What exactly is USDC?

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Explanation

USD Coin (USDC) is a stablecoin that runs on the Ethereum network and can be traded for one US dollar. Its aim is to make transfers quicker and easier than regular payments while reducing the uncertainty associated with cryptocurrencies such as Bitcoin.

Stablecoins, which have a fixed price tied to a reserve asset (often the US dollar), are one of the most common and scalable types of cryptocurrency to emerge in recent years. USD Coin (USDC), as the name suggests, is a dollar-pegged cryptocurrency.

Any USDC is promised to be backed by a bank-held dollar. Its mission is to make blockchain-based crypto payments more stable by reducing price fluctuations. Circle had minted more than $9 billion in USDC as of early 2021. (a consortium of which Coinbase and Circle are founding members.)

 

How does USDC work?

USDC is based on Ethereum, a decentralised, programmable blockchain that enables developers to build a wide variety of applications and tokens. It was designed to be a highly useful type of digital money whose value does not fluctuate significantly in the middle of a deal.

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Since each USDC is backed by one US dollar kept in a deposit, the stablecoin will sustain a one-to-one exchange rate with the US dollar. USDC can be purchased on exchanges such as Coinbase and stored in any Ethereum-compatible wallet. There are no costs associated with moving US dollars to USDC.

Stablecoins like USDC have a wide range of uses. You can:

  • Send money cheaply and near-instantly anywhere in the world without a traditional bank account (a huge improvement over wire transfers which can be expensive and take days).

  • Earn rewards on USC held in a Coinbase account.

  • Earn even higher yields by lending your USDC via a variety of decentralized finance (or DeFi) applications.

Think of USDC as being a programmable dollar. Being programmable unlocks a whole new world of applications and businesses: developers can create accounts to store money with one line of code; lending that is faster, cheaper, and more transparent; faster and cheaper payments, including payroll; global crowdfunding; transparent and stable donations to charity.

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USDC stats

As of March 2021, more than $2 billion a day was sent via USDC on Ethereum network on average, from around 20,000 active addresses — numbers that have vastly increased over the last year.

Keep in mind

The blockchain has seen a significant increase in the number of transactions as the Ethereum ecosystem has expanded, resulting in higher “gas” fees and potentially making USDC more costly to use. There are a range of possible alternatives on the horizon, including the current update to the Ethereum 2.0 (or ETH2) blockchain, which is intended to be quicker, cheaper, and theoretically more stable.

What’s next for USDC?

Since they do not have bank accounts, billions of people around the world are unable to participate in the financial economy. USDC enables unbanked individuals in every country to keep dollar value using only a cell phone and a digital wallet, making USDC a critical connection between conventional finance and the blockchain-powered transparent financial infrastructure. It is not appropriate to purchase an entire USDC; you can keep as little as 0.000001 USDC.

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