29 Sep DIGITAL MONEY FOR THE DIGITAL ERA- USD COIN
Stablecoins have been all the rage recently, prompting anything from heated disputes about crypto market manipulation to serious discussions on the viability of CBDCs (Central Bank Digital Currencies). To be honest, there is already a slew of them invading the market, and the notion is already unavoidable in the crypto industry.USD COIN
On September 26, 2018, the USD Coin, commonly known as USDC, was released. It is a stablecoin whose price is tied to the US dollar, and it is the result of a cooperation between Circle and Coinbase. USDC is a popular alternative to other USD-backed cryptocurrencies such as Tether (USDT) and TrueUSD (TUSD). As a result, it is deserving of our attention. Let’s get started.
Anyone who earns USDC can move that amount throughout the world at a faster pace. This link between USDC and the USD makes it simple to move your money throughout the world in minutes and provides much-needed stability to cryptocurrencies.
It also opens up new opportunities for risk hedging, trading, lending, and other activities. In this post, we’ll look at the history of USD Coin, how it works, how it performs, how it may be used, and what the future holds.
Who is in charge of the US dollar coins?
USD Coin was created by the Centre consortium in collaboration with Circle and Coinbase. For stablecoins, the consortium establishes technological, regulatory, and financial requirements. The Circle was created by Jeremy Allaire and Sean Neville in 2013 and is backed by Goldman Sachs.
Bitmain, a major Bitcoin mining firm that collaborated on the Centre consortium with Coinbase and others, owns a big portion of the USDC investment. Many additional businesses, as well as people from all around the world, have invested in cryptocurrency. Since 2018, the company’s user base has exploded.
What Is a USD Coin and How Does It Work?
To put it another way, USD Coin is based on Ethereum. USDC tokens can be issued and redeemed.
ERC-20 smart contracts, which are based on the Ethereum network, provide this assurance. But this isn’t to say that the Centre isn’t participating; it is. The printing of US coins does not happen by accident. There is no mining of USD Coins either.
Unlike Tether (USDT), the USD Coin’s developers give complete transparency and collaborate with a number of financial institutions to preserve entire fiat currency reserves.
The process of converting US dollars into USDC tokens is a textbook example of tokenization, in which you take a real-world item (in this case, USD) and generate a digital counterpart of it. The conversion of USD to USDC is a three-step procedure:
The user sends USD to the token issuer’s bank account.
The issuer then uses a USDC smart contract to generate an equal quantity of USDC.
The freshly created USDC is transferred to the user while the relieved US dollars are retained in reserve.
Once these tokens have been authorized, anybody may transfer their USDC to a designated institution, which will mint them. It’s how you are paid in USDC.
How to Use the US Dollar Coin
On the Ethereum blockchain, there is a 1:1 representation of the USD Coin (USDC) and the US dollar.
To tokenize or redeem USD Coins with Circle, you must first create an account, authenticate your identity using KYC, and link a genuine bank account. The Circle USD platform allows customers to do four key actions:
Tokenize USD; redeem USDC; send USDC to ERC20 Ethereum addresses; receive USDC from external Ethereum wallet addresses.
In general, stablecoins like USDC are used to:
Not cashing out short coins in order to make future cryptocurrency purchases simpler;
Traditional financial tools and institutions should be avoided.
Send money anywhere in the world in real-time, securely, and at a cheap cost;
In different crypto apps, platforms, and blockchain-based games, you may buy goods.
USDC’s Advantages
It is critical to recognize that the value of the USD Coin remains constant. As a result, it may be utilized to pay employees or donate to charity.
Traders all around the world utilize this coin as a kind of investment in order to gain USDC interest (annually). The interest is earned by lending the USDC to investors, which is regulated by the Centre.
It cuts down on the time it takes to complete several overseas transactions. As a result, the costs are reduced in comparison.
USDC also has the benefit of being more dependable than other stablecoins due to its developers’ strong support. As a result, it has a promising future.
What Is the Difference Between USD Coins and Other Stablecoins?
Stablecoins are divided into four categories:
The most common type of stablecoin is one that is backed by fiat currency. They get their worth from the fat reserves they have in bank accounts, investments, and other traditional assets. TrueUSD, Tether, and USD Coin, for example.
Stablecoins that are backed by crypto assets are known as crypto-backed stablecoins. They can be crypto-collateralized or crypto-backed. Havven is an excellent example.
Noncollateralized algorithmic stablecoins rely on software-based economic models to keep their prices stable. Here are a few examples: Kowala and Basis.
Hybrid Stablecoins use a combination of the techniques mentioned above to ensure price stability.
In this sense, USD Coin is a traditional centralized, fiat-backed stablecoin. It stands out largely because of its charging policies and the organizational structure that supports them. Making a USD Coin price prediction is pointless because its value is always linked to the US dollar. 1 USDC is equal to 1 USD.