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Author: Admin | 2025-04-27
Key Takeaways Every USDT and USDC in circulation is supposed to be backed by an equal amount of U.S. dollars in cash and cash equivalents. USDT and USDC are both widely adopted but differ in their utility. USDT is the most traded cryptocurrency with the highest 24-hour volume, while USDC was preferred by as a store of value due to its transparency, although the recent depegging of USDC in March 2023 has led to more investors moving their holdings into USDT. USDT and USDC are stablecoins backed by the U.S.dollar, and they are the two largest players in the space based on market capitalization. These stablecoins are less volatile than native cryptocurrencies as they are pegged to national currencies, and provide traders a store of value for their cryptocurrencies between trades.What are Fiat-Backed Stablecoins?The earliest stablecoins were backed by cash. How this works; fiat currencies are locked in an agreement and an equivalent is minted on smart contract blockchains. The minted stablecoins can be redeemed for fiat money. When redeemed, an equal amount is also burned through the traditional smart contract token burning process. The minting and burning processes are tightly controlled to ensure that the stablecoin doesn’t stray away from fiat pegging. This strategy has seen a great deal of success and has been adopted by many stablecoin projects, most notably by USDT and USDC.Fiat Vs. StablecoinsFiat-pegged stablecoins are tokenized versions of fiat currencies. Stablecoins pegged to fiat aim to maintain a 1:1 ratio with their related fiat currency, but they open up opportunities for wider usage.Fiat-pegged stablecoins create a virtual copy of fiat currencies on a relatively better management technology – blockchain; without necessarily inflating the currencies. The virtual currency created on the blockchain allows permissionless and borderless usage of the currency.Unlike the hard US dollar currency, stablecoins pegged to USD can be transferred to anyone around the world without going through rigorous steps to perform international transfers. They can be traded on centralized exchanges and DEXes like any other cryptocurrencies, which makes them a useful store of value for traders in between trades.Just like fiat-pegged stablecoins, other
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