USDC
In 2018, two digital finance companies, Circle and Coinbase, came together and developed a stablecoin (USDC) that pegs its value to the US dollars. They named it the USD Coin (USDC).
USD Coin (USDC) is a cryptocurrency designed to maintain a constant value of $1 USD. Along with assets like Tether (USDT) and the Gemini Dollar (GUSD), USD Coin is part of a broader category of cryptocurrencies called stablecoins, which use a variety of mechanisms — such as pegging their value to fiat currencies or commodities — to help maintain a stable price. Stablecoins are an essential tool in the dynamic cryptocurrency market and can help digital asset holders within the crypto ecosystem to benefit from the relative stability of the dollar or of other stable assets.
The USDC stablecoin was created by CENTRE, an organization founded by crypto exchange Coinbase and financial technology (FinTech) firm Circle. Each USDC is redeemable for one dollar and is backed by one dollar or a dollar-denominated asset with the equivalent value held in accounts at regulated U.S. financial institutions. Those accounts are audited by U.S. accounting firm Grant Thornton LLP, which issues monthly attestations on the reserves backing USDC.
USDC first launched on the Ethereum blockchain as an ERC-20 token but has since expanded to other blockchains including Solana, Stellar, and Algorand.
It can be purchased on both centralized and decentralized exchanges (DEXs). Since stablecoins like USDC have historically experienced much less volatility than digital assets like bitcoin (BTC) or ether (ETH), they can be ideal for payments and remittances and are often favored by traders who wish to place profits made from trading in higher-volatility digital assets into more lower-volatility digital assets without exiting to fiat.
Additional benefits of stablecoins like USDC can be uncovered within decentralized applications (dApps) and decentralized finance (DeFi). USDC is used in a variety of dApp and DeFi protocols — such as Aave, Celsius Network, Compound, Dharma, OpenSea, and others.
USD Coins are created through a process called tokenization. It’s similar to printing money in the physical world. The difference here is that one dollar always goes in for each token that comes out.
To get a USDC, a user simply needs to send USD to a token issuer or a cryptocurrency exchange. The issuer creates USDC tokens equivalent to the amount of US dollars received using smart contracts.
The freshly minted tokens would then be sent to the user’s wallet, ready for use. There’s currently $27 billion worth of USD Coins in circulation.
When you want to redeem your tokens for US dollars, the process is the same but in reverse order. Send a request for redemption to the issuer who gave you the token. It would then send the equivalent in US dollars to the account you used to buy the USDC and take back the token.
You can also buy USDC with Ether tokens or any other cryptocurrency and fiat if you already own some. Note that you can end up with more USDC than what you originally bought, and that would also go straight to the wallet.
Though super convenient, USD Coin can’t do everything. For example, you can’t just pull out a token and tip your waitress or reset the parking meter.
Aside from the obvious physical limitations, USDC has very subtle setbacks. One comes from the difference of usage between the USD tokens and mainstream crypto.
When dealing with coins, traders either want to grab or get rid of as many as possible at any given time. The constant need to profit dictates when and how they move their coins. In the case of USDC or other stablecoins, liquidity and conversion are the main concerns.
So, in a way, regular crypto is treated as a product while USDC is a service or multiple services streamlined into one transaction to make life easier.
The problem here is that you rely on many different services for a singular feature. Liquidity comes from the assumption that they run smoothly and that the cash reserves are always consistent with what the issuer claims on paper. Mass redemption is also an ever-present issue and can immobilize the market, especially if there are publicized discrepancies in stablecoin reserves.
USD Coin (USDC) can be purchased in the following exchanges:
Besides these exchange pairs, USDC can be turned to USD and vice versa at Coinbase.
It is clear USD Coin has a solid standing in traders’ preferences. The convenience and efficiency of spending USDC are almost as enticing as earning them. We believe stablecoins like USDC will continue to disrupt the financial systems and could eventually change how the world spends its money. Anyone can start owning tokens with a bit of cash or crypto and almost no effort.
Find more information about USDC
Website: https://www.circle.com/en/usdc
If you have any questions, comments, suggestions, or ideas about the project, please email ventures@coincu.com.
DISCLAIMER: The Information on this website is provided as general market commentary, and does not constitute investment advice. We encourage you to do your own research before investing.
VinceH
Coincu Ventures
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