What is USDC (USDC)?
USDC (USDC) is a stablecoin whose value is pegged to the US dollar.
USDC debuted in 2018 on the Ethereum blockchain, but is now available on many of the largest blockchains.
The Centre Consortium conceived USDC as an alternative to other popular US dollar backed stablecoins such as Tether (USDT), and focuses on creating transparency surrounding its USD backing.
Summary of USDC 🔍
USDC (USDC) is an asset backed stablecoin whose value is pegged to the U.S. Dollar (USD).
Every USDC token in circulation is backed by $1 USD in cash or cash equivalents, such as short-term U.S. Treasury bonds held by regulated U.S. financial institutions. USDC has adopted the ERC-20 token standard, making it interoperable with all Ethereum-based applications. The token is now found on many other popular blockchains including Algorand, Solana and Tron.
The price predictability of USDC has allowed it to serve as a safe haven for cryptocurrency traders during periods of market volatility. USDC also enables a more efficient transaction of value in a stable digital currency across borders than has been the norm from traditional finance.
USDC’s utility is underscored by its extensive ecosystem of holders and service providers such as decentralized applications (dApps) and crypto trading platforms.
Who created USDC? 👤
USDC was first announced in May 2018 and launched in September the same year by Centre, a joint enterprise between peer-to-peer payment provider known as Circle and one of the largest crypto platforms in the world, Coinbase.
Centre Consortium strives to provide the governance and standards required to build a digital financial ecosystem. USDC has aimed to improve the regulation, transparency and licensing standards of stablecoins when compared to other stablecoins available in the market today — namely Tether (USDT).
The project gained the attention of other large players in the financial sector as a result of the founding institutions’ reputation and experience in the industry. USDC was initially backed by $110 million USD from Goldman Sachs and Breyer Capital, among other notable investors.
How does USDC work? ⚙️
Unlike cryptocurrencies such as Bitcoin, new USDC isn’t released into circulation through the mining process. Instead, new USDC tokens are minted when users and businesses deposit United States government backed currency into their Circle account. A 1:1 representation of that asset, whose record of transactions is recorded and maintained using the efficiencies of blockchain technology, is created by exchanging USD for USDC.
Conversely, when USDC is deposited in exchange for USD, the tokens are burned to ensure the number in circulation matches the fiat amount held in reserve at all times.
At issuance, the equivalent amount of USD is held in cash and short-term U.S. Treasuries by Circle, ensuring that the value of USDC remains pegged with the value of USD. This means that unlike most cryptocurrencies that can fluctuate in value rapidly, USDC is designed to weather financial downturns with minimal volatility.
The one-for-one cash holdings that Circle uses to back their coin have allowed it to maintain a reliable peg to the U.S. Dollar, even during periods of extreme market volatility.
While USDC had previously held small amounts of commercial paper, a type of short term debt issued by companies to cover their more immediate liabilities, the company has recently claimed to hold only government backed assets.
As a registered money service business in the U.S., Circle’s holdings are audited by international accounting giant Grant Thornton.
Why does USDC have value? 🤔
La estabilidad de la USDC la convierte en una divisa confiable para utilizar como medio de intercambio, almacenamiento de valor y unidad de cuenta, las tres cualidades del dinero. Esto ha permitido que Circle crezca como medio de pago entre individuos y corporaciones en todo el mundo.
Quienes invierten en criptomonedas, cuyo precio puede estar sujeto a volatilidad, también pueden tener USDC mientras esperan a que se estabilicen los precios de determinados activos.
Las empresas aceptan pagos en USDC debido a que la perciben como segura y eficiente. Los titulares de USDC pueden transferir la divisa en todo el mundo rápidamente, lo que a menudo la convierte en una opción más viable que canales tradicionales como transferencias bancarias o transferencias electrónicas para transacciones transfronterizas.
La USDC también se utiliza para realizar transacciones con un número creciente de DApps para obtener recompensas mediante préstamos o staking de las participaciones de un usuario en plataformas como AAVE. Protocolos de préstamo similares en todo el ecosistema financiero descentralizado han permitido a los usuarios obtener mayores rendimientos de sus dólares que las cuentas de ahorro bancarias tradicionales.
Why buy USDC? 🧑💻
Crypto investors looking to hold their funds in a safe haven currency during periods of market volatility may find USDC valuable. Unlike other stablecoins which use a algorithm to maintain their peg to the U.S. Dollar, USDC is backed by verified, government backed reserves.
USDC holders will also find that their tokens can be used to pay for a variety of goods and services via an extensive ecosystem of dApps. USDC’s stable peg also means purchasers and vendors can transact without fear of losing value after a sale has been made — a situation often experienced by those who transact with more volatile crypto assets.
Opt in to earning rewards on your USDC with Kraken, so you can earn 5.5% annual percentage yield (APY) on your USDC.
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