Differences between USDT, USDC, TUSD, BUSD, DAI

Difference between USDT, USDC, TUSD, DAI, BUSD - Cover

Introduction

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There are different types of cryptocurrencies in the market. I am sure you have heard of DeFi, NFTs tokens, Stablecoins etc.

Cryptocurrencies known as stablecoins have values that are linked to a reliable asset, typically fiat money. The three most widely used stablecoins are Tether (USDT), USD Coin (USDC), and Binance USD (BUSD), with a combined market valuation of $140 billion.

Stablecoins offer faster, cheaper, and more secure transactions by eliminating the constraints linked with traditional banking, such as location-based restrictions and an absence of financial services during holidays.

By 2030, the market for crypto is expected to reach over $4 trillion, or nearly 40% of the value of the gold market, demonstrating their widespread acceptance.

What is TUSD?

TrueUSD (TUSD) is among the market’s most famous dollar-backed stablecoins. TrueUSD rose to prominence in the aftermath of the debate surrounding other stablecoins because of its transparency and regulatory compliance. TUSD is an ERC20 stablecoin that is backed by the US Dollar at a 1:1 ratio. It is the industry’s first regulated USD-backed stablecoin.

TrueUSD was created by the TrustToken platform in 2018. TrustToken identified an opportunity to battle rogue actors and manipulators in space after the 2017/2018 cryptocurrency market meltdown.

As a result, TrustToken sought to develop a stablecoin that promotes real-time audits, legal safeguards, and transparency for token holders.

What is DAI?

DAI is a decentralised cryptocurrency that aspires to maintain a steady one-to-one exchange rate with the US dollar. 1 DAI must equal 1 USD. As a result, DAI is a “stablecoin.”

Stablecoins are “crypto-versions” of traditional currencies like USD, EUR, or NOK. There are various reasons why you should use these cryptocurrencies, the most important of which is that their value remains stable, protecting you from the typical significant price volatility that other cryptocurrencies are prone to.

DAI is an Ethereum-based program that is built on the Ethereum blockchain. DAI is always classified as a stable cryptocurrency, often known as a stack coin.

What is USDT?

USDT (the Tether symbol) is a stablecoin that is tied to the US dollar at a 1:1 exchange rate. As a result, 1 USD = 1 USDT. Buyers can spend, transfer, and exchange USDT, in the same way they would any other fiat currency.

It is issued by iFinex, a Hong Kong-based firm that also operates the cryptocurrency exchange BitFinex.

Tether is the third-largest cryptocurrency in the world, and it remains the largest stablecoin by market cap, trailing only USDC.

However, USDT is notorious for being secretive about its reserves. In 2019, they claimed that every USDT is supported by one dollar in cash held by the corporation, but in 2021, the US Commodity Futures Trading Commission fined Tether (the company) $41 million (CFTC). Tether’s bogus assertions that its USDT Stablecoins are fully supported by real-world fiat money contributed to this.

Tether has since undergone an audit in May 2021 and updated its website with more information about its cash reserves, but what was surprising was that it only had 2.9% of its reserves in cash at the time.

However, as of the publication of this article, the figure has risen to more than 5% in cash, and they have also been providing monthly transparency reports.

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What is USDC?

USDC is another stablecoin whose value is linked to the US dollar. Circle Internet Financial developed it to shorten payment transfer times and lessen volatility connected with Bitcoin and other cryptocurrencies.

USDC, being an Ethereum token, can be saved in a blockchain-compatible wallet. Aside from enabling transfers, USDC enables users to earn better rates when lending their stablecoins through other decentralised finance applications.

The USD coin’s popularity has grown dramatically in recent years, with a daily average of $2 billion transmitted across the Ethereum network in March 2021.

USDC also has monthly attestations to demonstrate that they have an identical amount of USD backing their USDC in order to reassure investors that they are completely funded.

USDC has subsequently natively spread to many networks, including Solana, Tron, Hedera, Algorand, Avalanche, Polygon, and others, increasing their usage as cryptocurrency becomes multichain.

What is BUSD?

Binance and Paxos established BUSD to facilitate transactions with three critical characteristics: speed, flexibility, and accessibility.

