USDT vs USDC: Which Stablecoin Is Better?

USDT vs USDC: Which Stablecoin Is Better?

The term “stablecoin” is as much a part of the cryptocurrency lingo as Bitcoin (BTC) or Ethereum (ETH) in 2023 — and like the biggest crypto tokens, they are everywhere.

Are all stablecoins created equal? That is the focus of this article, as TabTrader unpicks the differences between the two largest stablecoins by market cap: Tether (USDT) and USD Coin (USDC).

Are there genuine things that set Tether apart from the rest? Is the media controversy around stablecoins a cause for concern? Continue reading to discover some of the main factors to bear in mind when it comes to USDT versus USDC.

What Are Stablecoins?

Put simply, a stablecoin is a cryptocurrency pegged 1:1 with some other asset which investors use in its place. Stablecoins allow crypto traders to transact with all the benefits of the blockchain – faster and cheaper transactions, as well as more control over funds – without having to hold large amounts of the backing asset. Given that stablecoins are crypto tokens like Bitcoin and altcoins, there is no need to interact with the legacy financial system when using them.

The most popular stablecoins, including Tether and USD Coin, are pegged 1:1 with the US dollar (USD). Other stablecoins are pegged to different fiat currencies or precious metals such as gold, to name but a few. You can learn more about stablecoins in our Academy article.

How do Stablecoins Work?

Stablecoins allow crypto investors to “trade” or “hold” a representation of the backing asset without them needing to handle that asset themselves. For example, holding USDT on Ethereum does not require an investor to purchase dollars themselves at any time.

This is possible thanks to stablecoin pegs. How stablecoins maintain the peg – the 1:1 equivalent value to their underlying asset – varies, but the end result is ultimately the same. 

Smart contracts are a key part of stablecoin pegs, as they are used to keep the supply in check and ensure the smooth exchange of users’ coins for the equivalent value as dictated by the underlying asset.

Stablecoin protocols regularly mint and “burn” tokens in order to maintain the correct peg. Burns frequently happen during force majeure events which threaten the stablecoin’s value and risk panicking investors into mass withdrawals. 

What is USDT (Tether)?

Tether (USDT) is the oldest and most widely-used cryptocurrency stablecoin. Created in 2014, it has grown to attain a market cap of over $83 billion as of June 2023, making it by far the largest stablecoin asset in existence.

USDT is issued by iFinex, a Hong Kong based company which also owns major cryptocurrency exchange Bitfinex. The corporations share senior executives, among them Paolo Ardoino, their famously vocal chief technology officer (CTO).

USDT is a dollar-backed stablecoin with a 1:1 peg ensured by various forms of collateral. According to Tether’s website, this currently consists of cash and cash equivalents or short-term deposits, corporate bonds, precious metals, secured loans and generic “other investments”.

Its most recent publicly-available attestation from March 2023 confirms that Tether’s assets outweigh its liabilities.

Originally available on Ethereum, USDT has grown to circulate on various major blockchains: Tron, Solana, Avalanche, EOS and others. At the time of writing, over half of Tether’s combined market cap came from Tron-based tokens.

What is USDC?

USD Coin (USDC) is the second-largest cryptocurrency stablecoin by market cap as of 2023. Like USDT, it is a US dollar pegged stablecoin redeemable for the equivalent USD value in other assets.

Launched in September 2018, it is controlled by Centre, a consortium resulting from a joint venture between financial technology company Circle and major exchange Coinbase. 

USDC initially circulated as an ERC-20 token on the Ethereum blockchain, as with USDT, but has also branched out to include more blockchains since. These include Solana, Tron, Stellar and Algorand.

US-based Circle places an emphasis on regulatory compliance, and as a licensed money transmitter and the sole issuer of USDC offers monthly attestation reports on its reserves in accordance with the American Institute of Certified Public Accountants (AICPA).

These reserves consist of US Treasury securities, cash and other assets for a total market cap of over $28 billion as of June 2023.

USDT vs USDC: Comparison Overview

While Tether (USDT) and USD Coin (USDC) ostensibly perform the same function within the cryptocurrency industry, they are completely separate projects.

