Stablecoins USDT vs. USDC vs. BUSD: How Are They Different?

Stablecoins are cryptocurrencies whose value is pegged to a stable asset, mostly fiat currency. Tether (USDT), USD Coin (USDC), and Binance USD (BUSD) are the three most popular stablecoins by combined market cap.
Stablecoins enable faster, cheaper, and more secure transactions without the restrictions associated with traditional banking, such as location restrictions and lack of financial services during the holidays.

The global blockchain market is projected to grow to $ 23,3 billion by 2023, which proves the popularity of cryptocurrencies around the world.

A stablecoin is a type of cryptocurrency that is more reliable and less volatile than its well-known counterparts such as Ethereum and Bitcoin, which means more potential for safer investments.

But which stable currency should you trade? How is stablecoin different from fiat currencies? Below you will find out all about the supply of stablecoins and how they differ from each other.

What are stablecoins?

A stablecoin is a fiat-backed cryptocurrency whose value is tied to another asset class, such as gold or fiat currency, to maintain a stable price.

According to Harvard Business Review, “True stablecoins are interest-free coins designed to maintain a stable value against a reference currency, say the US dollar.”

While major crypto assets like Bitcoin are beneficial in that you don't need to trust intermediary organizations, they are highly prone to price fluctuations.

Stable coins address this disadvantage by pegging the value of a currency to another stable asset, mainly fiat currencies such as dollars or euros.

Second, the issuer of the coin has a “reserve” with assets that guarantee buyers that the issuer will be able to redeem the issued coins.

The first stablecoin was created in 2014 and was named Tether. Most other stablecoins are modeled on Tether, with users receiving one token for every dollar.

Theoretically, users can get their original currency - dollars - back at a one-to-one rate. Initially, people used stablecoins to buy common cryptocurrencies like bitcoin since many exchanges were not bankable.

Thus, stablecoins have proven to be a more reliable option as they are available around the clock worldwide and do not require dependence on traditional banking channels. Plus, money transfers are done in seconds.

What drives stablecoin growth?

The use of smart contracts leads to the emergence of stablecoins. Unlike many other currencies, the code in the smart contract helps to clarify the contractual agreements to facilitate the transfer, lending, payment of money without problems and with limited human intervention.

The main factor contributing to the growth in popularity of stablecoins is their almost negligible volatility compared to conventional cryptocurrencies. In addition, industry partnerships are also fueling the growth of stablecoins.

For example, Visa recently partnered with Circle, the blockchain masters who created USDC. Thanks to this partnership Circle corporate cardholders can spend their USDC stablecoins at merchants that accept Visa.

Better yet, the Office of the Comptroller of the Currency of the US Treasury has issued guidance for banks on the use of stablecoins such as USDC payments and public blockchains in banking.

Thus, federal savings associations and banking channels can now use blockchain for coins like USDC, just like SWIFT or ACH transfers.

The future looks bright for holders of stablecoin, as this currency may offer a widespread payment method to reduce the cost of data processing and international transfers. Moreover, banks can also use stablecoins to minimize the threat of digital problems.

It's also likely that digital wallets such as Cash App and Venmo, which recently made it possible to buy cryptocurrencies, will use stablecoins in the future to make peer-to-peer payments a breeze.

Understanding USDT, USDC and BUSD

While there are dozens of different stablecoins, the three most common ones include USDT, USDC, and BUSD.

What is USDT?

USDT (Tether symbol) is a stablecoin pegged to the US dollar at a rate of 1:1. Thus, one US dollar is equal to one USDT. Buyers can spend, transfer or exchange USDT in the same way as regular fiat currency.

USDT was originally created to address the following problems:

• simplify the translation of national currencies
• offer a more stable version of volatile bitcoin
• Provide users with a verification method

Tether is in the spotlight as the third largest cryptocurrency in the world. While there are several controversies surrounding Tether's stability at the $ 1 level, there are still many reasons to prefer this coin to the regular currency, which will be discussed below.

What is USDC?

USDC is another stablecoin whose price is pegged to the US dollar. It was created to speed up the transfer of funds and reduce the volatility associated with Bitcoin and other cryptocurrencies.

As an Ethereum token, USDC can be stored in a blockchain-compatible wallet. In addition to facilitating transfers, USDC also allows users to generate higher returns when lending their stablecoins through various decentralized financial applications.

The popularity of the USD coin has grown significantly over the past few years, with an average of $ 2021 billion going through the Ethereum network daily in March 2.

What is BUSD?

Binance and Paxos founded BUSDto provide transactions with three important qualities: speed, flexibility and availability.

Simply put, Binance USD is a fiat-backed and regulated stablecoin that has a value equal to the value of the US dollar. For every USD bought on Binance, there is one dollar held in reserve. When the price of the dollar fluctuates, the value of the stablecoin also rises or falls.

BUSD holders can exchange their stablecoins for US dollars and vice versa. Moreover, Binance USD exists on three blockchains: Binance Smart Chain, Ethereum, and Binance Chain.

Therefore, BUSD holders can exchange stablecoins between these blockchains according to their requirements.

USDC vs. USDT vs. BUSD: Differences

This table compares the differences between the three stablecoins, which account for the majority of the stablecoin market.

