USD Coin (or USDC) is a US dollar stablecoin, that is, a cryptocurrency designed to match the value of the US Dollar. It was created to function as a stable and reliable representation of the US dollar in the digital world.
USD Coin (or USDC) is a US dollar stablecoin, that is, a cryptocurrency designed to match the value of the US Dollar. It was created to function as a stable and reliable representation of the US dollar in the digital world.
USDC was developed by the Centre consortium, a partnership between Circle and Coinbase, and launched in 2018. It is issued and maintained by a network of Centre’s regulated partners, who peg its value to USD by keeping an equivalent amount of USD in their reserves.
USD COIN (USDC) ESSENTIALS
- A stablecoin pegged to the US dollar with a 1:1 exchange rate.
- Intended for easy use over the internet and public blockchains.
- Issued through tokenization by exchanging US dollars for USDC using an Ethereum smart contract.
- Backed by US dollars in storage with Centre’s accredited partners.
- As a stablecoin, it has no hard limits on how many can be issued.
What are stablecoins?
USDC falls into a category of cryptocurrencies known as stablecoins. These cryptocurrencies differ from others in one major aspect: their price is pegged to another asset and maintains its value in relation to that asset, rather than being determined by the supply and demand on the market. Stablecoins can be pegged to various assets, from fiat currencies, gold and even other cryptocurrencies. USDC is pegged to the US dollar.
Stablecoins are not mined like Bitcoin or minted like Ether on Ethereum (once proof of stake is introduced), nor have they been issued all at once or periodically (like LINK or XRP). When it comes to USDC, new units are issued per users’ demand, with a certified financial institution backing them by locking the same amount of US dollars in storage.
How is USDC issued?
The process through which US dollars are turned into USD Coins is called tokenization. If you want to get some USDC, you first need to send a corresponding amount of USD to the bank account of one of the institutions that are certified by Centre to issue USDC. The issuer creates the equivalent amount of USDC using a smart contract. Then, the newly issued USDC is delivered to you, while your US dollars are held in the issuer’s reserve.
US dollars that are kept in reserve in theory guarantee USDC’s value, and they also add to the stablecoin’s integrity. Just like the gold standard that backed USD in the past was arranged so that you could literally walk into a bank and exchange your cash for an equivalent amount of gold, you can always turn your USDC back to USD by simply releasing it from the reserve at the institution that issued it.
Technically, there are no hard limits on how many USD Coins can be issued as USDC has no max supply (contrary to Bitcoin and similar proof of work cryptocurrencies). Instead, the USDC supply is determined by how much USD people decide to tokenize.
USDC uses
In a world where cashless transactions are getting more and more common, the tokenization of USD to USDC gives the fiat currency greater reach and usability worldwide, as it eliminates many obstacles that come with moving money globally. It also reduces the time required for international transactions and decreases some of the costs associated with worldwide transfers of money. This makes operating with USD in the virtual sphere easier, faster and more economical.
Additionally, during times of increased volatility on crypto markets, USDC can represent a stable asset for traders, as its price is, due to its increased stability as a stablecoin unlikely to move away from USD by more than a couple of percentage points. USDC can also make it easier for businesses to accept payments in cryptocurrencies and to support various sectors, such as decentralized finance and entertainment. Please be mindful that, while stablecoins are generally less prone to extreme volatility compared to non-stablecoins, their value can still fluctuate based on various factors.
Who’s behind USDC?
USDC was developed by the Centre consortium, a partnership between Circle and Coinbase, and launched in September 2018. Centre governs USDC through its network of partner institutions which are subject to audits by regulators of financial markets. Unlike some other major stablecoins, the institutions behind USDC maintain its transparency and stability by releasing regular attestations and conducting transparency audits and are obliged to maintain full reserves of US dollars.
This webpage has been approved as a financial promotion by Bitstamp UK Limited which is registered with the UK’s Financial Conduct Authority. Please read the Risk Warning Statement before investing. Cryptoassets and cryptoasset services are not regulated by the Financial Conduct Authority. You are unlikely to be protected if something goes wrong. Your investment may go down as well as up. You may be liable to pay Capital Gains Tax on any profits you earn.