What Is USD Coin (USDC)?
USD Coin (USDC) is a smart contract-based stablecoin that is backed by the US dollar. One USD Coin is worth one US dollar. Each US dollar that collateralizes USD Coins is stored in regulated financial institutions. These institutions are audited and checked each month to ensure that they do, in fact, support the active USDC tokens. The monthly attestation reports are published on the Centre website.
Besides, if you look at the USD Coin price chart above, you’ll notice that the USDC price is indeed pretty stable.
Since USD Coins are stored on the Ethereum network, they are based on the ERC-20 token model. Thus, this means that USDC tokens can be integrated with a huge variety of dApps based on Ethereum.
Essentially, USDC is an alternative to other stablecoins such as Tether (USDT). USD Coin crypto project aims to provide people with an asset that can be used as digital cash in a world that’s becoming more and more digital each day.
Besides, USDC is one of the biggest competitors of USDT in the field of stablecoins. Particularly given the fact that USDC coins are more transparent and dependable among crypto fans than USDT tokens, which are somewhat controversial.
The Developers of the USD Coin
The USD Coin was initially released in 2018 by the Centre Consortium. Centre is an open-source platform that was founded by two major players in the world of crypto – Coinbase (crypto exchange) and Circle (peer-to-peer payment service). The platform aims to create a decentralized network built on fiat-based stablecoins.
As stated by the founders of Circle, the main goal of the USDC crypto project is to create a global economy that is more effective and inclusive, connecting every individual worldwide.
The Success of the USD Coin
One of the main reasons why the USDC crypto project is successful is the transparency regarding the source of its funds. Besides, the community has a strong say in terms of the USD Coin project funds. For example, when Coinbase began to discuss a fund diversification strategy for USDC, there was a strong disagreement from the community. Thus, the proposal was quickly discarded.
Additionally, the transparency of UDSC tokens is assured due to the fact that Circle and Coinbase are pretty big companies that have an extensive amount of funds. This means that users can probably be guaranteed that they’ll get $1 for withdrawing 1 USD Coin.
Besides, the fact that the USDC crypto project has a solid reputation compared to USDT, provides it a significant edge as it gradually challenges USDT's dominance.
The Use Cases of USD Coin
The main benefit of USD Coins, or stablecoins in general, is that they are a great tool for decreasing the volatility of the crypto market. Since most crypto assets on the market tend to have prices that fluctuate a lot, the stable USD Coin price helps to reduce the volatility of the whole market.
This is also the reason why many investors use USD Coins as a plan B during periods of enormous crypto market price swings. They exchange their assets for USDC tokens this way preserving their value through times of high volatility. Therefore, they don’t need to fully withdraw their funds from the market.
Besides that, it’s believed that USD Coins (or other stablecoins, for that matter) can be used as a payment method by various businesses. Since its value is pegged to the US dollar, there shouldn’t be many inconveniences when using UDSC tokens as an additional digital payment method.
The Tokenomics of USD Coins
Theoretically, there is no limit to the supply of USDC. Whenever there’s a demand, more tokens can be issued.
Initially, Circle and Coinbase are the first two issuers of USD Coins. However, USDC can have more than one issuer, which is not the case with other stablecoins. This is because Centre Consortium is an organization that can be joined by other issuers that wish to become a part of the USDC network. Of course, Centre stays responsible for the legal structure and the development of USD Coins.
However, it's crucial to note that issuers of USDC are required to regularly declare to Centre the amount of USD reserves they retain. This is necessary to ensure that there is always one US dollar for one USD Coin.
Lastly, getting back to the concept of USD Coin price, it should be noted that stablecoins can also fluctuate a bit. However, their price range is usually very close to $1 (or any other fiat currency for that matter). You can see that for yourself by looking at the USDC price chart above.