USD Coin stands out as a prominent stablecoin in the cryptocurrency market. Catering to a wide array of applications for both crypto enthusiasts and traditional finance players alike, USD Coin holds a prominent position among the top 10 cryptocurrencies by market capitalization.
In this article, we delve into the features of this acclaimed stablecoin, examining its potential as a traditional asset, a means of preserving savings, and a service for digital value settlement.
USD Coin is relatively new to the market, launching in September 2018. The stablecoin is pegged to the US dollar, meaning that its value should always reflect the price of the dollar on a 1:1 ratio.
This is established by keeping an equivalent amount of the circulating supply in a reserve account, i.e. for every 1 USDC in circulation, $1 needs to be held in reserve. The reserve is a mixture of cash and short-term United States Treasury bonds.
What is the point of the USD Coin?
Built on top of the Ethereum network, USDC is a tokenized version of the US dollar that can operate over the internet and public blockchains. It is designed to provide a stable digital currency in an industry prone to volatility.
Setting itself apart in an increasingly saturated stablecoin market, USD Coin has received wide interest due to it providing a strong layer of transparency. The platform maintains strict protocols to ensure that the reserves are always at the correct levels, ensuring holders that they can withdraw 1 USDC for $1 at any given time, by way of enlisting a major accounting firm.
All USD holdings are required to be reported regularly by USDC issuers, which are in turn published by Grant Thornton LLP. Unlike Bitcoin, while the company uses the decentralized network of Ethereum to function, it has a centralized agency controlling it.
Who created USD Coin?
The coin was created by the Centre Consortium, a foundation consisting of the peer-to-peer payment service company, Circle and cryptocurrency exchange, Coinbase. Circle and Coinbase were the first commercial industry users of the stablecoin.
In 2020, Circle and Coinbase announced an upgrade to the USDC protocol and smart contracts. These upgrades were implemented to increase the cryptocurrency's usability for everyday payments, commerce and peer-to-peer transactions.
Both companies are well-funded and have achieved regulatory compliance, confirming the cryptocurrency's stability and international transparency appeal.
How Does USD Coin Work?
USD Coins are created through a process of minting. Users send USD to the USDC issuer's bank account, which then uses the USDC smart contract to create the equivalent amount of USDC. The digital currencies are then delivered to the user, with the fiat payment held in reserve.
Should the user wish to liquidate their USDC, they can send a request to the USDC issuer who then sends a request to the USDC smart contract to take a certain amount of USDC out of circulation. The issuer then sends the equivalent amount of USD (minus fees) to the user's bank account, taken from the reserve.
USD Coins can be traded through exchanges for other cryptocurrencies, or sent to crypto wallets around the world (provided that they support ERC-20 tokens). The coins are also often used to hedge against cryptocurrencies going through turbulent or crashing market periods.
What Is USDC?
USDC is a fiat-collateralized ERC-20 token hosted on the Ethereum blockchain platform. The stablecoin has an unlimited total supply with currently just under 26 billion USDC in circulation.
The coin provides an easy means of transferring asset funds internationally at a fraction of the cost and time that sending the traditional fiat would take, appealing to both businesses and individuals. It has also proven to be a popular innovation in the DeFi (decentralized finance) space.
How Can I Buy USDC?
If you're looking to add USDC to your crypto portfolio you can do so conveniently through the Tap app. Constantly reviewing and assessing the market, the Tap app has added support for a number of prominent cryptocurrencies, including USDC. Buy, sell, trade, and store USDC securely in the regulated Tap app. To learn more about cryptocurrencies, head to our blog.
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