Updated to reflect current data: June 16, 2022
“2020 seems to be the year of stablecoins,” said Tether CTO Paolo Ardoino.
And he was right. The case for stablecoins (USDT, USDC, and others) became much more compelling in 2020.
Stablecoin supply quietly surged in 2020 to $28 billion after starting the year below $5 billion. And the market continued to see substantive growth. By January 2021, the current stablecoin supply was over $33 billion.
Even after the recent downturn in the market, as of June 2022, the market cap for stablecoins is more than $150 billion.
The two largest stablecoins — Tether and Coinbase's USDC — account for most of the market by total supply. As of June 2022, Tether’s USDT comprised approximately 45% of the market at $69 billion in total supply. On the other hand, USDC is growing rapidly and sits behind Tether at 35% of the market and nearly $54 billion in total supply.
It’s interesting to look at USDC vs. USDT today — compared to the same time last year, Tether was about the same, while USDC had a significantly lower supply.
So which USD-backed stablecoin is better for B2B payments: USDC or USDT?
It helps to weigh the pros and cons of each in order to make an informed decision based on your unique circumstances. But before we get into specifics, let's think more broadly about the fundamentals and underlying technology.
What are stablecoins?
Stablecoins are a cryptocurrency whose value is backed 1:1 by another asset, such as the US dollar, euro, yuan, or gold. This keeps the price stable relative to that asset.
With 24/7 availability, near instant settlement, and lower fees, people are turning to cryptocurrency to make payments. That is the major difference between USD and USDT, USDC, and the other stablecoins — the latter options are available on the blockchain.
As the first cryptocurrency, bitcoin paved the way for blockchain payments. In 2010, Laszlo Hanyecz bought two pizzas from Papa John’s for 10,000 bitcoin (worth $30 at the time) which is thought to be the first instance that crypto was used to pay for goods or services. In today's value of bitcoin, those pizzas cost approximately $350 million.
Bitcoin is still the most popular cryptocurrency used for payments, but its wild volatility makes it problematic for enterprise use and payments (compared with assets like Tether or USDC).
That's where stablecoins come in. While many top cryptocurrencies are still in price discovery, you can take advantage of the benefits of blockchain payments without subjecting yourself to volatility or complicated tax calculations. Stablecoins, like USDT or USDC, allow institutions, traders, and individuals to hold crypto without dealing with the highs and lows of bitcoin or ether.
How does it work? The stablecoin issuer will typically hold a reserve in a bank for the asset that is backing the stablecoin. Then, this reserve will serve as collateral for the stablecoin. This is similar to how both USDT, USDC, and similar assets collateralize their stablecoins with fiat.
Other more complex stablecoins (such as Maker’s Dai) are borrowed against locked collateral and destroyed when the loans are repaid. However, we'll spare you the details, since we're focusing on USDC or USDT instead.
Why did stablecoins grow so much in 2021?
The economic data speaks for itself. Stablecoins exploded in 2021. Total stablecoin supply has ballooned nearly 4x from $29 billion to start 2021 to over $110 billion in July 2021. By February 2022, the total supply was 1.5 times more at $180 billion. And for good reason.
For starters, the growth of DeFi in summer 2020 likely would not have happened if stablecoins did not have sufficient liquidity in the market to counter the unpredictable pricing of other crypto assets. Stablecoins are key to making the sophisticated tools being built on top of blockchain technology attractive and usable for developers and traders alike.
Along with the need for stablecoins in DeFi and trading, institutions across the world are using stablecoins to make cross-border (or intra-border) payments in a fraction of the time as fiat payments. This trend accelerated in 2020, with businesses increasingly relying on cryptocurrency for payments. Many companies prefer to transact with a currency that is tied to the global reserve currencies.
In January 2021, the Office of the Comptroller of the Currency (OCC) officially announced that they will permit federally regulated banks to facilitate stablecoin payments and other blockchain activities. There still seems to be plenty of room for growth in 2021 with this news.
Now let's explore the two biggest stablecoins (by market cap) in crypto: USDC and USDT.
What is USDC?
The USD Coin (USDC) was launched in October 2018 by the Centre Consortium, powered by the massive cryptocurrency exchange Coinbase and Circle Internet Financial. USDC is the only stablecoin currently supported by Coinbase.
If you’re asking, “is USDC ERC-20,” the answer is yes! — USDC is built on the Ethereum blockchain. Therefore, it's considered an ERC-20 token.
As of June 16, 2022, USDC is a top-10 coin on every exchange. It’s the fourth highest cryptocurrency on CoinMarketCap. It has $54.4 billion in total supply (up from $518 million at the start of 2020 and $26.8 billion in July of 2021), and holds a 35% market share for all stablecoins. It’s quickly become one of the largest coins, and it looks like it's continuing to build serious momentum.
How is USDC stabilized? USDC is pegged 1:1 to actual U.S. dollars (USD) and held in reserve bank accounts. It’s subject to regular audits to ensure that it’s staying an actual dollar. This is how you can trust that USDC will remain $1 regardless of what happens.
