What is USDC? USD Coin (USDC) Details

• What is USD Coin (USDC)?
• Who created USDC?
• How does USDC work?
• USDC Use Cases
• Advantages and disadvantages of USD Coin (USDC)
• Advantage
• Defect
• Places to buy, sell and trade USDC
• USDC Storage Wallet
• What is the difference between USDC and USDT?
• Creditial
• Conversion conditions
• Trust and transparency
• Should I use USDC coin or not?
• summary

What is USD Coin (USDC)?

USDC is a stablecoin issued by Coinbase and Circle in 2018. Like USDT or any other token backed by the US dollar, the value of USDC is always fixed at US$1. 

USDC is traded on most major cryptocurrency exchanges and crypto providers today. Like USDT, USDC can be sent, received and stored using any wallet or exchange that is compatible with ERC-20 tokens (Ethereum) along with many other blockchains such as Algorand, Stellar, Avalanche, Hedera , Tron and Solana .

Many people mistakenly believe that USD Coin is issued or backed by the US government. However, USDC is an open source project, anyone can view and contribute to the project's source code.

Who created USDC?

USDC is developed and managed by the Center Consortium, which is a partnership between payment service provider Circle and cryptocurrency exchange Coinbase. The Center will be responsible for developing the technology and management for USDC. While Circle and Coinbase handle the development of the trade, promoting USDC.

Unlike USDT, where Tether is the sole issuer, USDC can be issued and redeemed by member institutions of the CENTER Stablecoin Network created by Circle and Coinbase.

Commercial USDC issuers must meet all licensing, procedural, accounting, and technical and operational requirements. To ensure that the USDC value always remains at US$1, issuers must also back all tokens with fiat reserve assets and provide monthly reports to the network. 

How does USDC work?

The process of converting USD into USDC tokens is called tokenization.

Tokenizing USD to USDC is a three-step process:

1. User deposits USD into the token issuer's bank account
2. The issuer uses a smart contract to generate an equivalent amount of USDC
3. That newly minted USDC will be transferred back to the user. The amount of USD sent by the user will still be stored in the issuer's reserve

The process of converting USDC to USD is as simple and easy as encoding USD to USDC:

1. The user sends a request to the issuer to exchange an amount of USD equivalent to the amount of USDC he wants
2. The issuer uses a smart contract to exchange USDC to USD and get that USDC out of circulation.
3. The issuer sends back the amount of USD in his reserve back to the user's bank account. The user will receive an amount equal to the requested amount of USDC minus any costs incurred within one to two days.

USDC Use Cases

As a stablecoin, USDC can be used in a few ways:

• Resist market volatility. Investors can reduce their losses in times of market volatility by taking shelter in a stablecoin like USDC.
• Property valuation. Other digital assets, cryptocurrencies can be priced into fiat using USDC
• Join financial services for profit. Investors holding USDC can participate in many financial services in the cryptocurrency market such as staking, farming, lending, etc. to earn profits similar to how USD is used outside.
• Means of payment
• Inflation prevention

Advantages and disadvantages of USD Coin (USDC)

Advantage

• Stable prices, low price volatility
• Easy, convenient and fast transaction and exchange with low cost on many different platforms
• Send money fast, safe, low cost worldwide
• High liquidity
• Issued, managed, audited by well-known and trusted companies
• Fully backed and guaranteed by Circle's reserve assets
• Can be used as an asset against inflation
• Transaction fees for USDC are based on Ethereum gas fees only and do not increase with the amount of coins wanted to be transacted. Therefore, for large payments, USDC can be much cheaper than traditional services
• The interest rate when using USDC at DeFi applications and services is much higher than the corresponding service in USD

Defect

• Stable price, no possibility of price increase
• High competition as there are many similar stablecoins on the market today
• Not many services are accepted by the company as an official means of payment
• Still subject to inflation impact from the US dollar
• Gas fees can be very high if the Ethereum network is congested. For small transactions, USDC payments may incur significantly higher transaction fees than traditional services
• Applications, DeFi services, blockchain still contain many risks and are not insured when something goes wrong.

Places to buy, sell and trade USDC

If you are a US citizen, you can trade USD to USDC or vice versa from Circle's own platform as well as the exchanges it has acquired. In addition, you can buy, sell, trade USDC at most major and small cryptocurrency exchanges in the world such as Binance, Coinbase, OKX, Poloniex, Uniswap...

USDC Storage Wallet

USDC is an ERC-20 token. So you can store USDC on any ERC-20 enabled wallet like MyEtherWallet, Trust Wallet, MetaMask, Ledger, Trezor… You can also store USDC directly on exchange wallets to convenient for your buying and selling process.

What is the difference between USDC and USDT?

Both USDC and USDT are the most popular stablecoins today, and the value is pegged to the US dollar. That is the only similarity between these two coins. You can track some of the basic differences between USDC and USDT in the following table:

Creditial

Both USDT and USDC are popular options that are used and traded frequently on most cryptocurrency exchanges today. However, due to its inception 4 years ago, USDT has long been the most widely used stablecoin with the highest trading volume. That also means the number of trading pairs of USDT will be significantly more than USDC. USDT has now also developed and is present on 8 blockchain platforms while USDC is only 6 platforms.

Conversion conditions

Investors can only convert USDT into USD and vice versa at Tether Limited with a minimum conversion value of USD 100,000. With USDC, investors can convert to Coinbase or Circle company with an unlimited amount of conversion. Investors will have to pay a fee to Tether when performing the USDT conversion process while with USDC it is completely free.

Trust and transparency

After many accusations, doubts about transparency and the amount of assets in reserve, it was not until March 2021 that Tether released its reserve analysis report. Consists of 85% cash and commercial paper, the remaining 15% are bonds, debt and other investments. Since then, Tether has taken steps to gradually become more transparent by publishing its reserves through daily updates. However, there is still a lot of data that Tether has not made public such as debts, commodity futures transactions, etc.

In contrast, USDC's parent company, Center Consortium, has always adhered to and well complied with Government regulations, regularly publishing audited reports on their reserves. Circle issues monthly audit of USDC reserves by renowned accounting firm Grant Thornton LLP. They also pledged to own only US dollars and short-term bonds in their fund.

Should I use USDC coin or not?

USD Coin is a fast growing and powerful cryptocurrency project, issued by many trusted financial institutions. Since announcing the project in May 2018 until now, USDC's ecosystem has expanded to more than 60 different large and small partners. USDC's reserves are also regularly updated and reported to users monthly by leading auditing firms. 

However, most other new stablecoins now have similar terms to USDC. Not only that, countries also intend to issue their own stablecoins to easily regulate the crypto market. With more and more stablecoins being born, Tether's influence on the cryptocurrency market is limited and opens up new investment options for participants.

In the face of this fierce competition, in order to attract and gain trust from users, stablecoins need to demonstrate transparency, price stability, attractive incentives, and be guaranteed and controlled by reputable agencies and organizations. And USDC is one of the stablecoins that has fulfilled the above conditions making it a worthy investment in the crypto market.

summary

USDC is the most commonly used stablecoin in the crypto market, after USDT. USDC can be converted completely free, secure, transparent to USD at any time through smart contracts on the Ethereum platform. Hopefully, through this article, readers have received a lot of valuable information about USDC. Good luck with your trading!

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