Stablecoins,” as they are known, are a form of currency that is linked to another asset, and the US Dollar Coin (USDC) is one of the most popular examples.
Stablecoins have a wide range of applications, and their trading volume and market capitalisation are constantly increasing. Back in 2021, USDC was the second-largest stablecoin in circulation, with a market value of over $130 billion.
In summary, the USDC is a service that tokenises and facilitates the usage of US dollars via the internet and public blockchains. USDC tokens may also be converted back to USD at any moment. Tokens of USDC may be created and redeemed thanks to the ERC-20 smart contract. It is possible to move US dollars across the globe in minutes by putting them on the blockchain, and this provides much-needed stability to the cryptocurrency market. Investing, financing, and risk-hedging have never been more accessible thanks to it.
Its Mechanics
The Ethereum blockchain, on which USD Coin is built, is programmable. The idea behind the coin was to develop a digital currency that wouldn’t experience dramatic price fluctuations. Developers must adhere to a set of programmatic requirements to issue their tokens on the Ethereum platform, which is why USDC is an ERC-20 token. In the world of utility tokens, ERC-20 is the standard by which all other standards are measured. Stablecoins like USDC may be seen as utility tokens in the sense that they serve as a digital asset replacement for dollars. The issue of USDC tokens is backed by dollar-denominated assets at a 1:1 ratio. There are assets to match every currency in circulation. USDC is very much helpful in facilitating cryptocurrency transactions. When it comes to trading, it is highly reliable.
On the other hand, security and legitimacy can be found on Crypto Genius which aids users in their trading journey. This app also helps traders to find and connect with trusted brokers. Learn more about the Crypto Genius trading software before signing up.
The Team Behind
Coinbase, the biggest US-based cryptocurrency exchange, and Circle, a financial services startup backed by some of the world’s major financial institutions, collaborated to develop USDC. The circle was founded in Boston in 2013 as a means to transmit money fast and simply. Announcing in April 2020 that they had purchased the crypto exchange Poloniex, the business swiftly entered the crypto market.
The value of the USDC is attributed to the assets that support it. Each coin is backed by a circle of cash or cash equivalents. For every new U.S. Dollar Coin, Circle is obligated to hold an equivalent number of dollar assets. Demand for USDC is on the increase, thanks to the coin’s ability to facilitate financial transactions without leaving the crypto ecosystem, thanks to the rising popularity of Decentralized Finance (DeFi) and Centralized Lending platforms.
Many of the “unbanked” — those who do not have access to standard banking services — may profit from USDC as well. An internet-connected device and a wallet that supports ERC-20 tokens are all users of USDC need; no bank account is required.
Uses of the USDC
USDC has a stable value over time, unlike other cryptocurrencies, so anyone may use it to pay for goods and services without fear of price volatility. Stablecoins appeal to investors because they allow them to preserve profits while still participating in the broader crypto community. As a result, some of the tax consequences of trading Bitcoin for fiat cash may also be postponed (note: this is not tax advice).
Users may earn interest on their USDC deposits on several sites. Offering USDC as collateral for loans is rewarded by Blockfi, Celsius, and Vauld, to name a few. It’s important to note that this activity carries a degree of danger. Using USDC, anyone may make visible philanthropic donations to the community.
Because USDC is not a proof-of-stake token, it is not possible to stake it. Crypto lending businesses exist that enable investors to deposit USDC and get interests in return. Like a bank, the platforms lend USDC to users at a rate of interest, and a portion of that interest is returned to the user as a profit.
Some crypto lending sites, in contrast to regular savings accounts, provide interest rates ranging from 8% to 120% or even more. Investors should do their own due diligence before making any investing decisions.
Final thoughts
USD Coins (USDC) can make it simple to convert cryptocurrencies into US dollars without the hassle of dealing with actual US currency. Blockchain-powered open financial systems and conventional financial systems may be linked through this currency.
If needed, USDC may be converted back into a crypto asset. In addition, some lending platforms provide competitive interest rates on USDC deposit accounts as an additional incentive to customers. Due to its status as an ERC-20 token on the Ethereum network, USDC does have a drawback: it is liable to high energy prices at times.
