What are the differences between BUSD and USDT? You will find a lot of popular stable coins in the crypto market but some of the stale coins that are popular as well as have the largest market cap are USDT, BUSD, DAI, and USDC.
The ever-growing popularity of these stable coins has brought in a lot of changes in their functionalities.
There are also several other features that have resulted in the increased use of stable coins by the crypto traders and investors of late.
These stable coins help in making faster transactions due to their faster processing.
The users are also assured of greater privacy and security which comes with the stability in prices of these coins.
There are lots of benefits of using these stable coins while trading but which of them will offer more benefits will need careful selection from your part by knowing the differences between them.
However, if you do not know what is the difference between USDT and BUSD then this is the right place to be.
In this article, you will not only know the differences between these coins but also know which particular stable coin among these two you should buy, hold, and trade.
11 Differences Between BUSD and USDT
Both these stable coins come with a few things in common such as they track the US Dollar. When you trade crypto on Binance or any other crypto exchange, you can use different trading pairs such as BTC/USDT, BTC/BUSD, and others.
Well, which one of these two stable coins is good for you to trade with will depend largely on your trading preferences and style but more so it will depend on your knowledge about the differences between them.
Here are all those differences that you should know about USDT and BUSD.
The BUSD stable coins were created and came into existence in 2019 but, on the other hand, the USDT coins were launched in the market in 2014.
BUSD coins are issued by Paxos and are approved by The New York State Department of Financial Services or NYDFS. It is also backed by the Binance crypto exchange.
The USD coins or Tether, on the other hand, are operated by Bitfinex. This is a crypto exchange located in Hong Kong.
The coin typically works on the Ethereum blockchain and converts the cash provided by a user into a digital currency. This ensures the value of the coin at the price of different national fiat currencies, including the US Dollar.
The initial purpose of creating the USDT tokens was to deal with a few specific issues such as facilitating national currency transfers and making it easier and faster.
Along with that Tether, the issuer of USDT, wanted to provide the users with a more stable edition of Bitcoin which is known to be highly volatile. In addition to that, it also provides the users with a method for checking.
On the other hand, the BUSD stable coin founded by Binance and Paxos was designed to provide the users with an opportunity to make crypto transactions with much more speed, accessibility and flexibility.
These are the three most important factors the crypto traders look for.
The BUSD coins are not mineable coins. These are basically coins that are created when any user offers US dollars to Paxos for minting new tokens.
The users can mint as many tokens as they want because there are no limits to it though the number of such coins that can be minted may vary according to the number of people providing funds to make these tokens.
On the other hand, all of the USDT coins are backed by cash reserves as well as assets made by Tether from loans made to other parties.
Every USDT token is valued at $1 but the value of the reserve may be the same or more than the value of USDT coins in circulation.
5. Trading Volumes
When it comes to trading volumes, it is higher in the case of USDT. This is because it has been around in the market for a longer period of time as compared to BUSD.
In comparison, the trading volume of BUSD is low. According to a recent report of September 2021, the trading volume for BUSD is about $12 billion as opposed to nearly $83 billion USDT.
All of the USDT coins are not backed by cash reserves fully and therefore there are lots of issues reported against it which have tarnished its reputation significantly.
On the other hand, BUSD is free from such issues because it undergoes quite extensive auditing processes on a regular basis.
The blockchain involved in BUSD includes Binance Smart Chain, Binance Chain, and Ethereum. It is more secure due to the additional support provided by Binance.
However, the USDT coin operates on the Ethereum blockchain only. This means that only one chain is responsible for all operations.
BUSD is audited routinely to ensure its safety and security in operation. Usually, the Withum auditing firm conducts monthly audits especially to make sure that the supply of the tokens in the market matches with the supply of money in the banks that it is linked to.
On the other hand, there are no such audits conducted for USDT. However, it shows the reserves but it does not provide any information related to it for the public. This can be quite a concern for those users who are looking for absolute security.
9. Reserves Location
All of the BUSD coins are backed by banks located in the United States. These banks are often FDIC insured which adds to the safety and security aspect. The amount of cash reserves, in this case, is maximum.
On the other hand, the USDT coins are backed by the offshore banks that charge less for operation but do not offer adequate tax benefits. These banks are often uninsured which is another security concern.
However, the USDT coins are backed by secured loans as well as corporate bonds and several other investments. The actual cash reserves for USDT are however minimal in comparison to that of BUSD.
