts by issuing a publicly available monthly audit report.
USDC began circulating in 2017 and has seen a steady increase in transactional volume and user adoption. This is currently the second-largest coin by market cap and trading volume.
Tether (USDT) is issued by Tether Holdings, a subsidiary of iFinex (also the parent company of Bitfinex) and is the largest stablecoin by both market cap and trading volume.
High profile lawsuits, a major security breach, and questions surrounding whether the stablecoin is actually backed in full by USD have all contributed to the controversy surrounding Tether and its parent company.
Tether began circulating in 2014 and maintained a borderline monopoly on the stablecoin market until 2017 when more transparent stablecoins became available.
Liquidity and trading volume is something all investors and traders consider. While Tether (USDT) has an edge in this category, it should be stated that USD Coin (USDC) maintains substantial trading volume. And is easily accessible across several major cryptocurrency exchanges.
- Available on almost every top cryptocurrency exchange.
- Largest stablecoin by market cap and circulating supply.
- Highest global trading volumes compared to all other stablecoins.
- A significant amount of trading pairs across all crypto asset types.
USD Coin (USDC)
- Available on most cryptocurrency exchanges.
- Second largest stablecoin by market cap and circulating supply.
- Above-average global trading volumes compared to all other stablecoins.
- An above-average amount of trading pairs across all crypto asset types.
Trust & Transparency
Now, let us compare the issuers (parent companies) of USDT and USDC. Historical events, regulatory standings, verifiable audits, and more are included as important factors in this category.
Tether Holdings does not release publicly verifiable audits showing that the stablecoin is backed 1:1 by USD held in segregated bank accounts.
Multiple cases have been filed against Bitfinex and Tether holdings in 2019. Two years before that, their systems were hacked, and $30M was stolen.
Tether’s defence team admitted in court that the stablecoin was only 74% backed by cash and related assets in April of 2019.
Tether Holdings migrated Tether (USDT) from its native Omni blockchain to the Ethereum blockchain in 2019. This will provide more transparency with regards to transactions, company wallets, and circulating supply.
USD Coin (USDC)
Monthly, Circle, Ltd. issues publicly verifiable audits showing that the stablecoin is backed 1:1 by USD held in segregated bank accounts.
Neither Circle, Ltd. nor USDC’s smart contracts have ever been hacked or compromised.
Also, Circle, Ltd. is fully licensed to offer its services in all operational jurisdictions. All USD Coin (USDC) transactions and ecosystem details (market cap, circulating supply, etc.) are publicly verifiable on the Ethereum blockchain.
The ambiguity surrounding USDT called for a more “stable” stablecoin, that being USDC. As a stablecoin, the price has little to no volatility; therefore, you cannot time the market. But as a value holder, USDC is the most transparent stablecoin in the crypto space. USDC and USDT are both centralized stablecoins. And while USD Coin is remarkable for having good connections and a high degree of transparency, USDT still has x100 more trading volume and x4 times the market cap.