What exactly is USDC? Beginner’s Handbook (2021)

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The US Dollar Coin (USDC) is a stablecoin, which is a cryptocurrency token that is tied to the value of a real-world asset, in this case the US Dollar.

Following Bitcoin’s wild ride, some investors are looking for more reliable cryptocurrencies. Enter’stablecoins,’ which are tokens backed by real-world assets. The US Dollar Coin (USDC) is one of a slew of stablecoins that have the same value as the US dollar.

Can it assist to alleviate crypto-anxiety? We’ll find out in the following sections.

What is US Dollar Coin?

The US Dollar Coin is a stablecoin that claims to be worth exactly one US dollar. Essentially, this means that one US Dollar Coin (USDC) should equal one genuine US Dollar, providing much-needed market stability. It began as an ERC-20 token and has now spread to the Algorand and Solana blockchains.

Circle is the driving force behind CENTRE, a consortium that develops frameworks and standards to increase the mainstream acceptance of stablecoins.

 

Who created US Dollar Coin?

The US Dollar Coin was created in a joint move by Coinbase, the hugely popular cryptocurrency exchange, and Circle, a crypto finance company based in Boston. Circle is backed by several high-profile companies, including Goldman Sachs.

Circle started in 2013 as way to send money easily and quickly. Since then, it has expanded into cryptocurrency—raising millions in venture capital and acquiring crypto exchange Poloniex.

USDC: a brief history

  • May 2018 – Circle announces US Dollar Coin, funded by $110 million in venture capital funding
  • September 2018 – US Dollar Coin officially launches
  • December 2018 – The token is ranked #5 by total market cap, according to CoinMarketCap
  • January 2019 – Centre publishes Grant Thornton statement attesting to $251 million held by Circle for USDC.
  • May 2019 – USDC open for trading in 85 countries.
  • March 2020 – DAI stablecoin accepts USDC as collateral. More than $10 million USDC minted per day amid the early days of the coronavirus pandemic.
  • June 2020 – Usage takes off amid the decentralized finance (DeFi) boom.
  • September 2020 – USDC partners with Algorand.
  • October 2020 – By October, the market cap of USDC increases to $2.6 billion. USDC partners with Stellar and Solana.
  • November 2020 – Bitcoin’s bull run starts, bringing another rush of money to USDC.
  • January 2021 – By January, $4.7 billion USDC is in circulation.

What’s so special about USDC?

The US Dollar Coin isn’t the first or even the most popular US Dollar-backed coin. That title belongs to Tether. But Tether is under intense scrutiny over the state of its finances. It once claimed to have a real dollar in the bank for every Tether in circulation, but an investigation by the New York Attorney General caused it to step back from that claim. The investigation is still ongoing.

As a result, additional US Dollar-backed stablecoins with more transparent funding and auditing methods have grown in popularity. Gemini dollar, True USD, Paxos, and US Dollar Coin are examples of this (USDC).

While USDC is not completely unique in comparison to its competitors, here are some of the reasons why it stands out:

  • 🏛 Regulated: USDC’s parent company is a registered Money Service Business in the United States. That means it’s regulated by the government’s Financial Crimes Enforcement Network (FinCEN), which combats money laundering.
  • ⚖️ Audited: USDC is audited by Grant Thornton, one of the top 10 accounting firms in the world.
  • ⚡️ Fast: It can take a long time to send US Dollars to people and institutions when banks are involved. USDC offers the stability and desirability of the US Dollar with the speed of cryptocurrency transactions.

How is the US Dollar Coin produced?

The US Dollar Coin isn’t mined like a lot of other cryptocurrencies. It is available as Ethereum ERC-20, Algorand ASA, and Solana SPL tokens that can be purchased using US Dollars on several major exchanges. Circle says there is a total supply of four billion tokens in circulation right now.

How does the US Dollar Coin work?

After a customer meets the Know Your Customer (KYC) identity requirements, they can link their bank account and make a wire transfer in US Dollars. That money is then converted into USDC, and the customer can use an exchange to trade it for other cryptocurrencies.

The customer can also convert the USDC back into US Dollars, which will then be wired back into their bank account.

What can you do with the US Dollar Coin?

The US Dollar Coin may be traded on Poloniex and Coinbase (the parent businesses’ platforms), as well as other prominent exchanges like as Binance and Huobi.

USDC can also be used in a number of decentralised financial protocols. You may, for example, put it in BlockFi, a loan company that pays interest on USDC deposits (among other coins).

USDC, like other stablecoins such as Tether and DAI, is commonly held as a stable asset by crypto traders. Stablecoins are beneficial to traders who desire an easy way to exchange cryptocurrencies for US dollars. Because USDC represents a US dollar, it’s an interesting way to trade more volatile currencies like Bitcoin.

 

Recent developments

USDC will spread to other blockchains in 2020. Its primary blockchain, ETH, is frequently slow and plagued by congestion. As a result, Centre has formed alliances with competing blockchains Algorand, Stellar, and Solana in order to increase the market.

USDC behaves similarly on those blockchains. Smart contracts on Algorand, for example, may require USDC to be powered.

Circle said in November 2020 that it is collaborating with the US government to redirect aid to Venezuelan healthcare workers via the country’s exiled government. The US Treasury and Fed provide funds to Juan Guaidó, the country’s acting president. Guaidó’s administration then spends that money to create USDC, which it then sends to the cryptocurrency exchange Airtm. The cash are subsequently transferred to Venezuelan healthcare workers via Airtm’s own US dollar stablecoin, AirUSD.

Stablecoins have been regulated by governments, particularly while central banks work on their own digital currencies. Regulators have been irritated by privately issued stablecoins. The G7 nations highlighted regulatory and supervision issues surrounding stablecoins in an October 2020 study, including market integrity, data privacy, and terrorist financing. They also weaken central banks’ sovereignty, according to the G7, because they compete with their ability to affect monetary supply.

However, in January 2021, the US Office of the Comptroller of the Currency (OCC) issued guidance stating that banks may use blockchains and stablecoins to facilitate payments. Unsurprisingly, Jeremy Allaire, co-founder and CEO of Circle, was elated, tweeting that it was “a huge win for crypto and stablecoins.”

The future

Traditional investors are sceptical of cryptocurrency for two reasons: lack of regulation and volatility. This new wave of stablecoins aims to change all of that by serving as a doorway for well-established organisations to enter the market.

The main firm of USDC isn’t shy about stating that the currency is for individuals who want to move medium to large sums. Stablecoins, such as USDC, may contribute to the mainstreaming of cryptocurrencies by making it more appealing for institutional investors to participate.

 

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