USD Coin (USDC) and USD Tether (USDT) are two of the most popular dollar-backed stablecoins in the cryptocurrency market. While fiat currencies are often maligned by the crypto community, many savvy traders use stablecoins to hedge against inherent market volatility.
In this article, we’ll delve into the differences and similarities between USDT and USDC, their market share, and their reported reserves.
USDC vs USDT: The Basics
USDC is an Ethereum-based ERC-20 stablecoin formulated in a joint venture between fintech firm Circle and popular crypto brokerage Coinbase in 2018.
The token is pegged at $1 per USDC, with each token backed 1:1 by the US Dollar. In order to verify its reserves, UDSC undergoes regular independent audits.
USDC currently stands as the 2nd largest stablecoin by market cap (behind USDT) with a total capitalisation of $5.5 billion and an approximate market share of 18%.
The end goal for the USDC is to be accepted by all major exchanges, wallets, crypto services, and decentralised apps (Dapps).
USD Tether (USDT) was founded in 2014 by three crypto entrepreneurs Brock Pierce, Reeve Collins and Craig Sellars. USDT is issued by Tether Holdings, a subsidiary of iFinex—the parent company of crypto exchange Bitfinex.
Originally called Realcoin, Tether was the first stablecoin on the crypto scene and remains the most popular stablecoin today, with a market cap of nearly $25 billion, and a market share of approximately 70%.
Akin to USDC, Tether claims to be backed 1:1 by the US dollar. However, there has been some dispute over whether or not this is truly the case—something we’ll discuss in more detail later on.
USDC vs USDT: Similarities
Despite the disparity between their market share, USDC and USDT are remarkably similar. Both are supposedly backed by fiat, and their trading price has stayed almost unwaveringly consistent at around $1 per coin.
Here’s a breakdown of the similarities between USDT and USDC:
- Both coins are ERC-20 tokens developed on the Ethereum blockchain
- They both claim to be backed by fiat or the US dollar
- Both stablecoins are centralised
- Neither have a hard cap on the overall supply
- Each claims to be regulatory compliant
USDC vs USDT: Differences
While the stablecoin market has erupted of late—reaching an aggregate market cap of $35 billion—USDC and USDT remain the two most popular options. However, when it comes to liquidity, security, and solvency, the pair aren’t without their differences.
While USDC is a linchpin within many decentralised finance (DeFi) protocols, USDT finds less support within the DeFi sector.
Moreover, no fiat redemption limits exist on USDC when reclaimed via Coinbase. USDT users, meanwhile, are only authorised one redemption per week—which have to meet the rather lofty minimum redemption of $100,000.
The biggest difference, however, comes in the form of market cap. USDT has a significantly higher market cap than USDC ($25 billion to $5.5 billion). Because USDT is traded at a higher volume, it enjoys greater liquid than USDC and is therefore much more accessible.
For more differences between USDC and USDT, take a look at the table below:
|Purpose:||Coin backed by US dollar reserves that can be acquired on some exchanges and used extensively within the DeFi sector||Coin backed by US dollar reserves and loans that can be bought on nearly all exchanges, but not as prominent on DeFi platforms|
|Redemption Process||Can be instantly purchased via credit card, debit card, or bank account through Coinbase||Must be issued via Tether and pass the minimum redemption requirement along with a verification fee|
|Available Exchanges:||Binance, Bitfinex, Coinbase, Poloniex, OKex||Binance, OKEx, HitBTC, Huobi Global, Kraken|
|Derived Value:||Reserves only||Reserves and Loans|
USDC vs USDT: Market Performance
USDC’s market capitalization is approximately $5.5 billion. USDT’s market cap is just over $25 billion. USDT has a much higher market cap, but that’s to be expected since it’s been around since 2014, while USDC was released a few years later in 2018.
Check the table for a detailed breakdown:
|All-Time Peak:||$1.11 (October 2018)||$1.21 (May 2017)|
|All-time Low||$0.93 (March 2018)||$0.90 (March 2020)|
Is Tether Really Backed?
As with any backed-assets, It’s worth considering the validity of their reserves. While USDC undergoes regular independent audits of its dollar reserves, USDT has never been fully vetted by a third-party auditor. This has led to debate regarding the credibility of Tether’s reserve claims.
While the firm has always toed the line that each coin was 100% backed by a single US dollar in reserve, in 2019 they modified their stance, noting that USDT was only 74% backed by cash and fiat equivalents.
Nevertheless, in a relatively recent development, the embattled stable coin firm u-turned once again with Tether’s Bahamas-based bank Deltec suggesting that that USDT is fully backed by reserves held by Deltec among “other institutions.”
It’s perhaps important to note that iFinex, the parent company of Tether and its sister firm Bitfinex, is currently under investigation by the New York Attorney General (NYAG). In April 2019, the office of the NYAG alleged that Bitfinex covered up losses of over $850 million in client and corporate funds by printing USDT—something that iFinex vehemently denies.
While both USDC and USDT claimed to be backed by the US dollar, USDC has undergone significantly more scrutiny through audits to keep confidence high. And with the controversy around its reserves as well as the ongoing NYAG investigation, it’s fair to conclude that USDC represents the safer option right now.