USD Coin is a type of cryptocurrency that is pegged to the US Dollar. Read more about cryptocurrencies in this link here. You can redeem this for $1.00 at any given time which gives it a stable price. What you need to know about it are the following:
- It has a stable value. Customers with bank accounts in US dollars can redeem it for $1.00.
- You can exchange the 1 USDC to $1.00 and vice versa using platforms such as Coinbase.
- Each coin is backed by a dollar that is kept in a bank account.
- The system is supported by Ethereum so you can store it in a crypto wallet.
- It is designed to move globally, and you can transact in businesses and exchanges using it.
Why Get It?
You don’t have to open a bank account with USDC. You can send it wherever you are in the world. The cost for transactions is extremely low and you will remain anonymous.
Why is a Programmable Dollar a Good Choice?
This unlocks a whole new world of possibilities that are limited to the fiat currency. There are developers, businesses, and people who can store money using the system of cryptocurrency. This means that the transactions are cheaper, faster, and more transparent.
Will the USD Coin Hold its Value?
Yes. There’s a consortium called Centre that mints the tokens. There’s a special bank account that is frequently monitored and audited for every transaction using this cryptocurrency. Know more about the value, supply, and volume of USDC in sites such as Rubix.
What is its Purpose?
Coinbase built USDC because they have a mission that the whole world should enjoy the stability of the dollar. Anyone who owns a mobile phone can do transactions anywhere in the world using the dollar as their currency.
What’s the Connection between USDC and the Ethereum Token?
USDC uses the Ethereum platform because of the stability factor. Ethereum is one of the leading contract platforms of crypto with strong support from developers.
Other Things You Might Want to Know
It was launched on September 26, 2018, and it was considered as a stable coin. It is managed by Coinbase and Circle. Two companies that collaborate with everything that relates to cryptocurrency. The USDC is considered as an alternative to True USD and Tether which are cryptos that are also backed by the US Dollar.
The ERC-20 smart contract that is related to Ethereum ensures that every transaction is reflected in the blockchain. The USDC is a tokenized version of the dollar which can be exchanged back at any given time. It can be used on public blockchains and across the internet for trading.
The tokens allow the movement of the dollar around the world in a matter of minutes. Since the price is stable, it is the answer to the much-needed stability that cryptocurrencies need nowadays.
How Does it Work?
The tokens do not come from thin air. Circle guarantees every user that their token is backed by a single dollar. The process of turning USD into USDC is called tokenization.
The tokenization involves three processes. They are the following:
- Users send USD to the issuer of the token’s bank account.
- The smart contract is used by the issuer to convert USD to USDC
- The newly minted tokens are then delivered to the user and the dollars that were substituted are held back.
4 Categories of Stablecoins
These are stablecoins that base their value on a fiat currency. They are designed to be centralized. Some examples include Tether, Paxos Standard Token, USD Coin, and Digix Gold.
Their values are based on crypto assets. For example, if the stablecoin is based on the value of Bitcoin, then users can exchange it with the current price of the said cryptocurrency. Some examples are Havven and Makercoin.
These are software-based models that aim to provide stability without the need to collateralize an asset. Some examples of these are Fragments and Kowala.
These are a blend or a mix of approaches of the three categories mentioned above. An example is Carbon.
The above information is just a glimpse of how USDC works. If you are interested in the process of getting it, then you can do research, set up a wallet, and start trading small amounts of tokens to get a feel of how they work.