- USD Coin (USDC) is a stablecoin fully backed by the US dollar and developed by the Centre consortium. Centre issues and redeems USDC with none extra fee and is licensed as a money-transmitter within the US and as an e-money institution in Europe.
- USDC can always be redeemed 1:1 to US dollars. Funds (for collateral) are held in segregated bank accounts, that are monitored and audited by third-parties.
- Unlike other stablecoins (e.g., BUSD, USDT), USD Coin runs solely on the Ethereum blockchain.
- USD Coin has become one among the most important stablecoins (with a supply approaching a billion), its support has been extended to multiple decentralized applications (e.g., DeFi) and a good sort of exchanges.
USD Coin (USDC) is that the second-largest stablecoin pegged to the US dollar in terms of market capitalization and usage. it had been launched in September 2018 as a collaborative effort between Circle and Coinbase. Like Tether (USDT), USDC may be a major participant within the stablecoin market facilitating all kinds of money flow and use-cases.
USDC is actually a service that tokenizes the US dollar and facilitates its use over the web and public blockchains. The stablecoin are often exchanged back to USD at any time, which is where the term ‘stablecoin’ comes from. Issuance of USDC tokens is ensured via an ERC-20 smart contract built on the Ethereum protocol.
Bringing US dollars on the blockchain allows for the graceful movement of cash anywhere round the world within minutes, and also serves to supply stability during a market known for its relative volatility. additionally , USDC exposes new opportunities for trading, lending, risk-hedging and more, almost like other stablecoins like Tether.
Who built the USDC stablecoin?
Technically, USD Coin was developed by the Centre consortium, which may be a partnership agreement between Circle and Coinbase teams. On the one hand, the tech and governing framework were built by Centre, while Coinbase takes the role of issuing USDC tokens commercially.
Founded in 2014 by Jeremy Allaire and Sean Neville, Circle may be a recognised Money Transmitter, which makes the corporate and open financial book, almost like other authorities which issue money and lookout of the monetary policy. Of course, Money Transmitters are US money businesses that are obliged to suits US federal rules and regulations. In fact, before the issuance of USDC, the equivalent amount of USD is ascertained with one among Circle’s trusted associates. As such, all USDC tokens are regulated, transparent and verifiable on the blockchain.
How Does USD Coin function?
USD Coins are minted with a guarantee that each USDC token is backed with one US dollar. Of course, the US dollar standard is backed by the US economy and therefore the wide-spread belief in its value proposition. These relationships are where USD Coin derives its fundamental value.
As with other stablecoins, the method of turning US dollars into USDC tokens is named tokenization.
In essence, this is often a three-step process:
- A user sends USD to a token issuer’s checking account .
- The issuer uses a USDC smart contract to make an equal amount of USDC.
- The freshly minted USDC are sent to the user, and therefore the substituted US dollars are held within the issuer’s reserves.
Inversely, a USDC token are often redeemed for USD. Generally speaking, the method also has three steps to it:
- A user sends an invitation to the USDC issuer to redeem the same amount of USD for USDC.
- The issuer transmits that request through the USDC smart contract to exchange tokens for USD while taking an equal number of tokens out of circulation.
- The issuer sends the USD from its reserves back to the user’s account. The user receives internet amount like the one in USDC tokens minus any fees which may be incurred.
Unlike Tether, which has had several run-ins with regulators within the past, the developers of USD Coin are obligated to supply full transparency while working within a variety of monetary institutions so as to take care of reserves on a 1:1 ratio with the fiat currency. In fact, all USDC issuers must report their USD holdings, which are successively published by Grant Thornton LLP on a monthly basis.
How do you use USD Coin?
As previously mentioned, USDC may be a 1:1 representation of 1 US dollar on the Ethereum blockchain. It’s an ERC-20 token which will be used with each application that supports this industry standard. so as to exchange fiat for USDC, one must first register an account with a USDC provider, verify his/her identity through a KYC process, and link a legitimate checking account . SwissBorg are going to be offering such service by the top of June 2020.
Once this is often done, the Circle platform allows four main functions for redeemable tokens:
- Tokenizing USD
- Redeeming USDC
- Transferring USDC to ERC20-compatible ETH addresses
- Depositing USDC from compatible wallets
Circle USDC doesn’t charge users fees for tokenizing and redeeming services. However, there’s a $50 commission for vetoed bank transfers.
Broadly speaking, stablecoins like USDC are used for the subsequent reasons:
- Leverage trading consumption to 100x leveraged contracts
- Avoiding traditional financial institutions and bureaucratic procedure
- Working around hyperinflation in destroyed economies (Venezuela, Turkey, Lebanon)
- Sending money across borders without bureaucratic procedure
- Buying and selling assets on various exchanges, dApps and blockchain-based games.
Naturally, the centralised nature of stablecoins like USDC by definition makes them different from Bitcoin which can’t be pack up by a governing authority, because none exists. That being said, stablecoins have a crucial role to play within the digital economy regardless of political leanings, beliefs and inclinations, and fill a much-dreaded gap between traditional finance and cryptocurrencies.