What is USDC and how does it work?

USD Coin (USDC) is a stablecoin developed by Centre Consortium, a partnership between Circle and Coinbase that was formed in 2018 with the mission “to provide the governance and standards for the future digital financial ecosystem.” USDC, their first project together, was developed so that there could be a layer of trust and transparency for digital payments all over the world.

USDC is a stablecoin that is fully backed by US dollar reserves—meaning that its value stays at 1.00 USD per USDC. Behind Tether (USDT), USDC is the second-largest stablecoin on the market with a market cap of 46,055,381,509 USD at the time of writing.

How does USDC work?

USDC’s primary function is that of a centralized stablecoin, meaning it’s mostly used as a financially transparent fiat-to-blockchain solution. Basically, it’s meant to be used as a representation of a US dollar in the cryptocurrency world.

With stablecoins like USDC, users can experience and have easy access to finance that’s truly decentralized. It’s the best of both worlds: all the benefits of a cryptocurrency—like transparency, lower fees, and quicker transaction speeds—and access to participate in global financial transactions.

What makes USDC valuable?

At this point, you’re probably wondering: how can a cryptocurrency like USDC have a market cap of over 46 million USD and keep its value of 1 USD?

The answer to this question lies solely in USDC’s utility. Because its market value stays at around 1 USD, its real-world value is what entices and draws people in. This is especially seen in its real-use cases.

USDC’s real-use cases

Like Bitcoin and other cryptocurrencies on the market, USDC has real-use cases that everyday people can take advantage of. Here are a few examples of some of the most popular ones:

• Hedging against inflation and volatility

  There are many countries in the world experiencing high rates of inflation and their currency performing poorly against the dollar. So what do you do when the value of your money is plummeting? Converting it into USDC could be a great way to keep its value. For investors, exposure to cryptocurrencies can sometimes mean a lot of volatility. Converting your cryptocurrency into USDC will allow you to strategically stabilize your portfolio in times of market uncertainty.

• Remittances

  Since most cryptocurrencies aren’t tied to any institution or government, cross-border payments have always been one of their specialties. With a stablecoin like USDC, people can send money abroad in just a few clicks without needing a bank account or traditional remittance services to facilitate it.

• Crowdfunding

  Many nonprofit organizations and startup companies need funding to achieve their missions. Lately, cryptocurrencies have shown that they’re not only an efficient way of supporting a business or charitable organization, but they’re also very transparent. USDC is a great way to ensure that the value of your donations—whether you’re the one asking for donations or the one giving them out—doesn’t fluctuate over time.

• USD pricing

  Imagine this: you’re shopping on an online marketplace that accepts cryptocurrencies as payment. All the items shown are in the value of a cryptocurrency like Bitcoin. Sometimes, it may be hard to gauge how much they actually cost because of the conversions you’ll have to apply. Situations like that can be a little frustrating, so having items for sale priced in USDC can make things a whole lot simpler. This goes for other cryptocurrencies for sale on exchanges and marketplaces or even e-commerce platforms that are forward-thinking enough to accept cryptocurrencies like USDC.

• Blockchain compatibility

  USDC is compatible with several other autonomous blockchains. This makes it easier to integrate it with payment systems and applications that go through several blockchains at a time.

The difference between USDC and USDT

USDC and USDT are functionally the same in concept: each stablecoin is backed by the US dollar in a 1:1 ratio. However, their main differences lie in the entities or companies that issue them.

With USDT’s four-year headstart, it’s been a more popular stablecoin and has maintained the highest consistent trading volume. However, USDC has been making strides in closing the gap and is now available on many of the same blockchains as USDT.

Some also believe that USDC is more transparent since its reserves are regularly reviewed by the US Securities and Exchange Commission (SEC).