Source: YouTube blogger Angela Shui Mu Dao

Content organized by: Peter_Techub News

Stablecoins, as the cornerstone of the cryptocurrency market, have swept the globe in recent years, with USDT (Tether) and USDC (USD Coin) undoubtedly being the "number one" and "number two" in the market. How did they come into existence, and what allows them to dominate the market? How do stablecoin companies profit? What value do stablecoins hold for ordinary people? This article will delve into the origins, development, profit models of USDT and USDC, and their significance for the average person.

The Birth of Stablecoins: A Product of the Cryptocurrency Wilderness

The Grassroots Rise of USDT

The story begins in the cryptocurrency market of 2013-2014, a time described as a "lawless wilderness." Bitcoin's price once soared to $1,000, but exchanges faced a fatal problem: a lack of fiat currency channels. Traditional banks viewed cryptocurrencies as a threat, cross-border transfers took days and were costly, and compliance issues were a minefield.

At the end of 2014, the team behind the Bitfinex exchange launched USDT, a token pegged 1:1 to the US dollar. USDT does not require miners to mine it, nor does it rely on banks; users simply transfer dollars to Tether, and they receive an equivalent amount of USDT. This "dollar clone" solved the problem of being unable to trade directly in dollars, effectively acting as a "shadow bank" in the crypto world. However, the operations of USDT were shrouded in mystery: the company was headquartered in Hong Kong, registered in the British Virgin Islands, and had close ties to Bitfinex, operating on the edge of regulation.

Initially, USDT was just an internal tool for Bitfinex, but as Bitcoin's price surged to $20,000 in 2017, USDT quickly became the "digital dollar" of the crypto world. Exchanges like Binance, Huobi, and OKX adopted USDT, bypassing banks and regulations to enable 24-hour global trading. However, concerns about USDT's transparency arose: did Tether really hold sufficient dollar reserves? In 2017, researchers found that the timing of USDT's issuance often correlated highly with Bitcoin price increases, leading the market to suspect potential price manipulation. Even more unsettling was Tether's claim that its reserve account was held at a bank in Puerto Rico, which closed less than a year later for unknown reasons.

Despite the looming crises, USDT swept the market due to its practicality, especially in emerging markets (like Southeast Asia and Latin America) where banking services were scarce. Its low fees and fast transactions made it a lifesaver for traders. In 2016, after Bitfinex suffered a hack that stole 120,000 Bitcoins (worth over $70 million), Tether issued new BFX Tokens to compensate users, weathering the crisis and further solidifying its bond with Bitfinex.

The Compliance Path of USDC

In contrast to USDT's grassroots origins, USDC was launched in 2018 by Boston fintech company Circle and crypto giant Coinbase, positioning itself as a compliant "digital dollar." Each USDC token is backed 1:1 by cash or short-term US Treasury bonds, audited monthly by top accounting firms, ensuring high transparency. Circle is backed by top-tier capital from firms like Goldman Sachs and Fidelity, and CEO Jeremy Allaire is a veteran with 20 years of experience in technology and finance, aiming to establish USDC as the "Citibank" of the blockchain era.

USDC's compliant image quickly earned it the trust of Wall Street. Starting in 2022, global asset management giant BlackRock began managing USDC's cash and Treasury reserves, further enhancing its credibility. USDC not only serves the crypto market but also entered the cross-border payment space through partnerships with Visa and Mastercard, becoming a bridge between traditional finance and blockchain.

The Soul of USDT and USDC: A Clash of Teams and Beliefs

USDT: The Adventurous Spirit of the Rogue

The founding team of USDT is filled with a grassroots vibe, including Hollywood child star Brock Pierce, brand strategist Reef Collins, and technical core Craig Sellars. The real mastermind is Giancarlo Devasini, a legendary figure who transitioned from a plastic surgeon to a cryptocurrency investor. In 2012, he sold tens of millions of dollars in assets to fully bet on cryptocurrencies and rebuilt trust through "debt-for-equity" after the Bitfinex hack.

Current CEO Paolo Ardoino is a tech enthusiast who set a record in 2017 with 37,720 code submissions on GitHub and continues to drive USDT's multi-chain deployment as a "coder." He believes in open-source culture, likening USDT to a "chaotic yet efficient marketplace." The Tether team blends adventure, ideals, and technology, fostering USDT's wild growth in the gray area.

USDC: The Elite Aura of Wall Street

The USDC team can be described as a "dream team of Wall Street and Silicon Valley." CEO Jeremy Allaire founded a web development tool company in the 90s, later selling it for $360 million; co-founder Sean Neville led the technical architecture of USDC; and Coinbase, as a co-issuer, provided exchange support and compliance framework. Circle, backed by top-tier capital from Goldman Sachs and BlackRock, aims to establish USDC as a template for the global digital dollar, even applying for a banking license to compete with traditional banks.

Profit Model Unveiled: How Stablecoins "Print Money"

USDT: A Risk-Free Arbitrage Machine in Finance

Tether's profit model can be described as "financial alchemy." In 2023, USDT's market cap surpassed $100 billion, with 80% of its reserves in US Treasuries and the remainder in corporate bonds, Bitcoin, and gold. During the interest rate hike cycle from 2022 to 2024, Tether utilized the funds from USDT users, which are akin to "free deposits," to invest in Treasuries with a 4%-5% yield and corporate bonds with a 5%-7% yield, earning an astonishing profit of about $13 billion. Additionally, Tether charges a fee of 0.1%-1% for minting and redeeming USDT.

