Among the myriad of stablecoins available, USDC and USDT stand out as two of the frontrunners in the market. In this article, we'll delve into what is stablcoin, USDT and USDC, and why you should choose USDT payout from UniFans as a non-US creator.

Key takeaways:

• Stablecoins are digital currencies designed to maintain a stable value by being pegged to real-world assets like the US dollar, Euro, or gold.
• As a non-US creator, trading with stablecoin can reduce currency exchange payout fee to 1.5%, in comparison to using PayPal for cross-border transaction.
• There are two popular stablecoin: USDT & USDC. Tether faced criticism for reserve transparency issues but remains the most popular stablecoin. USDC offers verified backing and transparency.
• Trading stablecoins carries its risks, including regulatory uncertainty and market fluctuations, as demonstrated by the SVB failure.

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What is Stablecoin?

Imagine you have a digital form of money that can be used online, just like how you use physical cash or your bank card for purchases, but it's based on the technology behind cryptocurrencies like Bitcoin. However, unlike Bitcoin, whose value can jump up and down unpredictably, this digital money, called a "stablecoin," is designed to have a stable value. It achieves this stability by being pegged or linked to something stable in the real world, such as the US dollar, Euro, or even gold.

This means that if you have 1 stablecoin pegged to the US dollar, the idea is that it's always worth 1 US dollar. This stability is a big deal because it combines the benefits of digital currency – like fast transactions and privacy – with the predictable value of traditional money. This makes stablecoins a popular choice for people looking to use cryptocurrency for everyday transactions, trading, or moving money across borders without the wild price swings associated with typical cryptocurrencies.

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Last updated on March 6, 2024.

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Benefits in Receiving

Stablecoin as Payout

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• Blockchain enables 24/7 trading without geographical limits.
• Lower transaction fees than banks due to decentralized nature.
• Stablecoins offer financial services to unbanked populations.
• Facilitates global market access without needing a bank account.

Trading with stablecoins for fiat currencies on crypto exchanges offers significant advantages over traditional bank exchanges. The speed and accessibility of transactions are greatly enhanced by blockchain technology, allowing for 24/7 trading without geographical restrictions. This is particularly beneficial for responding to market changes in real-time and for those without access to traditional banking. Additionally, the transaction fees involved in stablecoin exchanges are typically lower than those charged by banks, due to the decentralized nature of blockchain, which reduces the need for intermediaries and associated costs.

The use of blockchain also ensures a higher degree of transparency and security. Every transaction is recorded on a public ledger, minimizing the risk of fraud and providing a clear transaction history. This security aspect is bolstered by robust protocols against hacking, offering peace of mind compared to traditional banking systems' vulnerabilities.

Furthermore, stablecoins facilitate financial inclusion by providing access to financial services for unbanked or underbanked populations. This opens up opportunities for international trade and access to global markets without requiring a conventional bank account. Overall, stablecoins and crypto exchanges present a more efficient, secure, and inclusive alternative for currency exchange, aligning with the needs of today's digital and global economy.

What is USDT (Tether)?

Tether was introduced back in 2014, making it one of the first stablecoin in history. It's a bit like a promise where for every USDT out there, there's a real dollar or something of equal value held by the company that made USDT, to back it up. However, in 2021, it was discovered that they weren't completely transparent about what was backing USDT, leading to a fine of $41 million. Despite these issues, USDT remains the most popular stablecoin. It's widely used for trading digital currencies and is accepted in many places where digital currencies are used, thanks to being one of the pioneers in the stablecoin space.

What is USDC (USD Coin)?

Now, let's talk about another digital dollar, called USDC, or USD Coin. Launched in 2018 by a company named Circle, USDC is a bit like the newer, more transparent cousin of USDT. It's also a stablecoin, which means it's designed to always be worth one US dollar, just like USDT. But what sets USDC apart is its commitment to being open and trustworthy about the dollars or assets it holds to back up each USDC in circulation.

The group behind USDC, called the Centre consortium—which includes big names in the digital currency world like Circle and Coinbase—goes to great lengths to show everyone that for every USDC, there's a real dollar or equivalent sitting safely in a bank. They do this by having outside experts check their reserves regularly and share these check-ups with the public every month.

Risk in Trading Stablecoin

There are a couple of insecurities in trading stablecoin: lack of regulation and market fluctuations. The perk of low currency conversion fees is mainly due to the lack of regulation. Not having banks and payment processors in between transactions mean that you are losing security and convenience; however, what you gain in return is a transaction with lower transaction fee and a real-time fiat exchange rate.

The failure of three US banks—Silicon Valley Bank, Signature Bank, and Silvergate Bank—caused significant disruptions in the stablecoin market, particularly affecting USDC and DAI. USDC's value dropped by 13% below $1 after it was revealed that $3.3 billion of its cash reserves were held at SVB, impacting its stability. This issue was compounded by Circle's reliance on Signature Bank and Silvergate Bank for managing USDC redemptions. DAI was also affected due to its substantial holdings in USDC, which accounted for over half of its collateral reserves. However, both USDC and DAI eventually returned to their pegged values after the Federal Reserve announced support for the banks' creditors. In contrast, Tether, another major stablecoin, was not impacted by these banking failures and even saw a temporary increase in value as investors sought safer options. This event marked a notable instance of contagion between the cryptocurrency and traditional banking sectors.