10. Trading Pairs
There is no doubt that the USDT coins are readily available and therefore support more trading pairs since it is easier to complete any trade.
In contrast, the BUSD coins are not as readily available as the USDT coins because these will be more visible as their qualities are seen more by the users and the demand for them rises. Therefore, as of now, the trading pairs for it are not as many as that of the USDT coins.
11. Working and Usage
The BUSD coins work on the Ethereum blockchain mainly but also work on a secondary blockchain of Binance.
You can buy and sell these coins at a ratio of 1:1 and do not need any fees for operation. You can use these coins for making payments for buying goods, loans, and make other transactions anywhere where ERC-20 tokens are accepted.
The USDT coins can work in a lot of ways including offering services in crypto exchanges by the people.
Users can also exchange these coins for other fiat currencies without the need for any bank as an intermediary which makes it much easier and faster to manage a fund transfer.
Which is Better – BUSD or USDT?
BUSD and USDT are essential stable coins that not only help in making crypto transactions easier and faster but additionally it eliminates the need to rely on a bank to move funds by the users. There are also a few other similarities between these two crypto coins.
Some of the few similarities between BUSD and USDT can be summarized as follows:
- These are both pegged to the US dollar at a ratio of 1:1 ratio and therefore both do not have issues with volatility.
- They both are known to have faster transaction times irrespective of the location and time of the users and funds can be transferred 24/7.
- They have a similar minting process that does not involve mining but supports minting new coins by the group behind one of these crypto coins that adds your fiat money to their reserves.
- The fees charged by both are quite low because they are both linked to a fiat currency.
- They both use smart contracts while operating which need a particular set of conditions and rules to follow so that a transaction can be moved forward. This provides additional safety and security to the process.
However, the differences between these coins seem to be more than that and quite prevalent.
In order to determine which among these two stable coins is better, you will not only need to know the differences but the similarities in them as well.
This will ensure that you have a more comprehensive knowledge of these crypto coins.
And, in terms of the differences between these two crypto coins, from the point of view of an average crypto trader, there may not be many differences visible between USDT and BUSD apart from the greater liquidity and higher trading pairs offered by USDT than BUSD.
However, the different characteristic attributes of the two coins will point out the differences between them.
As for BUSD:
- It is regulated
- It is regularly audited
- It is backed by a physical dollar at a 1:1 ratio and
- The cash reserves are stored in US banks that are FDIC insured
On the other hand, as for USDT:
- It is not audited
- All the coins are not backed by physical dollars and
- The cash reserves are stored in uninsured offshore banks
Also, the USDT has had a fair share of security breaches and issues and there are several lawsuits filed in the past against it.
Therefore, considering all these factors, the BUSD coins are much safer as compared to the USDT coins.
However, the USDT coins are much more useful than the BUSD tokens because the traders can make the most out of the higher daily volume as well as the larger number of trading pairs available, as said earlier.
On the other hand, you will get a much better savings rate when you use BUSD tokens instead of USDT coins on Binance.
The main reason behind it is that the BUSD coins are stable coins of Binance.
But USDT coins are more widely used as compared to other stable coins as of now because it offers the traders a larger and more varied trading option.
The most important factor to consider is that most of the users doubt the backing of all the USDT tokens in circulation.
Tether provides no particular way for the users to confirm this and therefore the masses stay away from using the USDT coins in spite of the fact that it is one of the most popular and most liquid stable coins.
Therefore, to conclude, it can be said that both USDT coins and BUSD tokens are good to use on Binance but people prefer using the Binance stable coin or BUSD over than Tether or USDT coins because:
- There are no controversies surrounding it as there are around the USDT supply and
- There are also several legal issues as of now surrounding USDT which the BUSD coins are free of.
However, you should also keep in mind that both USDT and BUSD coins do have some issues associated with centralization.
But, remember one thing when you make your choice especially if you want to hold a large sum of money in the form of stable coins. In that case, it is better to hold only BUSD.
Alternatively, you can even split the money between USDT and BUSD.
This might be a much better idea if only you hold your money in the right proportion considering the safety and security aspects of the two stable coins.
USDT and BUSD are two good options to deal with stable coins in the crypto market. However, if you want to jump on the bandwagon and be as successful as the other crypto investors, you must know the differences between them.