Binance USD is a fiat-backed and regulated stablecoin that has the same value as a US dollar. For each Binance USD acquired, a single dollar is held in reserve. The value of the stablecoin fluctuates with the value of the dollar.

BUSD owners can exchange their stablecoins for USD and vice versa. Binance USD is also available on three blockchains: Ethereum, Binance Smart Chain, and Binance Chain.

As a result, BUSD holders can freely exchange stablecoins between blockchain systems. BUSD also has monthly attestations to demonstrate that they have an identical amount of USD backing their BUSD in order to reassure investors that they are fully supported.

USDC vs USDT vs BUSD vs TUSD vs DAI

USDTUSDCBUSDTUSDDAI
BlockchainAlgorand, Avalanche, Ethereum, Solana, Tezos, Kusama, Tron, Polygon, EOS, Liquid, HECO, Gnosis, Chain, Terra, Waves, Fantom, Klaytn and moreAlgorand, Solana, Avalanche, Ethereum, Tron, Hedera, Stellar, Flow, Polygon, Fantom, Gnosis, KCC, Moonriver, Velas and moreEthereum, Binance, Binance Smart Chain, Avanche, Velas, Solana, Harmony, Polygon, BitgertBinance Smart Chain, Binance Beacon Chain, Avalanche, Tron20, ArbitrumBinance Smart Chain, Gnosis, Fantom, Polygon, Avalanche, Arbitrum, Harmony, Sora, Solana, Terra Classis, Moonriver, Moonbeam and more
Stablecoin IssuerTetherCircleBinance and PaxosTrustTokenMakerDAO
Launch Year20142018201920182019
Collateral TypeFiatFiatFiatFiatFiat
Market Rank3465212
Base Fiat CurrencyU.S.DollarU.S.DollarU.S.DollarU.S.DollarU.S.Dollar
Table depicting differences between USDC vs USDT vs BUSD vs TUSD vs DAI

 

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Growth

Tether’s market cap has recently begun to fall against USDC, particularly since UST was depegged. On May 9, UST began to depeg, and as investors became concerned about the risk of USDT, they began to sell it.

Since then, USDT’s market cap has dropped by $11 billion, or around 15%, as holders began exchanging it for USDC instead, with some also redeeming USDT for USD cash. USDT depegged by roughly 4% on Binance at one point on 12 May, however it swiftly rebounded to peg by the end of the day as cash withdrawals were fully met and traders were reassured.

As a result of this event, the USDC market cap has increased from $49B to $54B, a 10% increase, and is now only 30% away from surpassing USDT in market cap, having risen from $4B at the start of 2021.

Blockchains

The blockchains used by these stablecoins differ significantly. A blockchain is a technology that records transactions using an immutable cryptographic signature to remove or reduce the danger of system hacking or cheating.

Having many blockchains provides a number of benefits, including increased transaction speed and utility. All USDT, USDC, TUSD, DAI, and BUSD support multiple blockchains, allowing buyers to trade and deposit across them. Hence, their usage depends on the blockchain you are transacting at.

Stability

Although stablecoins attain price stability through the collateralization of buying and selling the benchmark asset, they may deviate somewhat from their token price before gradually returning to their original value. USDT’s stability is quite solid, as the stablecoin has managed to maintain a constant value of $1.

Binance USD and USDC have also remained constant at $1.

Tether’s claim that it has sufficient dollar reserves, however, has sparked debate, with analysts and investors suspecting that it does not.

Stablecoin Supply and Volume

The volume of a stablecoin represents the total number of trades that occur, whereas “liquidity” refers to the number of coins that are accessible for trading at the predetermined price, which in this example is $1. Typically, as volume increases, so does liquidity.

A high-volume stablecoin makes it simpler for traders to trade their currencies. USDT has a bigger trading volume than the other two currencies as of June 17, 2022, at 50 billion. USDC has a market cap of 5.8 billion, whereas the Binance USD stablecoin has a market cap of 5.1 billion. The total stablecoin supply reached 180 billion and has since begun to decline, with USDT remaining the largest stablecoin by market cap, with a total circulating supply of approximately 69 billion USDT. While USDC has a supply of 54 billion USDC, BUSD has a supply of 17 billion BUSD.