USDC is available to trade at seven different exchanges, including Coinbase, Poloniex, Binance, and KuCoin. For Coinbase Pro or Coinbase Prime users, you’re able to purchase and sell USDC from all regions of the world. If you have USDC on Coinbase, it’s simple to convert your USDC back into fiat and withdraw it to your bank account.
How can I use USDC?
Since USDC is an ERC-20 token, any two ethereum wallets can send and receive USDC to anyone in the world almost instantly.
This means that USDC, the ERC-20 based token can be used by any new decentralized application (dApp) built on the Ethereum blockchain. That’s why USDC is popular in the DeFi community. USDC holders are free to explore the wild west of DeFi lending, high-yield savings accounts, and other possibilities.
Most recently, USDC partnered with the exiled government of Venezuela to provide aid to people and healthcare workers in Venezuela. According to the CEO and founder of Circle, stablecoins are now a tool for US foreign policy and USDC is leading the charge.
Many people believe that coins like USDC, USDT, and other stablecoins, go against the crypto narrative of being anti-fiat, but there's an opportunity here. For crypto to go mainstream, it needs to work collaboratively with traditional finance. Fiat-to-crypto payment rails are going to become more and more prevalent in the coming years.
In order for people to understand the significance of blockchain technology, they first need to be introduced to cryptocurrency. One way of doing this by showing them the similarities and differences between USDC vs. USD — they’ll see the technological changes that crypto brings, alongside a price stability that parallels the dollar.
How to get paid in USDC
With Gilded, it’s easy to send and receive payments using USDC. You can send invoices to your customers priced in USD (or other global currencies) and then accept the payment in USDC.
When you pay with USDC, the fees are lower, payment is faster, and you don’t have wait for an intermediary. Gilded never touches your funds. For those that prefer the convenience of a trusted custodian, Gilded's Coinbase integration allows you to send and receive USDC payments directly in your Coinbase account.
What is USDT?
Tether, known by its ticker symbol of USDT, is widely known as the first stablecoin project. Originally known as MasterCoin, the idea for Tether was first conceived in January 2012 and officially launched in 2014 by Bitfinex. It’s a fiat-collateralized currency, meaning that the value is supposed to be pegged 1:1 to the U.S. Dollar.
USDT has nearly $69 billion in supply and accounts for almost 50% of the total stablecoin supply. As mentioned earlier, the total supply of USDT isn’t growing as quickly as the total supply of all stablecoins — in the question of USDT vs. USDC, the latter seems to be catching up. However, for now, USDT is the third biggest cryptocurrency by market cap (behind Bitcoin and Ethereum) and is the reigning king of stablecoins.
How do I use USDT?
Since USDT is the biggest stablecoin by high margins, it provides high liquidity to its users. Most notably, USDT has a daily 24 hour volume of well over $60 billion, far more than even Bitcoin. Therefore, it’s the most liquid cryptocurrency in the world.
This makes it perfect for traders who need easy access to transfer funds. You can enter and exit trades without huge changes in price (like you would with Bitcoin or Ethereum). And if you’re only trading between various digital currencies, then the tax liability is lower or non-existent.
It’s also a good use as a medium of exchange, and not just for traders. More and more businesses and freelancers are using USDT (vs. USD even) as a form for B2B payments.
But Tether also is not without controversy, which center around whether it’s fully backed by the U.S. Dollar.
In 2019, Bitfinex, the exchange that shares a parent company with Tether, reportedly raided $850 million of Tether reserves for their outstanding debt.
We won’t get into too much detail here, but it’s worth mentioning. We suggest that you do your own research, in order to come up with your own conclusions.
How to get paid in USDT
Getting paid in USDT is incredibly simple with Gilded. Since Tether is such a liquid asset, you never have to worry about the supply running low or the price becoming volatile.
Whether you use USDT or USDC, you’re going to save yourself time and fees by creating or accepting payments with either of these stablecoins.
Should you use USDC or USDT?
Short answer: it depends. From our research and conversations with hundreds of customers and prospects, it depends on your specific needs, preferences, and your customer profiles.
USDC is most commonly used by institutions in the United States (or other countries where Coinbase is offered). If your customers are businesses, then you’ll likely want to use USDC to send invoices to your customers. If you're a Gilded user working with Gilded's Coinbase integration, it also makes sense to use USDC.
On the other hand, USDT is most commonly used by traders and investors. Tether is a tool that allows traders to protect profits, while staying invested in crypto. It allows you to keep your money on exchanges without subjecting yourself to volatile prices in bitcoin or other digital assets. If your customers are traders, then perhaps USDT is the right choice.
Finally, we’d like to remind you this article is for educational purposes only. This is not investment advice, and we encourage you to do your own research. Hopefully, we’ve given you information regarding the difference between USDC and USDT.
If you’re still asking, “which stablecoin should I use,” we’re happy to direct you to other resources that we find helpful. Additionally, we’d love to introduce you to the Gilded software, if you’re curious about processing transactions using Tether or USDC.