USDC or USD coin, is a fiat-collateralized stablecoin that is pegged 1:1 to the US dollar. With this, the collateral for the stablecoin is being held in fiat currencies like the US dollar. The aim of USD coin is to provide users with a stable and secure blockchain based version of the dollar that mimics the value it as well. The stablecoin was launched on the 26th of September, 2018 on the Ethereum blockchain and was developed by Circle, which is a fintech company from Boston, and Coinbase.
What is USDC
USDC or USD coin is a stablecoin that was initially created with the intent of providing users with a stable cryptocurrency that can act as an alternative to other stablecoins such as USDT. As USD coin is a stablecoin, it maintains a stable value. In the case of USD coin, that stable value lies in it being pegged 1:1 to the US dollar. Meaning that each USDC token represents 1 US dollar. It was launched on September 28 , 2018 as an ERC-20 token on the Ethereum blockchain by Boston based fintech company Circle. Since the succesfull launch on the Ethereum blockchain, Circle made sure to launch USD coin on other blockchain networks such as the Algorand blockchain and the Solana blockchain.
How does USDC work
So far we know that USD coin is a stablecoin that maintains a value that is 1 to 1 to the US dollar. But how does it maintain that value? Down below we have provided an overview of the key concepts behind USDC to give you a bit of general knowledge about how USD coin works.
Creation
USDC tokens are created when someone purchases them from a regulated financial institution known as a “trusted issuer.” These trusted issuers are responsible for the minting process of new USDC tokens and include companies like Circle itself and Coinbase.
Fiat Reserves
In order to back up the value of the created tokens, trusted issuers will hold an equivalent amount of US dollars in reserve bank accounts. These reserves act as an colletaral and are regularly audited to insure that the USDC tokens are collateralized for. USDC also provides a public, real-time attestations of the reserves held by the trusted issuers. So holders can verify if there is still enough supply to back up the issued USD coins. Holders want to keep an eye on that because holders of USDC tokens can redeem there tokens at a trusted issuer for US dollars. This ofcourse is in a 1:1 exchange where the holder of the tokens gets an equal amount back in US dollars.
The team behind USDC
USD Coin was developed through a collaboration between Circle and Coinbase. Cirlce, is a peer-to-peer (P2P) payment company from Boston that manages USD coin and Coinbase is a cryptocurrency exchange that helped with launching the USDC token. Besides these companies (and ofcourse the ginormous teams of those companies) USDC also has a consortium involved. This consortium, called Centre Consortium, is an open-source project that aims to foster the growth and adoption of USDC. To achieve this, it establish standards, protocols, and guidelines for USDC and manages the network of trusted issuers who are responsible for minting and redeeming USDC tokens.
Partnerships
Payment Processors and Wallets
Visa: Visa and Cirle have an ongoing partnership since 2021. In which Visa integrates USDC into its payments system. Allowing businesses to send and receive USDC.
BitPay: Butpay, a global cryptocurrency payment service provider, also initiated a partnership with USDC in which they allow merchants to accept the token.
Crypto.com: Crypto.com has integrated USDC into its wallets. Allowing users to hold USDC but also earn interest over there USDC.
Centralized exchanges and Trading Platforms
Binance: Binance, world’s largest crypto exchange, has added USDC as a trading pair on its platform. With which users can trade USDC against various other cryptocurrencies.
Kraken: Kraken, Another big crypto exchange, also offers its users the possibility to trade with USDC against different cryptocurrencies.
Coinbase: Coinbase is quite an obvious one, as it created the cryptocurrency alongside Circle. It allows users on its platform to trade USDC.
DeFi and Decentralized Exchanges (DEX)
Compound: Users can borrow and lend on the platform using USDC.
Uniswap: Uniswap is a decentralized exchange on the Ethereum blockchain where users can trade there tokens. On the platform USDC is accepted and can be traded against various other tokens.
Aave: Aave, a decentralized lending protocol, allows users to deposit and borrow USDC. Furthermore, users can also earn interest on there deposited USDC.
Where to buy
USDC is buyable on Bitvavo (Europe focussed), Bybit (Global focus) and Kucoin (Asian/Global focus)
Disclaimer
Please note that the information provided in this blog post is for informational purposes only and should not be considered as financial advice. The content presented is based on personal opinions and research, and it is recommended to conduct your own analysis and consult with a qualified financial advisor before making any investment decisions. Cryptocurrency investments carry inherent risks, and the author and website shall not be held responsible for any financial losses or damages incurred. Always exercise caution and make informed decisions when dealing with cryptocurrencies or any other financial assets. Lastly, please conduct your own research into the legality of crypto within your jurisdiction.