	USDT	USDC	BUSD
Blockchain	Ethereum	Ethereum, Stellar, Algorand, Solana	Ethereum, Binance, Binance Smart Chain
Issuer	Tether	Circle	Binance and Paxos
Launch year	2014	2018	2019
Type of security	Fiat	Fiat	Fiat
Market rating	5	8	13
Base fiat currency	US dollar	US dollar	US dollar

Blockchain

One of the significant differences between these stablecoins is their blockchain. A blockchain is a system in which transactions are recorded using an immutable cryptographic signature to eliminate or minimize the risk of the system being hacked or spoofed.

The presence of different blockchains provides a number of advantages, such as the speed and convenience of transactions. While USDT only operates on one blockchain, USDC and BUSD have multiple blockchains, allowing buyers to transact and transfer between them.

Stability

While stablecoins achieve price stability by securing the purchase and sale of a reference asset, they can fluctuate slightly from the price of their token and then gradually return to their original value. The stability of USDT is quite reliable as the stable token managed to stay at the $ 1 level.

Likewise, Binance USD and USDC are also stable at $ 1.

However, controversy has arisen over Tether's claim that it has sufficient dollar reserves, while economists and investors suspect it does not.

Eric Rosengren, President and CEO of the Federal Reserve Bank of Boston, worries that “a future crisis could be easily triggered as they [stablecoins] become a more important sector of the financial market if we don’t start regulating them and make sure that there really is much more stability in what is being sold to the general public as a stablecoin.”

But compared to USDT, USDC and BUSD are stable and free from contradictions.

Volume and supply of stablecoins

Stablecoin volume refers to the total number of trades, while “liquidity” refers to the number of coins available for trading at a set price, which in this case is $1. As volume increases, so does liquidity.

A high volume stablecoin makes it easier for investors to trade their coins.

As of August 30, 2021, USDT has a trading volume of 75 billion, higher than the other two currencies. The trading volume of USDC is 2,7 billion and the stablecoin market volume of Binance USD is 5,8 billion. The total supply of stablecoins is around 116 billion, among which USDT remains the largest stablecoin by market capitalization with total circulating supply.
A circulating supply is the number of cryptocurrencies or tokens that are publicly available and circulating in a cryptocurrency…
over 65,49 billion USDT. While USDC circulating supply is 27,37B USDC and BUSD is 12,25B BUSD.

Benefits of USDT, USDC and BUSD

Despite their differences, stablecoins have the following benefits:

• Fast Transactions: Fiat deposits can reach your bank account within one to four business days. In today's fast-paced world, this is relatively slow. Whereas stablecoin transactions are instantaneous.
• Availability: Regular banking channels are not available on weekends and public holidays. The exchange of stablecoins is possible 24 hours a day, 7 days a week - anywhere in the world.
• Transaction fees: Normal transactions have high fees, especially international transfers. In contrast, stablecoins allow you to conduct transactions with little or no cost.
• Stability: Unlike other cryptocurrencies like Bitcoin or Dogecoin, stablecoin prices remain stable at the level of the asset they are pegged to. For example, if a stablecoin is pegged to the euro, its price will remain the same as the fiat currency.
• Transparency: Most stablecoins are fairly transparent, allowing users to make sure that issuers have sufficient reserves in reserve to redeem them. For example, Binance Coin is checked monthly Withum, a well-known accounting firm.
• Security: Blockchain technology makes transactions extremely secure, which is why many users consider stablecoins to be more secure than traditional banking channels, which are prone to hacking and malicious attacks.

Application of stablecoins

Stable coins like USDC can be used for a variety of purposes, such as storing value, accessing the market profitability provided by the blockchain, and payments. Here are some lucrative uses for stablecoins.

Trading cryptocurrency pairs

Typically, in cryptocurrencies, “trend pairs” refer to assets that users can exchange for each other through an exchange.

These pairs allow buyers to compare the value of different digital assets. For example, the BTC / USDT crypto pair will let you know how much USDT equals one BTC.

When you have stablecoins such as USDC and others in stock and want to exchange them, you can check for a pair on the exchange. For example, if you have USDC, you can trade with a pair on an exchange like BUSD.

DeFi Protocols for Lending

Decentralized Finance (DeFi) takes the decentralized blockchain concept and applies it to the world of finance.
or decentralized finance, refers to an ecosystem that includes blockchain-based financial applications that operate without a central management or third party.

Because it uses a peer-to-peer model, anyone can connect to it no matter where they are.

With DeFi lending, you can lend your stablecoins to a borrower and receive interest. This is beneficial for both borrowers and lenders, as users can obtain loans at much lower rates than if they used decentralized exchanges. At the same time, long-term investors can earn interest on the coins they borrow.

Which stablecoin should you choose?

Although USDT has a higher market cap and market size, most economists, oddly enough, do not consider it the best stablecoin. The reason for this mistrust is the transparency and audit gaps of the USDT.

USDC and BUSD are more transparent than USDT. Moreover, they are comparable to USDT in terms of exchange rate and blockchain. Thus, USDT is more suitable for those who prefer to invest in cryptocurrencies with high volume and liquidity, while USDC and BUSD are preferred if you value transparency.

Сonclusion

USDC, USDT and BUSD, which account for nearly 93% of the stablecoin market cap, are undoubtedly ideal options for investors looking to try their hand at the stablecoin market.

With Visa partnering with Circle and with vendors eagerly embracing the idea of ​​stablecoins, the future looks promising for this cryptocurrency. So if you are planning to embark on this journey, now is the time to do so.