The two largest stablecoins have varying characteristics under the surface, and these will be of interest to those looking to deploy them for specific purposes or who trade them in large enough volumes. Continue reading to discover how USDT and USDC stack up.

USDT vs. USDC Founders

As the oldest stablecoin, Tether’s history goes back to 2012, while its current incarnation emerged two years later. The three co-founders of what is now known as USDT — but was originally called Realcoin — are Brock Pierce, Reeve Collins and Craig Sellars. Pierce is a well-known crypto industry figure in his own right, serving as director of the Bitcoin Foundation at the time of Tether’s launch among other activities.

Exchange Bitfinex began offering USDT trading in 2015, and the two firms are now under the same umbrella of iFinex. As such, both exchange and stablecoin share senior executives.

USDC, on the other hand, only emerged in 2018, but has since grown to become the second-largest crypto stablecoin by market cap.

Its creator is blockchain financial firm Circle, which together with executives from exchange Coinbase and mining giant Bitmain form the Centre Consortium which oversees its operation.

Circle CEO Jeremy Allaire is also a well-known crypto industry personality, for years acting as one of the industry’s public figures.

USDT vs. USDC: The Blockchain Protocol

Both USDT and USDC began life as an ERC-20 standard cryptocurrency on the Ethereum blockchain. Since then, however, other blockchains have gained popularity, and both stablecoin issuers have opted to mint tokens on these blockchains as well.

The blockchains available for each stablecoin as of June 2023 are summarized in the table below.

Circle has introduced the Cross-Chain Transfer Protocol (CCTP), a method for transferring USDC across otherwise non-interoperable blockchains.

The protocol is a permissionless feature which controls cross-chain transactions by minting and burning tokens as required. This is especially useful in the DeFi era, with traders demanding interaction with endless tokens and ecosystems on a constant basis.

Tether’s Chain Swap feature, meanwhile, performs similar functions for USDT holders, with minting and burning performed as necessary.

USDT vs. USDC: Safety & Stability

As their names suggest, both USDT and USDC are designed to bring stability to cryptocurrency investing and allow users to avoid the often considerable volatility inherent among free-floating cryptocurrencies — including Bitcoin and Ethereum.

However, neither asset’s track record is pristine in this respect. There have been occasions over the years where both stablecoins have become “depegged” from their underlying asset — the US dollar — becoming worth less than $1 per token.

A notorious example of this was in March 2023, when macro uncertainty caused both USDT and USDC to temporarily lose large amounts of redeemable value. 

Beyond these events, the issuers of each coin are in charge of keeping conditions steady. Tether and Circle are the sole parties able to control issuance of USDT and USDC, respectively, and each pledges to do so, as among other things it is in their interest to provide a nonvolatile, reliable environment for trading and investing.

A caveat is in the form of guarantees — a stablecoin investor is not assured that their holdings can be redeemed for the underlying asset in the manner of their choosing.

Tether’s legal terms warn that delays in USDT redemptions can occur as a result of “illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens.” Circle operates somewhat differently as a licensed money transmitter, but still emphasizes the many potential risks that users bear in transacting in USDC. 

USDT vs. USDC: Market Cap

A cryptocurrency’s market cap can vary considerably depending on overall market conditions in what is a notoriously volatile space.

Stablecoins are no exception in this respect, with market caps fluctuating in line with cryptocurrency market trends.

In the case of Tether, for instance, a peak market cap of over $83 billion in May 2022 became just $65 billion at the end of the year, before reversing upward again to challenge those highs.

As mentioned, USDT remains far and away the largest stablecoin in terms of market cap, with second-place USDC coming in at below $30 billion.

This currently makes USDT and USDC the third-largest and fifth-largest cryptocurrencies in the world by market cap, respectively. First, second and fourth place are occupied by Bitcoin, Ethereum and Binance Coin (BNB) as of June 2023.

Largest global exchange Binance is also the owner of what is at present the third-biggest stablecoin by market cap — Binance USD (BUSD). This, with a market cap of just $1.8 billion, nonetheless stands far behind the two market leaders.

