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What Is USD Coin All About?

USDC or USD Coin is pegged to the US dollar as a stable coin. The coin is jointly managed by Coinbase and Circle, which is a relatively fresh stable coin. It is a direct alternative to other stable cryptocurrencies, like TrueUSD or TUSD, and Tether or USDT. These coins like the USDC are also backed by the US dollar. USDC is a true representation of the current market value of 1USD. Each USDC on the Ethereum blockchain is valued at $1. USDC is an ERC-20 token and is acceptable by every Dapp that supports the standard protocol.

This short guide will explain what USD Coin is designed for, the team behind it, the way it works, and the various uses and applications.

What Is USD Coin Designed For?

The crypto sector has come up in a big way with more industries adopting it. Bringing blockchain to incorporate US dollars, much-needed stability can be incorporated in the world of crypto. This allows for the opening of new possibilities and opportunities for lending, trading, risk hedging, and much more.

A price-stable means of value is vital for true financial interoperability. The technology employed by Circle and Centre in USDC allows for this stability through fiat-backed stable coins. USDC is designed to create increased opportunities in lending, payments, investing, trade finance, and individual trading. The ecosystem is expected to grow as with any other fiat currency token.

Who Is The Team Behind USD Coin?

The Centre consortium, which is a partnership between Coinbase and Circle is responsible for developing USD Coin. The governing framework and technology are developed by the Centre, while Coinbase and Circle are the first commercial issuers of the coin.

Jeremy Allaire and Sean Neville founded Circle in 2013 as an official Money Transmitter making the company an open financial book. Money Transmitters can best be explained as US money service businesses, which are required to comply with relevant federal laws and regulations. An equivalent amount of USD is held by one of Circle’s accredited partners before USDC is issued. All USDC tokens are transparent, verifiable, and regulated.

The circle is a crypto startup that is backed by Goldman Sachs.

How Does USD Coin Work?

USD Coins are different from other regular crypto tokens. These cannot be printed out of thin air. They are highly regulated and not just to keep crypto inflation in check. Circle guarantees every USDC to be backed by a single US dollar. This process of converting real-world US dollars to USDC tokens is known as tokenization.

The process entails three important steps. Users can send a required amount of USD to the token issuer's bank account. The issuer, in turn, makes use of USDC smart contracts to develop or create an equivalent amount of USDC token, depending upon the value and rate of inflation.

This newly minted USDC shall be delivered to the user’s wallet while the US dollars that were offered at the beginning are held as a reserve.

Redeeming USDC for an equivalent amount of USD is a simple process as well. This can be equated to minting the token, except the process is largely reversed. The user shall send a request to the issuer, from where they received the USDC to redeem the tokens for an equivalent amount of US dollars.

The issuer would, in turn, request the USDC smart contract to initiate the exchange. USDC tokens would be exchanged for an equivalent amount of US dollars by taking them out of circulation.

The requested amount of USD shall be sent by the issuer from its reserves, back to the user’s bank account. The user shall receive a net equivalent amount of USD equivalent to the USDC offered to be exchanged. However, there is a small fee charged as a transaction fee in the entire process.

What Are Current and Future Applications of USD Coin?

USD Coins serve an important role by tokenizing US dollars. They facilitate the use of USD over the internet through USDC, bringing USD to blockchains. This opens up new doors of opportunities and possibilities for the USD. Besides, the best part is that USDC tokens can be exchanged for USD whenever a user wants. The execution of redeeming and issuing the tokens is ensured to be safe, secure, and transparent via ERC-20 smart contracts.

Generally, USDC can be used for the following:

Purchasing other cryptocurrencies by cashing out small amounts of USDC whenever needed

Avoiding traditional financial instruments to make purchases

Avoiding hyperinflation and still getting dollars’ worth in places like Venezuela

Transfer monetary value anywhere anytime across the globe

Paying for items in various other Dapps, crypt, blockchain-based games and exchanges

While USDT is one of the biggest competitors to USDC, the upper hand is still with USDC.

Unlike USDT, USDC is required to provide full transparency. They also have to work with a range of different financial institutions to maintain the required reserves of USD, which ensures security.

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