The US Dollar Coin, known USDC, is a stablecoin that was created by Centre, a organization sponsored exchange platform Coinbase and Fintech firm Circle. USDC has a set value of US$1 and each coin is backed by a US dollar in a separate bank account. This is why it is a popular choice for investors who want to avoid the volatility and price risk associated with big currencies like Bitcoin and Ethereum. Here is everything you need to know about the stablecoin:
USD Coin is a stablecoin with a fixed value of $1 per coin. Stablecoins are cryptocurrencies with a more stable value that uses other assets such as fiat currency, commodities, and other cryptocurrencies to back their value. The value of a stablecoin changes depending on its backed assets, which are usually fiat currencies at the moment. USDC uses the US dollar as its backed asset in 1:1 ratio; meaning 1 USD = 1 USDC.
The stablecoin was first announced on 15th May 2018 by Circle, but was launched later in September of the same year with the partnership of Coinbase. On March 29, 2021, Visa announced that it would allow the use of USDC to settle transactions on its payment network. Earlier this year, Circle said that there are 24.1 billion coins in circulation.
USDC solves two major issues that exist in the industry, which are high volatility and convertibility between crypto and fiat currencies. The network was launched out of the insight that the crypto industry needed a fiat-collateralized stablecoin with strong governance and transparency, unlike USDT. The stablecoin solve these issues through publishing a monthly public attestation of 100% reserves of fiat currencies on CENTRE.io and issuing out rules and guidelines for CENTRE’s users regarding USDC issuance and redemption. Exchanges have been the primary users of USDC as an alternative to fiat currencies, outsourcing the need to maintain banking relationships. Moreover, it is one of the only fiat-collateralized stablecoins available for use in the proliferate DeFi ecosystem.
USDC runs on Ethereum, a decentralized and programmable blockchain that developers use to create a huge range of apps and tokens. Every USD Coin is backed by a single US dollar in segregated accounts with US regulated financial institutions, according to Circle. Tokenization is the process of converting US cash into USDC tokens. The conversion of USD to USDC is a simple three-step procedure. First, the user sends USD to the bank account of the token issuer. Then the issuer creates an identical quantity of USDC using a USDC smart contract. Finally, the user will then receive the freshly issued USDC while the replaced US dollars are retained in reserve.
Stablecoins like USDC have a wide range of uses; which are:
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