USDT vs. USDC: Availability

Availability of USDT and USDC is more complex than it might appear. Neither asset is “public” — its issuers make the rules when it comes to who can use their tokens and under what conditions.

Circle, for instance, has extensive user agreements which dictate — especially in the case of U.S. citizens — how prospective investors can acquire, trade and redeem USDC.

That said, third-party trading forms a major aspect of stablecoins’ circulation, and anyone with an account on an exchange which supports USDT and USDC can purchase them. Likewise, individual wallet owners can transact freely between one another.

As can be expected from their status, both USDT and USDC are supported everywhere, with both major and less well-known exchanges offering them. This is, after all, one of the main use cases of stablecoins — an on-tap safe haven for traders to diversify into in the event of volatility or other unexpected circumstances.

USDT vs. USDC: Transaction Fees

In terms of transaction fees, stablecoins function like any other cryptocurrency — the cost to send USDT or USDC from one wallet to another depends on the conditions of the underlying blockchain on which the tokens are issued.

In the beginning, both stablecoins were only available as ERC-20 tokens on Ethereum, meaning that in order to send them, users needed to pay gas fees. These varied greatly in accordance with Ethereum blockchain loads, sometimes making transactions extremely expensive.

In 2023, USDT and USDC exist on multiple blockchains, some of which offer consistently low fees. When it comes to official purchasing of USDT or USDC via accounts with the issuer, various fees apply, and in the case of Tether, these can be substantial, as such purchases are geared to large-volume buyers.

Circle’s fee schedule for businesses promises no added charges for purchasing or withdrawing USDC via its in-house account in the majority of cases.

USDT vs. USDC: Staking Rates

As the two most widely used stablecoins, both USDT and USDC feature prominently in stablecoin staking. Staking is the process where crypto holders “lend” funds to platforms in order to earn interest, rewards or a combination of these incentives. In 2023, with the rise of decentralized exchanges (DEXes), staking has become even more popular as a way for platforms to access liquidity.

Staking interest and other rewards vary by platform, and do not necessarily depend on the stablecoin itself. They can, however, be highly attractive, topping 8% on centralized exchanges such as Nexo and Crypto.com.

An important thing to note when it comes to staking is that it introduces added risk  — funds held outside the investor’s control can be affected by problems with the platform itself, such as theft, hacking or failure of the business.

Certain platforms offer some form of insurance to stakers, but this is rarely all-encompassing cover which caters to even more common eventualities. 

USDT vs. USDC: Similarities

When it comes to pitting Tether (USDT) versus USD Coin (USDC), the fundamental similarities are easy enough to spot and understand. Both assets are centralized cryptocurrencies which are used to represent an underlying asset at a ratio of 1:1. In the case of both, this is the US dollar.

The private issuers of these US dollar stablecoins are in complete control of their supply, as well as who gets to buy and trade them (when purchasing from the issuers directly). The issuers also permit third parties, such as exchanges, to offer their stablecoins.

Both USDT and USDC come with terms and conditions of use, with the issuers stating their obligations to investors and intent to support the 1:1 USD peg. However, when it comes to a guarantee of always being able to redeem tokens at that peg, there are a large number of strings attached which reduce the issuers’ liability in the event of problematic scenarios.

As mentioned above, both stablecoins now trade on multiple blockchains, and can attract transaction fees payable in that blockchain’s native asset, such as gas fees on Ethereum when transacting with ERC-20 tokens.

USDT and USDC are also popular for staking, with their peg allowing for more controllable, reliable rewards over long periods or during times when other cryptocurrencies may be highly volatile.

USDT vs. USDC: Differences

Differences between Tether (USDT) and USD Coin (USDC) are minimal when it comes to their broader use case as US dollar stablecoins. The contrasts between the two are mostly limited to individual terms and conditions and the nuts and bolts of buying or redeeming them with their respective issuer.

Tether, for example, places various fees and minimum purchase and sale amounts on direct transactions, while Circle pushes the zero-fee promise in most cases.

Similarly, the stablecoins’ terms and conditions offer differing extents of protection when it comes to being able to redeem stablecoin holdings for their pegged asset — USD.

