USD Coin (USDC) is a crypto stablecoin that maintains a 1:1 peg with the United States dollar. The CENTRE consortium which is a partnership between Circle and Coinbase issues USDC. It is designed to act as a digital alternative to traditional U.S. dollars, allowing users to easily and securely hold, transfer, and trade dollars using blockchain technology.
Key Takeaways
- USD Coin (USDC) is a stablecoin that is built on the Ethereum’s ERC-20 token standard.
- A stablecoin, as the name suggests, is a type of cryptocurrency that is specifically engineered to maintain a stable value relative to a specific asset or currency.
- In the case of USDC, it is pegged 1:1 to the value of the U.S. dollar. This means that the price of the USDC token is equivalent to the price of 1 U.S. dollar.
- The USDC token is issued by the Centre Consortium, formed by Circle and Coinbase.
Stablecoins are digital asset types that specifically intend to keep a steady value relative to a specific asset or currency. USD Coin (USDC) is a perfect example. It pegs to the value of the U.S. dollar, meaning that each token of USDC tends to be equivalent to one U.S. dollar.
USDC was introduced in September 2018 as a dollar-backed digital asset aimed at providing users with a safe, transparent, and efficient way to perform transactions on the blockchain.
According to Coinbase, a US dollar or an asset with the equivalent value backs every USD Coin 1:1, all held in accounts of US-regulated financial institutions.
The primary purpose of the USD Coin is to provide value exchange for people who want to avoid volatility associated with the cryptocurrency market. This makes it attractive for merchants since they can accept payments without worrying about currency fluctuations affecting their profits.
How does USD Coin Work?
Fundamentally, the nature of USDC is pretty similar to other cryptos. Users can buy it from exchanges or other sources, as well as store it in any crypto wallet that supports it.
Users are also able to buy USDC directly via Coinbase or Circle. Once purchased, users send the coins to their wallets. They act as a value store and people use them like every other digital asset.
A couple of popular wallet options for storing USD Coins include the Binance web wallet, the Trust Wallet mobile app, and the Ledger Nano hardware wallet.
Tokenization
The procedure of tokenization, also known as minting, involves converting an asset into a digital token that can be traded, transferred, and managed using blockchain technology. Specifically, in the context of USD Coin (USDC), tokenization refers to the process of transforming U.S. dollars into USDC tokens.
The CENTRE consortium, the issuer of USDC, creates new USDC tokens and then holds an equivalent fiat currency amount in reserve to back the USDC tokens and maintain its stable value relative to the U.S. dollar.
Users can utilize the minted USDC tokens on various compatible blockchain networks such as Ethereum Virtual Machine (EVM), TRON blockchain and Binance Smart Chain, providing a digital alternative to traditional U.S. dollars while ensuring safety and stability.
Why is a digital dollar beneficial?
A digital dollar presents numerous benefits in comparison to traditional fiat currencies. One of the key advantages is convenience, as it enables individuals to make payments and transactions seamlessly using smartphones or other digital devices, and eliminates the need for physical cash.
Additionally, implementing blockchain tech for cashless transactions increases security and access to financial services for unbanked or underbanked individuals, particularly those living in remote areas or with low income.
Furthermore, a digital dollar could potentially optimize the financial system by reducing the need for intermediaries such as banks or payment processors, thereby resulting in faster and more cost-effective transactions. Digital dollars do have the potential to revolutionize the way we handle our finances, with increased accessibility, efficiency and security.
Enhanced security
A digital dollar could provide enhanced security compared to traditional payment methods, such as cash or credit cards. It could make it easier to track and prevent fraud, and it could provide additional protections for consumers through the use of digital signatures and other security features.
Digital Dollar-denominated assets do have a considerate range of benefits to offer for both individuals and the broader economy, making them a potentially valuable addition to the existing financial system.
However, it is definitely worth questioning who will eventually take the throne of digital money: Crypto Stablecoins (Tether, USD Coin) or Central Bank Digital Currencies (CBDCs).
USD Coin Development
USD Coin is developed and maintained by the Centre Consortium. The CENTRE consortium is a partnership between Circle and Coinbase that was formed to develop and promote the use of USDC. CENTRE is an open-source consortium that focuses on advancing stablecoin adoption and use in the global financial system.
The CENTRE consortium is responsible for issuing USDC tokens and maintaining its fiat currency reserve. The consortium oversees all activities related to USD Coin, such as audits from third parties and compliance checks, ensuring strict adherence towards regulations laid out within the industry.
USDC FAQ
How Can I Buy USD Coin?
- To buy USDC on Coinbase, you will need to first create a Coinbase account and complete the verification process. This typically involves providing some personal information and proof of identity, such as a government-issued ID.
- Secondly, deposit funds into your Coinbase account using a bank transfer or a credit/debit card.
- Thirdly, go to the “Buy/Sell” page on Coinbase and select USDC from the list of available cryptocurrencies.
- Finally, enter the amount of USDC that you want to buy, and the payment method that you want to use. You can then review and confirm the details of your purchase. Once everything is correct, complete the transaction.
It’s important to note the possibility that Coinbase may not support the purchase of USDC in all regions. Availability varies on your location. You should also be aware of the associated fees when buying USDC on Coinbase. They can vary depending on your payment method and the amount you are buying.
What backs USD Coin?
The CENTRE consortium regularly publishes audits and monthly attestation reports of USDC reserves and the token’s circulating supply to verify its backing.
Third-party auditors perform these audits. Their aim is proving assurance to USD Coin users and stakeholders that the stablecoin is fully backed by U.S. dollars and asset equivalents.
USDC Full Reserves Report (November 2022):
Circulating USDC: $44.1B
USDC reserves $44.3B
- Cash $9.8B
- U.S. Treasury Securities $34.5B
What Are the Advantages of Using USD Coin?
The key benefits of using USD Coin include stable value, ease of use, increased access, improved efficiency, and enhanced security.
What Is USD Coin Used For?
Since the USD Coin price is always 1$, the range of use cases for USDC is plentiful. It mainly depends on the acceptance of the currency from the respective business or institution. The most frequent uses cases would include making online as well as in-person purchases, paying bills, and transferring money overseas.
Apart from being a digital currency, users can also use USD Coin as a collateral asset in DeFi applications. There’s lending and borrowing platforms on the DeFi space that support it.
Final Thoughts
People regard USDC as Tether’s best alternative, sparking healthy competition between the two digital assets. Crypto almost always requires stability, transparency, and trust. The more the crypto space maintains these characteristics, the more of an impact and transformation it makes in global industries. Among the industry shifts to the blockchain, DeFi and Web3, we are happy to oblige with our upcoming token – DUA. Learn more about DUA token here and follow our Twitter for updates!