Tether also diversifies its profits into various investments, including:

• Bitcoin Investments: Holding 84,000 Bitcoins;
• Energy and AI: Investing in hydroelectric-powered Bitcoin mining in Uruguay and planning to build a 70-story skyscraper in El Salvador;
• Sports and Media: Spending €128 million to acquire a 10.7% stake in Serie A's Juventus and investing $775 million in the video platform Rumble;
• AI and Brain-Computer Interfaces: Investing $1 billion in AI data centers and $200 million in brain-computer interfaces.

However, as the interest rate cut cycle approaches in 2025, declining Treasury yields pose challenges to Tether's high-profit model.

USDC: Steady Returns Under Compliance

USDC's profit model is relatively straightforward, with 70%-80% of its income coming from the 3%-5% yield on cash and short-term US Treasuries. Circle collaborates with Visa and Mastercard to launch cross-border payment and API services, charging fees. If it obtains a banking license, Circle could further profit through digital asset custody and lending. However, its American roots and high compliance costs make it difficult to compete with USDT in the Asian market.

The Status of Stablecoins: A Battle Between Centralization and Decentralization

USDT: The Underground Emperor of Centralized Exchanges

USDT holds an absolute dominant position in centralized exchanges (CEX) like Binance and OKX, accounting for over 60% of stablecoin trading volume. Its liquidity attracts more liquidity, creating a "trust paradox": despite transparency concerns, its ubiquity and convenience make it indispensable. Especially on the TRON chain, USDT has become the preferred choice for Asian traders due to its low cost and high speed, even playing a key role in illegal gambling and money laundering in gray areas.

USDC: The Legitimate King of Decentralized Finance

USDC dominates decentralized exchanges (DEX) like Uniswap and Curve, with an issuance volume of $9 billion on the Solana chain in 2024, far exceeding USDT's $2 billion. Its compliance and compatibility with the ERC20 standard make it a pillar of the DeFi ecosystem, widely used for lending, staking, and liquidity mining. Visa's support for USDC in cross-border payments marks its entry into traditional finance.

However, the collapse of Silicon Valley Bank in 2023 left $3.3 billion of USDC reserves trapped, causing its price to briefly drop to $0.88, exposing its dependence on the banking system. Although the crisis was quickly resolved, USDC's "aloof" image still makes it somewhat out of place in the wild market of cryptocurrencies.

The Value of Stablecoins for Ordinary People

"Lifeline Dollars" in Emerging Markets

In countries like Venezuela, Turkey, and Nigeria, where fiat currencies are devalued and inflation is severe, USDT and USDC have become tools for preserving value. In 2023, USDT accounted for over 20% of retail transactions in Venezuela, was the preferred choice for P2P payments in Nigeria, and saw a 200% increase in trading volume in Turkey.

"Instant Channels" for Cross-Border Transactions

For cross-border workers and small businesses, stablecoins provide nearly free, instant transfers, far exceeding the efficiency of traditional banks.

Investment Opportunities in the Dollar System

For those living in areas with free circulation of the dollar (like the US), stablecoins can serve as hedging tools or low-risk investments:

• Simple Investment: Depositing USDC in Coinbase can yield about 4% annual interest, similar to a money market fund, though the interest rate cut cycle may reduce returns.
• Advanced Investment: Lending USDC or providing liquidity through DeFi platforms (like Aave, Morpho) can yield annual returns of 5%-10%, but with higher risks, including hacking and liquidation risks.

The Future of Stablecoins: A Clash of Two Beliefs

USDT and USDC represent two ideals in the blockchain world:

• USDT: A bottom-up currency experiment, thriving in the gray area through grassroots networks and pragmatism;
• USDC: A top-down financial innovation, backed by Wall Street and regulation, attempting to become the global digital dollar.

As of June 2025, USDT's market cap surpassed $150 billion, accounting for over 60% of stablecoin trading volume; USDC's market cap is approximately $61.5 billion, growing rapidly, especially in DeFi and institutional markets. USDT dominates centralized exchanges, while USDC expands its territory in decentralized ecosystems.

This battle of stablecoins is not just a competition between two currencies but a confrontation of financial beliefs between centralization and decentralization, grassroots and elite. As the "first gateway" for blockchain into global finance, stablecoins are reshaping cross-border payments, trade settlements, and the digitization of the dollar. Regardless of who ultimately prevails, this contest to reshape the global monetary system has only just begun.

The story of USDT and USDC is a financial epic filled with adventure, controversy, and innovation. USDT has become the "underground emperor" of the crypto world due to its practicality and liquidity, while USDC attempts to be the legitimate heir to the "digital dollar" through compliance and transparency. For ordinary people, stablecoins are not only a savior in emerging markets but also tools for cross-border transactions and low-risk investments. In the future, the competition among stablecoins will determine how blockchain integrates with the global financial system, changing our monetary world.

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