As far as backing is concerned, Tether and Circle also diverge in their approach, with Circle avoiding controversy in its capacity as a licensed money transmitter in the US. Tether, on the other hand, has often encountered controversy over the legitimacy of its USDT reserves — something its executives have sought to rebut, both formally and on social media.

Other differences are mutable, and may not persist indefinitely — the USDT market cap, for instance, currently dwarfs that of any other stablecoin, including USDC. As mentioned, however, cryptocurrencies’ market caps can change rapidly in response to market conditions.

Summary: USDT vs USDC: Which is Better?

Given the many similarities between USDT, USDC and other US dollar stablecoins, is there anything that makes the two market leaders stand out from one another?

For the average crypto investor and trader, the two coins stack up pretty much equally. Accessibility, security and ease-of-use are broadly similar for both USDT and USDC — that is, when trading regular volumes on exchanges or using them as a volatility hedge. 

One can argue that a tangible “hierarchy” only becomes apparent in specific circumstances — for example, when purchasing large amounts of a stablecoin direct from the issuer as a business customer.

Beyond that, history has shown that in times of crisis, no stablecoin is safe — pegs can become unstuck and losses ensue, but while USDT and USDC did not behave exactly identically in such situations, both assets ultimately returned to par with the dollar.

Despite the controversy which sometimes envelops Tether, meanwhile, the market continues to vote with its wallet — USDT remains by far the most popular stablecoin, and is the de facto go-to for crypto exchange users worldwide. Its utility, then, would appear to take precedence over such potential concerns for the majority of crypto traders who opt to use USDT over other widely-available stablecoin assets.

TabTrader offers a wide variety of stablecoins via integrations with the world’s biggest exchanges. TabTrader Terminal users benefit from being able to trade on multiple platforms at once, right from one convenient interface.

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Frequently Asked Questions (FAQ)

Are USDT and USDC the same?

Both Tether (USDT) and USD Coin (USDC) are cryptocurrency stablecoins pegged 1:1 to the US dollar (USD). Their remit can be said to be identical — to provide a representation of the dollar for crypto traders and investors, who in turn do not need to hold USD themselves. Beyond their use cases and the way in which traders interact with them, however, there are some fine details which differentiate how USDT and USDC are issued, monitored and controlled. In addition, in basic terms, the two stablecoins’ issuers are separate private entities and their operations are thus wholly unrelated to one another.

Can you lose money with USDC or USDT?

As their name implies, crypto stablecoins are designed to preserve the value of an investors’ holdings in terms of the asset to which the stablecoin is pegged. In the case of USDT and USDC, this is the US dollar, and maintaining the 1:1 USD peg is critical for their success. Sometimes, during unforeseen wider market swings, this peg can come unstuck, but both USDT and USDC have succeeded in bringing back the peg without necessitating any actions on the part of investors. That said, depending on a trader’s individual circumstances, even a temporary loss of a stablecoin peg can spell considerable difficulty.

Is Tether (USDT) safer than USDC?

Stablecoins, when in regular operation, tend to come up against similar hurdles — notably problems ensuring their peg remains wholly intact 100% of the time. As the largest stablecoin, USDT is still no exception, and the various controversies it has sparked through the years likewise continue at the time of writing (June 2023). Nonetheless, for regular users, there is little overt difference between USDT and USDC — trading or redemptions have been possible despite the differing composition of the assets used to back them and maintain their peg. With any stablecoin, however, nothing is absolutely guaranteed, as is stated to varying extents in the terms and conditions supplied by their issuers.

Alternatives to USDT and USDC

The third largest US dollar stablecoin — and stablecoin overall — by market cap is Binance USD (BUSD) as of June 2023. Again, backing and terms differ from USDT and USDC, and investors looking for lesser-used alternatives to established stablecoins should always exercise caution. Other USD stablecoins exist, but history has shown that due diligence is required — certain forms of backing, for example, have not stood up in terms of pressure, leading to mass loss of funds for users. Perhaps the most notorious example occurred in mid-2022, when stablecoin terraUSD (UST) collapsed from what was previously a market cap of $18 billion.