Blog Crypto What Is USDC, How It Compares to USDT, and Ways to Earn

What Is USDC, How It Compares to USDT, and Ways to Earn

date July 20, 2022 time 5 min read 341 views

USDC has gained a reputation for transparency and stability—two of the most important characteristics for a stablecoin. However, it’s still lagging behind USDT when it comes to market cap. Let’s take a closer look at the coin, including ways to earn money by holding it.

USD coin (or USDC as it’s better known) might not be the top stablecoin, but it enjoys a better reputation than most thanks to its transparency, with the team publishing reports on its reserves each month. However, the protocol is still facing some scrutiny due to the problems of the wider crypto market, with the fall of Terra shining a spotlight on the potential problems that can arise.

It’s essential to do your due diligence before jumping into using stablecoins like USDC, but we’re here to help you out. We’ll run through everything you need to know about the coin, including how it compares to competitor USDT and a way to earn up to 15% APY by holding it. Don’t go anywhere yet!

What is USDC?

The clue is in the name here. USD coin merges the worlds of crypto and fiat currencies by creating a cryptocurrency with its value pegged to the US dollar. It’s what’s known as a stablecoin, because its price remains stable over time—in the case of USDC, it will always be worth $1 (although stablecoins can be pegged to the value of any asset, including other cryptocurrencies or precious metals).

Before we get into how to buy USDC, make sure you know what it’s all about.
Before we get into how to buy USDC, make sure you know what it’s all about. (Source: Circle)

Yet despite using a fiat currency to keep its value stable, it still offers the usual benefits of blockchain technology, such as decentralization. 

USDC was created in 2018 by Centre, a project founded by Circle, Coinbase, and bitcoin mining firm Bitmain. It has a market cap of around $55 billion as of July 2022, making it the fourth biggest cryptocurrency at the time of writing and the second largest stablecoin (after USDT).

USDC maintains its peg to the dollar by holding reserves of the currency. The protocol makes sure it has US dollars needed to back up each unit of USDC in circulation (either in the form of cash or government bonds). So, if someone buys one USDC, the protocol buys a US dollar—and if someone sells a USDC, it sells the dollar.

What is USDC used for?

The objective behind stablecoins is to provide an asset that isn’t affected by the usual volatility of the crypto market, unlike coins such as bitcoin and ether.

This has various uses in the crypto world. Blockchain applications, protocols, and marketplaces involve plenty of times when you need to pay fees. But using fiat currency for this purpose compromises the decentralization benefits of the blockchain, while the constant price swings of cryptocurrencies makes them an impractical choice.

Stablecoins overcome this problem—you can hold them in a crypto wallet ready for when you want to use them, without having to worry that their value will have fallen by 30% within a matter of days. They can also be used for staking, providing liquidity for trading, and crypto lending.

Since USDC is also an ERC-20 token, it can be used on the Ethereum network as part of smart contracts too.

Stablecoins are also useful for traders. Speed is of the essence when you’re trying to profit from the highs and lows of the market, and using fiat currencies for the job isn’t ideal due to the lags and fees. Stablecoins offer the perfect solution by providing a crypto option that retains its price, along with fast transactions and low fees.

USDC vs USDT

If you’re familiar with the world’s biggest stablecoin, USDT, you might be thinking that the description above sounds familiar. Both cryptocurrencies are stablecoins pegged to the US dollar—and like USDC, USDT uses reserves to make this possible.

USDC and USDT are both stablecoins pegged to the US dollar.
USDC and USDT are both stablecoins pegged to the US dollar. (Source: Unsplash)

However, there are some key differences between the two currencies.

One of them is USDC’s transparency and the care it takes to comply with regulation. As mentioned briefly, the team publishes monthly reports that reveal how much US dollars it’s holding in reserves and the amount of USDC in circulation. This helps to prop up faith in the system. USDT isn’t quite so transparent and has faced controversies in the past.

They’re also compatible with different blockchains. Tether supports Bitcoin, Ethereum Tron, OMG Network, Algorand, and EOS. Meanwhile, USDC is compatible with Ethereum, Solana, Stellar, Algorand, and Tron.

USDC price history

Although we previously said that USDC will always be worth $1, this isn’t strictly true. Since stablecoins like USDC maintain their value by holding reserves of the currency, there are always slight variations as the team adjusts its reserves. If you hold $100 worth of USDC in your wallet, you might notice that occasionally it drops down to $99.9 or similar, before rising to its original value.

This is why USDC’s price chart doesn’t look like a horizontal line. However, the price swings have been marginal and haven’t lasted long, partly thanks to the transparency and stability of the protocol.

Although USDC is a stablecoin, it experiences some price swings as it adjusts.
Although USDC is a stablecoin, it experiences some price swings as it adjusts. (Source: CoinMarketCap)

After the problems with Luna and its stablecoin UST, the crypto market became spooked. Even Tether lost its peg, and many questioned if stablecoins have a future. However, USDC held up better than its competitors thanks to its commitment to complying with regulations and publishing information about its reserves.

How to buy USDC

As with standard cryptocurrencies, you can buy USDC on a crypto exchange. It’s available on most major exchanges thanks to its popularity, including Binance and Coinbase.

But while buying and holding is a good bet if you anticipate using your stablecoins at short notice and want to have them at the ready, they’ll just be sitting there without earning returns. Fortunately, there’s an alternative.

How to earn 15% APY on your USDC

At the start of the article, we mentioned you can earn up to 15% APY by holding USDC. Now, it’s time to explain how.

At MyConstant, we offer a range of crypto products, including crypto lending. By depositing your USDC with us, you’ll earn up to 12.5% APY. Plus, you’ll be able to withdraw the money whenever you want without facing penalties, and there are no hidden fees. If you thought things couldn’t get better, they can. By joining our membership program, your returns will rise to 15% APY. That certainly beats the banks

Plus, by joining us, you’ll be able to access other perks, including:

  • Up to 18% APR from staking
  • 20% more interest from MyConstant investing products 
  • 20% reduction in borrowing fees on MyConstant 
  • 50% discount on NFT fees through MyConstant 
  • 50% discount on crypto swap fees on MyConstant 

Sound like something you’d like to get involved in? Sign up today to test it out for yourself.

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George Schooling

George Schooling

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