Benefits of USDT, USDC. TUSD, DAI, and BUSD

  • Quick Transactions: Fiat currency deposits can take one to four business days to appear in your bank account. That is relatively slow in today’s fast-paced environment. Stablecoin transactions, on the other hand, are instant.
  • Availability: Traditional banking systems are closed on weekends and public holidays. However, stablecoin exchanges are available 24 hours a day, 7 days a week, from anywhere in the world.
  • Transaction Fees: Conventional transactions, particularly international cash transfers, incur hefty fees. Stablecoins, on the other hand, provide a low- or no-cost transaction option.
  • Stability: Stablecoin prices stay constant at the assets to which they are linked, unlike other cryptocurrencies like Bitcoin or Dogecoin. For example, if a stablecoin is linked to euros, its value will remain constant with the fiat currency.
  • Transparency: Most stablecoins are fairly transparent, with users able to see that the producers have sufficient assets in reserve to redeem them. Binance Coin, for example, is audited regularly by Withum, a well-known accounting firm.
  • Safety: Many users believe stablecoins to be more secure than regular banking channels since blockchain technology makes transactions incredibly secure and makes them less vulnerable to hacking and malicious attacks.

The Uses of Stablecoins

1. Trading Crypto Pairs

In cryptocurrency, “tranding pairings” are assets that users can swap for one another via an exchange.

Buyers can use these pairs to compare the prices of various digital assets. A BTC/USDT crypto pair, for example, will tell you how many USDT equals one BTC.

When you have stablecoins like USDC and others and wish to trade them, you can look for the pairing on the marketplace. For example, if you have USDC, you can trade it with a BUSD pairing on the marketplace.

2. DeFi Protocols for Lending

Decentralized finance, or DeFi, refers to a network of blockchain-based financial apps that run without the involvement of a central administration or a third party.

Because it uses a peer-to-peer paradigm, anyone, regardless of location, can connect.

You can earn interest by lending your stablecoins to a borrower through DeFi lending. This helps both borrowers and lenders because users can obtain loans at far lower interest rates than if they used decentralised exchanges. In the meantime, long-term investors can earn interest on the coins they lend.

3. Providing Liquidity

With the growing popularity of AMM DEXes (automated market maker decentralised exchanges), individuals can provide liquidity with their USDC on their preferred pairs, such as ETH-USDC, and earn trading fees in addition to other incentives.

On the Ethereum network, some of the most significant AMM DEXes include Uniswap and Sushiswap, which passively generate millions of dollars in revenue for liquidity providers. The negative is that liquidity providers may suffer a temporary loss with their USDC.

The Future of Stablecoins

Because of the impact of USTC (Terra Classic USD), which has affected thousands of users across the world and billions wiped off from the market, and the absence of transparency in USDT, the largest stablecoin in crypto, regulations will most certainly be a hot topic in the coming months.

Stablecoins exist outside of the US financial system, and as they grow in popularity, lawmakers and regulators will pay closer attention to them in order to protect the average Joe and avoid systemic dangers.

The US Federal Reserve is also working on building its own central bank digital currency (CBDC), as are other countries, and how they regard stablecoins might have an impact on the entire crypto market in the future. With rising interest rates and excessive inflation all across the world, particularly in poor nations, a controlled USD stablecoin is expected to get a great deal of attention and adoption.

Which Stablecoin Should You Choose?

Despite having a larger market size and volume, most analysts may not consider USDT to be the best stablecoin. The reason for this lack of trust is USDT’s lack of accountability and auditing.

The USDC and BUSD are more transparent than the USDT. Furthermore, in terms of exchange rate and blockchain, they are comparable to USDT. Thus, USDT is a better choice for those who prefer investing in crypto with larger volume and liquidity, but USDC and BUSD are preferred if transparency is important to you. Similarly, TUSD has real-time audits. DAI runs on a self-enforcing smart contract and is totally transparent and corruption free.

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Conclusion

USDC, USDT, BUSD, DAI, and TUSD which account for about 90% of the stablecoin market cap, are unquestionably the best options for investors looking to get into the stablecoin market.

With Visa collaborating with Circle and vendors becoming more comfortable with the notion of accepting stablecoins, the cryptocurrency’s future appears bright. So, if you’ve been thinking about joining the bandwagon, now is the moment.

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