USD Coin (USDC)
Each USDC is backed by one dollar or an asset of equivalent value, held in reserve in accounts with US regulated financial institutions. You can always redeem 1 USDC for USD$1.00, giving it a stable price.
USD Coin is a service to tokenise USD so they can be used over the internet and public blockchains. As an Ethereum token, USDC can be stored in a compatible wallet and can be changed back to USD at any time.
Issuing and redeeming USDC tokens is ensured by ERC-20 smart contracts.
To tokenize USD into USDC, a user first sends USD to the token issuer's bank account. The issuer then uses a USDC smart contract to create an equivalent amount of USDC. The new USDC are delivered to the user, and the US dollars are held in reserve. To redeem USDC for USD, the process is reversed.
USDC creators are obligated to provide full transparency and work with a range of financial institutions to maintain full reserves of the equivalent fiat currency.
All USDC issuers are required to regularly report their USD holdings.
USDC was launched on September 26, 2018 by a consortium called CENTRE - a collaboration between crypto exchange Coinbase and payment platform Circle. The goal was to develop price-stable crypto assets and network protocols.
USDC is an alternative to other USD backed cryptocurrencies like Tether (USDT) or TrueUSD (TUSD). It exists to counter high volatility and convertibility between fiat currencies and cryptocurrencies. USDC attempts to solve governance and transparency issues by publishing a monthly attestation of100% reserves of fiat tokens and provides clear rule and guidelines regarding issuance and redemption.
To become an issuer of USDC members must follow key membership and operating rules which include licensing, compliance, technology &operations, accounting, and custody of fiat reserves.
Circle was founded in 2013 by the entrepreneurs Jeremy Allaire and Sean Neville. It’s known as the crypto startup backed by Goldman Sachs.
Coinbase was founded in 2012 and has grown to support dozens of unique cryptocurrencies. Coinbase users in more than 100 countries trade trade hundreds of billions of dollars in crypto per quarter.
Bringing US dollars on the blockchain allows moving them anywhere in the world within minutes and brings much-needed stability to cryptocurrencies. It also opens up new opportunities for trading, lending, risk-hedging and more.
Exchanges have been the primary users of USDC as an alternative to fiat currencies, replacing traditional banking relationships.
Stablecoins are especially useful when you want to sell a coin ahead of a dip and know that your fiat value with remain stable or want to hedge an investment against future loss. They can help populations avoid hyperinflation.
USDC is also one of the only fiat-collateralized stablecoins available to be used in rapidly-growing DeFi ecosystem.