Complete Guide November 2024? – Forbes Advisor INDIA

The cryptocurrency world consists of tokens whose prices are fixed because they are pegged to fiat currency or a dollar. These tokens are collectively known as stablecoins. USDT and USDC are the major stablecoins in the cryptocurrency universe. 

Tether USDT and Circle USDC are stablecoins. They aim to maintain a ratio of 1:1 peg with the U.S. dollar. However, they operate on various blockchain networks, with USDT mainly on Ethereum and USDC on multiple blockchains, including Algorand. 

What is USDC?

Coinbase and Circle created USDC in 2018. Like any other USD-backed token, its price remains fixed at $1. The Centre Consortium oversees and governs the financial and technical standards, ensuring 1-to-1 backing transparency. For each USDC, $1 of USD is held in reserve as U.S. Dollars or other cash alternatives. 

What is USDT?

Tether USDT was launched in 2014 by the Hong Kong-based Tether Limited. It was introduced to bridge the gap between cryptocurrencies and fiat currencies. This was the first time a company presented users with a platform to trade a U.S. Dollar-backed cryptocurrency. USDT has several technical advantages over ETH and BTC, such as no volatility and high liquidity.

Features of USDC And USDT

USDC Vs USDT

Key Similarities 

• Stable value: Both USDT and USDC tokens are stablecoins pegged to the US Dollar in a ratio of 1:1. Thus, they do not have the price volatility of cryptocurrencies like Bitcoin, Ethereum, etc.
• Ethereum compatible: USDC coin and USDT are based on the ERC-20 token and support many applications, smart contracts, and protocols built into the ETH blockchain ecosystem.
• Transaction speed: USDT and USDC are pretty fast compared to traditional payment methods. They can be transferred anytime with a proper internet connection.
• Transaction cost: Both stablecoins provide funds transfers at a meager cost compared to the high gas fees of other cryptocurrency assets, traditional finance credit cards, etc.
• Accessibility and Liquidity: Most crypto exchanges, DeFi protocols, and wallets support USDC and USDT stablecoins, which have various trading pairs and high trading volumes and liquidity.

Key Differences

• Reserve Management: The USDT asset reserve is managed by issuer company Tether Ltd, whereas Circle’s USDC asset reserves are held in the custody and management of top financial institutions, including BlackRock and BNY Mellon.
• Audit: The Deloitte accounting firm audits the USDC coin asset reserve, and its monthly attestation report is published on the Circle USDC website. While Tether USDT provides monthly asset reserve reports, it does not publicly have regular auditing information.
• Transparency: USDT has been under surveillance and has been the subject of several talks about its transparent working model. On the other hand, USDC always maintains its public trust and transparency through regular audits and reverse reports.
• Global Adoption: While USDT and USDC are well-known stablecoins in the crypto market, the USDT market cap is $120.14 billion, and the USDC coin market cap is only about $34.46 billion as of Oct. 25, 2023.
• Divisibility: Circle USDC is divisible into units just like fiat, the U.S. dollar. On the other hand, Tether USDT is not divisible, which limits its features. 

Volume

USDC: With a staggering $34.46 billion market capitalization, the stablecoin is ranked sixth on CoinMarketCap. As of Oct. 25, 2024, the token has a circulating supply of 34.46 billion USDC and a 24-hour volume of $6.98 billion. 

USDT: With a staggering $120.12 billion market capitalization, the stablecoin is ranked third on CoinMarketCap. As of Oct. 25, 2024, the token has a circulating supply of 120.22 billion USDT and a 24-hour volume of $56.33 billion.

Risks Associated With Stablecoins

Risks associated with stablecoins:

• Changes in regulations can influence issuance and use.
• Depending solely on a single issuer can lead to issues.
• Non-public issuers must be trusted to back tokens with assets.
• Diverse levels of openness in reserve asset reporting.
• Blockchain and smart contract vulnerabilities
• Insufficiency of liquidity can affect price stability.
• Unexpected market events can question stability.
• Demand and supply can fluctuate stability.
• Restrictions or delays in redeeming tokens.