Is USDC safer than Tether?
If you follow the crypto market for a long time, you must have witnessed numerous occasions of some coins collapsed to zero. This isn’t a big deal for cryptos in volatile conditions. Traders who realize this try to look for safe and relatively stable coins in order to save their holdings. Even such giants as BTC and ETH not always can mitigate the impact of intense value fluctuations. That’s why many switch to so-called stablecoins.
Stablecoins are special virtual currencies whose prices equal the prices of fiat assets. This is possible because their developers back the issuance of new coins with real financial products. USDC and USDT are the mainstream cryptos keeping up with the prices of fiat assets. Many enthusiasts argue which one is safer to keep holdings in. This is the main topic of today’s review.
What are their benefits?
- Their prices aren’t as unstable as those of other cryptos because they are pinned to traditionally non-volatile products.
- Investing in USDC/USDT is considered the best haven for digital currency holders when extreme instability comes. Holders of fiat products can also benefit from them by storing their cash in digital assets that are pegged to safer securities.
- They can ensure more rapid and safer operations with amounts equal to fiat reserves but in the decentralized blockchain environment.
- They aren’t as speculative as many other popular cryptos and even some traditional securities.
- USDT and USDC are frequently utilized as means of medium exchange between businesses that need to process money transactions safer and faster.
- Transactions in the blockchain environment, processed in stablecoins, are cheaper than operations of fiat money.
Do coins differ from one another a lot?
Even from the names of the tokens, you might guess that they are both pegged to the USD, meaning their prices shouldn’t be upper or lower than $1. Nevertheless, there is a difference between USDC and USDT.
Foremost, we need to realize that probably USDC was inspired by USDT as USDT is one of the first stablecoins ever created. The history of Tether dates back to 2014 when the launch of Tether became the bridge between two different worlds – crypto and fiat.
USDC was launched four years after Tether. It has had quite a rapid growth right after the launch. Now, this coin is the fifth biggest cryptocurrency by market cap, whilst its predecessor is losing only to BTC and ETH.
How do they work?
The main function of these stablecoins is not to fluctuate from the $1 level. Although USDC and USDT are the biggest coins in this segment, they faced several occasions when they were a few cents lower or higher than they were supposed to be. This means that the fact that these tokens are pinned to the U.S.D doesn’t mean they are completely safe.
Besides, there are concerns that the Tether team isn’t completely frank regarding the amount of U.S. dollars by which the project is backed. These concerns were revealed in March 2019 when Tether Limited changed the backing to include loans to affiliate companies. This was a big issue for crypto enthusiasts and many of them started doubting whether they could rely on the reserves of Tether if it doesn’t use them the way it should have been done.
By the time of writing this review, USDC hasn’t been messed up in such unpleasant stories. The team behind the project provides regular audits every month, which proves that backing by the USD reserves is real.
The bottom line: which is safer?
In 2022, the collapse of Terra UST took place. After this, it became clear that even stablecoins aren’t 100% resistant to technical issues of the virtual currency market. It made many crypto enthusiasts concerned about whether USDT and USDC would endure such big pressure.
If we talk about the influence on the crypto market, we should take into account that USDT is bigger and more popular. This also means that more transactions are made in USDT. However, this doesn’t mean that the bigger ecosystem is safer.
USDC seems to have made more steps towards making its policy regarding USD reserves and token supply transparent and clear to future investors. This allows us to assume that USDC is safer than Tether.
