What Is USD Coin USDC
What Is USD Coin USDC

What Is USD Coin?

USD Coin (USDC) is a stablecoin developed based on the Ethereum technology and was officially introduced in September 2018.

The token is a product created and governed by the Center consortium, a partnership between the fintech startup Circle Internet Financial and the world-renowned crypto exchange Coinbase.

USDC is generally seen as a safe token thanks to CIRCLE, which is a money services company supported by investment bank Goldman Sachs. Accordingly, USDC’s value is secured by reserve assets and can be redeemed at the exchange ratio 1 USDC = $1 US dollar.

In other words, USDC is considered an alternative US dollar in digital form, which is designed to surpass all geographical and technical boundaries, which allows the US dollar to be used in digital transactions across the world.

With the integration of ERC-20 smart-contracts, USDC can be used to facilitate daily transactions, including crypto trading, P2P payments, or even more complex lending arrangements.

USDC is fully regulated and ranks among the largest stablecoin systems globally. CENTER commits to maintaining the token’s transparency by publishing monthly financial reports to reassure users about USDC’s convertibility to the US dollar.

It is one of the most transparent stablecoins in the marketplace and is backed by some of the most talented people in the established financial system.

What is the Purpose of USD Coin (USDC)?

USDC was invented to create a new stablecoin that can upgrade the capabilities of blockchain via the US dollar by making the token more easily accessible, cheaper, and more efficient. It is also supported by a well known mega bank, which helps with credibility.

As a joint venture between CIRCLE together with Coinbase, USDC was issued with the following vision:

  • To improve the transparency of the blockchain-based stablecoins, and to establish trust with crypto users, from individual traders to investors and businesses.
  • USDC is written on an open source platform, with all the issued coins publicly reported and regularly audited by the most reputable accounting firms, including Grant Thornton.
  • To increase crypto liquidity, as USDC is fully backed and can be redeemed to the US dollar anytime at a stable rate of 1:1. This makes USDC a safe digital asset.
  • To create a digital asset that is supported by established banks that have direct connections with the US central bank also raises the ability of USDC to be converted into fiat.
  • To establish a prestigious and reliable brand, which is regulated, easy to access, and widely used among the crypto community.

How Does USD Coin (USDC) Work?

As an ERC-20 token, USDC can be operated on any applications that support the ERC-20 protocol. USDC is listed on a number of exchanges, and users can get USDC from Coinbase (one of the project’s co-founders), Binance, Poloniex, Kucoin, and many others.

The tokens can be used to conduct transactions with digital wallets, complete payment transfers or be redeemed in US dollars.

To ensure each USDC is fully backed by USD, a process has been designed by the issuers, which includes three steps:

  • Buyer deposits USD in the bank account of the issuer
  • The issuer creates the equal amount in USDC, using the ERC-20 smart contract
  • The issuer sends the newly minted USDC to the buyer and holds the USD deposit

To convert USDC back into USD, the opposite process is performed.

When a request for redemption is submitted by USDC holders and then confirmed by the issuer, an equivalent USDC amount will be taken out of circulation. The corresponding amount of USD will be sent to the user’s bank account almost simultaneously, with a small fee deducted.