Everyone in crypto has heard of stablecoins, and they serve a fantastic purpose for traders and people simply looking to move some money around. But what are stablecoins, how do they work, and which is the best? Today, we’re going to take a peek at USDT, USDC, and BUSD, comparing them to see which is the best stablecoin for you to use.
Why these 3, you ask? They’re regarded as the best stablecoins around, with deep liquidity and unmatched utility!
What are Stablecoins?
Before we can get into each stablecoin and why specific features make it better than another, we need to understand what stablecoins are and how they work. At their core, stablecoins are meant to be pegged at a particular ratio to a fiat currency. In the case of these 3 stablecoins, they’re all pegged to the US Dollar at a ratio of 1:1. This means that for every 1 USDT, USDC or BUSD, you have $1 worth of value. This means that stablecoins have a stable price, hence the name. Price fluctuations are impossible, or are miniscule, due to this. This makes stablecoins great as a store of value or if you’re looking to send money – you know it’ll arrive in the destination wallet as the correct amount.
They achieve this pegging by securely storing the fiat equivalent in a bank somewhere. So for every 1 coin minted, there should be at least 1 USD stored. Now, not all stablecoins actually do this, and this has led to the collapse of several major stablecoins, with TerraUSD (UST) being a prime example. Tether (USDT) has come under fire as well for similar tactics, but has managed to come out with audits that verify it does have enough USD and US Treasury notes in reserve.
When you sell your stablecoins at an exchange, the exchange has the option to take those stablecoins and go back to their issuers (Tether, Center, Binance) and redeem that stablecoin for the fiat equivalent. If the stablecoin is correctly pegged, then every stablecoin in circulation could be redeemed and there would be enough to give everyone their money.
That’s what stablecoins are in a nutshell. Now, time for the good stuff! Let’s explore these 3 stablecoins!
Read also: Are stablecoins securities?
The Benefits of Stablecoins
We have touched on a few benefits of stablecoins, but let’s take a bit of a deeper look into the benefits of stablecoins and how you can use them to get more out of crypto and blockchain!
Fiat Backing
As we already mentioned, stablecoins achieve their stable value as they’re pegged to a fiat currency. In the case of USDT, USDC, and BUSD, they’re all pegged to the US Dollar. So, unless the US Dollar goes tits up, then your stablecoins should be nice and stable. For every 1 coin minted, there should be at least $1 popped away securely so that when that 1 coin is redeemed, the money can be dispersed correctly and not cause a bank run scenario.
Availability
Stablecoins are amazing as there’s no hard cap. This means that if your aunt dies and leaves you $50 million, you can go and buy that much in USDT, USDC, or BUSD without any issues. Tether, Center or Binance can pop your funds away safely in their treasury and mint more coins. This high availability means that there are never any liquidity issues to cause price spikes and dips.
International Usage
The US Dollar is still somewhat a dominant currency in the world, so it makes sense that most cryptocurrencies are quoted in USD. But not everyone has access to USD and USD funding – yes, we’re looking at you Binance. So, USD stablecoins allow everyone to gain access to USD and trade it around the globe in a matter of seconds for a fraction of the cost of setting up a bank account, buying USD and sending it.
Stability
As most USD stablecoins are pegged 1:1 to the US Dollar, we’re not looking at algorithmic stablecoins here, they’re incredibly stable. Virtually all cryptocurrencies are quoted in USD as well, so any fluctuation in USD doesn’t impact their purchasing power against cryptocurrencies, making them the ideal store of value in times of crypto market volatility.
Quick and Cheap Transactions
If you’ve ever tried to send USD, you’ll know how long it takes. But thanks to blockchain, sending USD via a USD stablecoin is not only blazing fast, but it’s ultra-cheap too. A bank wire transfer can cost you upwards of $20, but using USDT on Tron as a TRC-20 token will cost you less than $0.01 at times and it’ll arrive before you’ve even had a chance to log in to your other wallet. That’s much better than waiting 5 working days.
What is USDT, and How Does it Work?
USDT is a USD stablecoin from the lovely folks over at Tether. Tether is pegged to the USD with a 1:1 ratio secured by cash and US treasury notes, which according to its auditors, overcollateralized USDT. This means that it’s meant to be extra secure in the event of a bank run. However, in the past, Tether did lend funds to its sister company BitFinex to cover some major holes in the balance sheet which left Tether partially unbacked. But following a case with the New York Attorney General, Tether admitted to its wrongdoings and has vowed to never do this again. Currently, USDT is on a range of blockchains, meaning you can send it on different networks to take advantage of lower gas prices and faster transaction speeds. These include Ethereum, Solana, and Tron.
What is USDC, and How Does it Work?
USDC comes to us from a conglomerate of crypto companies known as Center and is pegged to the USD at a value of 1:1. The main backer behind it is a company known as Circle. Unlike USDT, USDC is overcollateralized and highly transparent with all of its audits, reserves and ecosystem. USDC is arguably one of the best stablecoins from a trust perspective thanks to this, and it doesn’t have any nasty scandals. For an exchange to be able to redeem USDC they must go through monthly attestations and audits to ensure correct reserves are held, making USDC the shining star in the stablecoin world.
What is BUSD, and How Does it Work?
Binance entered the stablecoin market with its very own BUSD, created in partnership with Paxos. It’s regulated by the New York Attorney General, which gives it a rather unique edge case in the States, but a recent scandal has definitely hurt its reputation. Paxos has been ordered to stop issuing BUSD and Binance lost $2.3 billion from its reserves in the most recent BUSD mess. BUSD might be pegged at a value of 1:1 with the USD for now, but if its current dilemma continues much longer, we could see it drift off into the sunset and join UST in the stablecoin graveyard.
USDT vs USDC vs BUSD
Now we’ve given you the background on these leading stablecoins, let’s compare them and see which one takes the crown!
| USDT | USDC | BUSD | |
| Year of Launch | 2014 | 2018 | 2019 |
| Issuer | Tether | Center | Binance & Paxos |
| Networks Active On | Algorand, Avalanche, EOS, Ethereum, Kusama, Liquid, Polygon, Solana, Tezos | Algogrand, Avalanche, Ethereum, Flow, Hedera, Polygon, Solana, Stellar, Tron |
BNB Chain, Ethereum |
| Benefits | Cash and cash equivalents, US treasuries, Commercial paper, Corporate bonds, Fiduciary, deposits, crypto assets, reverse repo rate, secured loans | Cash and cash equivalents, US treasuries, Commercial paper, Corporate bonds, Municipal bonds, Yankee commercial deposits | Cash and cash equivalents, US treasuries |
| Auditor | BDO Italia | Grant Thornton LLP | Withum |
| Scandals | Multiple | None | Multiple |
Which Stablecoin is Best?
There we have it. Not all stablecoins are built equally, or are backed equally. USDT stands out as a great all-round stablecoin that still offers some semblance of privacy when used with blockchains such as Tron, but it’s bumpy past has left a bad taste in the mouth of many. USDC is without a doubt the standout stablecoin thanks to its stellar reputation and transparent audits.
