What is US Dollar Coin?
US Dollar Coin (USDC) is a coin that claims to have the same value as an actual US dollar. This would imply that one US Dollar Coin (USDC) would be equivalent to one real US Dollar, which could help stabilize the market. In addition to being available on the Algorand and Solana blockchains, it was originally an ERC-20 token.
USDC: An overview
Circle announced USDC on May 15, 2018, and launched it in September 2018. USDC will be utilized by Visa to settle payments on its payment network as of March 29, 2021. Approximately 24.1 billion USDC will be in circulation by June 2021.
US Dollar Coin: Who created it?
Major cryptocurrency exchange and a crypto finance company have created the US Dollar Coin after working together. Goldman Sachs is one of the companies backing Circle. Money can be sent quickly and easily with Circle since its inception in 2013.Â
After acquiring Poloniex, it raised millions of dollars in venture capital and has expanded into cryptocurrency.
 How Does USD Coin Work?
It’s not like USD coins appear from thin air. Dollars from the US Treasury underpin every USDC token, as guaranteed by Circle. Creating USDC tokens by tokenizing US dollars is known as tokenization.
USDC can be tokenized in three steps:
1) Users send USD to a bank account of the token issuer.
2) USDC smart contracts are used by the issuer to create USDC in equivalent amounts.
3) US dollars will be substituted for the newly minted USDC and will be delivered to the user.
US Dollar Coin redemption is as simple as minting a token, except the process is reversed:
1) The user requests redemption of USDC tokens in exchange for equivalent USDC amounts.
2) The issuer requests USDC to issue USD in exchange for the token and remove an equal amount of tokens from circulation.
3) The issuing entity sends the requested amount of USD from its reserves back onto the account of the user. After all, fees have been deducted, the user is paid the net amount equivalent to the USDC token.
Unlike Tether (USDT), the creators of USD Coin are required to maintain full reserves of the fiat currency equivalent, and they must work with a range of financial institutions.
 USDC: What makes it so special?
Despite its popularity, the US Dollar Coin is not the first US Dollar-backed coin. Those rights belong to Tether. The state of its finances, however, is subject to severe scrutiny. After an investigation by the New York Attorney General, it backed away from the claim of having real dollars in the bank for every Tether in circulation.
Due to this, other US Dollar-backed stablecoins are now available with more transparent funding methods and auditing processes. US Dollar Coin (USDC), Gemini dollar, True USD, and Paxos are among them.
In comparison to other cryptocurrencies, USDC does not stand out positively. Here are reasons why:
- Regulated: USDC’s parent company is qualified as a Money Service Business in the United States. In other words, it’s governed by the Financial Crimes Enforcement Network (FinCEN), which fights money laundering.
- Audited: Grant Thornton audits USDC, one of the world’s top 10 accounting firms.
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- When banks are involved, it can be a very long process to send US Dollars to someone or an institution. US Dollar Cash offers the stability and desirability of US Dollars and the speed with which cryptographic transactions can be conducted.
3 Categories of stablecoin:
Real-world collateral:
Crypto Collateral
No collateral
How is USD Coin Different From Other Stablecoins?
- Fiat-collateralized. The stablecoins listed here are all pegged to reserved fiat value. Centralization is inherent in all fiat-backed coins. There are many examples of digital currencies, including Tether (USDT); TrueUSD (TUSD); Gemini Dollar (GUSD); Paxos Standard Token (PAX); Digix Gold (DGX); USD Coin (USDC).
- Crypto-collateralized. These stablecoins are backed by reserved crypto assets, so their value is pegged to them. Among these are Makercoin (MKR & DAI); Havven (nUSD & HAV).
- Algorithmic non-collateralized. These economic models are based on computer software, and they aim to provide price stability without collateralized assets. The following projects are examples: Basis; Kowala; Fragments.
- Hybrid. Stablecoins include a blend of the methods listed above. Example projects: Carbon.
A centralized stablecoin, USD Coin belongs to the first category, fiat-collateralized coins. It is common for all of the projects in a category to have only a few differences but work similarly. One notable example is Tether (USDT), which refuses to conduct a truly transparent audit, and Digix Gold (DGX), whose value is linked to gold.
Many stablecoins are backed by fiat and release regular attestations. Fee policies and partner organizations are the main differences between them, but the business model remains the same for the most part.
Current State of the Project
With trustworthy institutions backing USD Coin, it is a rapidly evolving project. Over 60 partners have already joined the project since it was announced in May 2018.
USDC project creators are guarding a high degree of control over the project-based cryptocurrency, according to some of the latest news surrounding USDC. If the USD Coins are suspected to be used for illegal activities, the developers are reportedly entitled to blacklist addresses and freeze funds.
In addition, the clauses of most of the other stablecoins are also similar. Only Maker’s DAI stablecoin does not contain such terms.
How can you use the US Dollar Coin (USDC)?
Poloniex and Coinbase (the companies that own USDC’s parent company) are among the exchanges where USDC can be traded, as well as Binance and Huobi.
Additionally, USDC is compatible with some decentralized finance protocols. In BlockFi, an online lender that often offers interest on USDC deposits (along with other cryptocurrencies), for example, you can deposit USDC.
In the same way that Tether and DAI are held as stablecoins, USDC is usually held by crypto traders as a stable asset. Traders who are interested in the easy trading of cryptos for US dollars will benefit from stablecoins. USDC is great to trade more volatile cryptocurrencies such as Bitcoin since it represents a US dollar.
 Final Thoughts:
Two key reasons cause traditional investors to be wary of cryptocurrencies: low regulation and volatility. In the next wave of stablecoins, institutions will be able to dive in from a haven, becoming a cryptocurrency gateway.
A company-sponsored by USDC doesn’t hesitate to say it’s for people who want to move medium-sized to large amounts of money. Stablecoins like USDC are likely to help cryptocurrencies become more mainstream if they grow to become an attractive entry point for institutional investors.
