Stablecoins have become a staple of the blockchain industry. They are omnipresent in centralized trading and DeFi and are the best on and off-ramp into the crypto markets. Many believe that the industry has managed to thrive thanks to the advent of these assets pegged to the USD. It’s much easier to swap USDT to BTC than to use fiat currencies.
They shield investors from volatility, while simultaneously allowing them to remain in the ecosystem. They are also great for cross-border transactions and provide the benefits of blockchain technology without price fluctuations.
So, if you are looking to hedge against volatility in the short term, you should look at some stablecoins to invest in. But which one is better if we were to compare USDT vs. TUSD? That’s what this article will help you find out!
What Is USDT?
Tether or USDT was the first successful stablecoin to enter the crypto markets way back in 2014. It was originally running on the Bitcoin Omni chain. It has since spread out to multiple chains such as Ethereum, Solana, and Tron, among others.
This stablecoin is owned by a Hong Kong registered company iFinex and claims to be pegged to 1 USD thanks to reserves held by the Tether company. Today, it is the largest stablecoin by market capitalization, reaching nearly $84 billion.
What Is TUSD?
True USD or TUSD is a much smaller stablecoin issuer, at least compared to Tether. The stablecoin came into the markets in 2018 and quickly became a fan-favorite thanks to the transparency of its reserves.
The asset is currently at a $3.5 billion market capitalization and is the 4th largest stablecoin behind USDT, USDC, and DAI. You can find USDT initially on Ethereum, but also on Tron, Avalanche, and BNB.
USDT vs TUSD: Reserve Backing
One of the major aspects of all stablecoins is their reserve backing. A stablecoin’s peg should be trusted only if the reserves of the company match the number of tokens that are issued.
Tether provides reserves in USD and equivalents, as well as corporate bonds, precious metals, Bitcoins, other Investments, and secured loans. The fiat portion represents the vast majority of the reserves, north of 85%.
True USD has always been transparent regarding its reserves, which made it quite popular with the community. Each TUSD is backed by 1.02 US Dollars. However, it recently implemented an on-chain proof of reserve by Chainlink. This system allows the minting of TUSD only after off-chain verification of the reserves, ensuring the reserve backing remains genuine at all times.
USDT vs TUSD: Transparency
Over the years, Tether has been accused of a lack of transparency regarding its reserves multiple times. Until recently, the company wasn’t audited by third parties and sparsely provided any information. This has caused a lot of fear within the crypto community that the supply of USDT isn’t fully backed by sufficient collateral.
However, in recent months, Tether has provided full audits of its reserves, increasing the trust of the community. That being said, it still carries the stigma of being opaque regarding its holdings.
True USD, on the other hand, has always been fully transparent. It uses LedgerLens which is an automated attestation system that collects financial data in real-time. This data is provided to the users on the website and can be consulted by anyone at any time. Moreover, the system has multiple failsafes, ensuring reserves are always superior or equal to the amount of TUSD in issuance.
USDT vs TUSD: Reputation
Although Tether has encountered trust issues from the community in the past, its reputation still remains quite strong. The concerns about the opacity of the reserves have slowly been pushed away thanks to new reporting mechanisms. It also benefits from the “Lindy Effect” of being present in the market longer than any other stablecoin.
TUSD has managed to build a great following thanks to its transparency since the early days. Although with a much smaller market cap, the stablecoin is present on most centralized exchanges. Though it does lack a serious presence in DeFi, we may see it grow in that niche in the future.
USDT vs TUSD: Investors Choice
Stablecoins are essential for any serious crypto trader. Both USDT and TUSD are trustworthy assets that provide you with a hedge against volatility. The limiting factor should be the exchanges that list them and the blockchains that you plan to use them on.