USDC, aka United States Dollar Coin, is one of the most popular stablecoins on the market. As a stablecoin, it is pegged to the US Dollar on a 1:1 basis. This means that one USDC will always cost $1. As one of the most popular stablecoins, it is held by many regulated financial institutions.
What is the history of USDC, and how does it work?
What is USD Coin (USDC)?
USD Coin is a stablecoin pegged to the US Dollar on a 1:1 basis. One USDC will always cost $1 because every coin in circulation is backed up by a dollar held in reserve. This reserve is a mix of cash and short-term US Treasury Bonds.
USDC was launched by an organization called the Centre Consortium. The Centre was founded by Coinbase, the US-based cryptocurrency exchange, and Circle, a peer-to-peer payment company.
Launched in September 2018, the motto for USD Coin is “digital money for the digital age”. As cash continues to become less common for transactions, the founders wanted a digital currency that was stable and could be used for everyday transactions.
While it first launched on the Ethereum blockchain as an ERC-20 coin, it is now available on other chains such as Solana, Stellar, and Algorand.
USDC is essential in many different DeFi Applications, such as Aave and Uniswap.
Is USDC Safe?
There are many different stablecoins available currently. However, recently some stablecoins have collapsed or lost their peg to the US Dollar. TerraUSD was one of the most famous stablecoin collapses that happened earlier this year.
This has drawn concern by some as to how safe stablecoins actually are. What makes USDC safe?
For one, the stablecoin is safe because it is extremely transparent. Coinbase and Circle are both regulated firms that pass numerous compliance tests. Users have assurance that they will be able to always exchange one USD Coin for $1 without an issue.
Because of this, it has started to gain much more market share in the stablecoin market. In early 2021 Tether, or USDT, controlled over 70% of the stablecoin market, while USD Coin held only 14%. However, Tether’s reliability and solvency has been called into question many times over the past few years, so USDC has gained a market share of over 30% by the end of 2022.
How Much Money is in USD Coin’s Reserves?
After TerraUSD collapsed, investors stopped trusting stablecoins at face value. Many looked at similar algorithmic coins with skepticism, while others called into question the true amount of reserves for stablecoins.
For transparency, Circle published exact numbers around how much is in their reserves to back up USDC. As of July 2022, there are $42.3 billion of US Treasury Notes, and cash deposits of $12.2 billion.
This report was independently issued by accounting firm Grant Thornton.
What Do You Use USDC For?
USDC is one of the most popular cryptocurrencies on the market now, particularly because of its use in Decentralized Finance.
Many protocols allow users to stake their USDC for interest. This is particularly helpful as an investor, because USDC does not have the same price fluctuation as other cryptocurrencies do.
USDC, and stablecoins in general, also offer an alternative to cross border transactions. Because these transactions are on the Blockchain, there are far less fees with cross border transfers than with fiat money.
