One of the key reasons why a lot of investors are scared to invest in cryptocurrencies is because of their high volatility. This means the price of any cryptocurrency can rapidly increase or decrease in a matter of seconds, let alone days.
This is why cryptocurrency developers needed to create a solution that minimizes volatility while providing all the features of a regular cryptocurrency by saving its decentralized nature.
In this guide, we are going to focus on one such stablecoin. USDC (USD Coin) is a stable going launched by CENTRE. This coin is available on cryptocurrency exchanges such as Coinbase and Circle.
What is a Stablecoin?
Before moving to the next steps and learning about stable coins in depth, let’s take a brief look at how they work. Just like regular cryptocurrencies, stablecoins are digital assets as well. However, they usually replicate fiat currencies like USD.
Moreover, stablecoins use certain stabilization tools to avoid rapid fluctuations in their value against the currency they replicate.
Every stablecoin represents a regular fiat currency on a blockchain. These coins have specialized stabilization tools to help them avoid price fluctuations against the currency they are representing. They exactly mimic the value of their parent fiat currency.
For example, since the stablecoin USDC is pegged to the fiat currency USD, you can redeem one USDC for one USD, and vice versa. These coins are also used by traders and investors to save their capital whenever the traditional cryptocurrency market is volatile. Switching to a stablecoin reduces, or even eliminates your risk of incurring a loss when the market is bearish.
Reasons to Use Stablecoins
Since a stablecoin can successfully contain its value regardless of the situation in the market, you can use it to keep your profits and capital safe whenever the market becomes unpredictable.
Moreover, stablecoins can help you transfer value across multiple exchanges without requiring you to convert your capital into fiat currency. This means you can stay within the cryptocurrency ecosystem while switching exchanges.
Doing this keeps the user safe from any consequences which might arise by them converting their crypto assets into fiat currency (conversion fees, taxes, and other legal concerns).
Moreover, if you are using a cryptocurrency exchange that is not regulated, it might not support the conversion of cryptocurrencies to fiat currencies.
In this case, you can move your cryptocurrency assets in and out of the exchange in the form of stablecoins like USDC. This can prove to be a great tool for crypto investors who can’t easily access foreign currencies.
When it comes to their liquidity and ease of use, stablecoins beat fiat currencies by a huge margin on blockchains. Every payment made by stablecoins is always completed within a minute or so. However, the exact transaction completion time depends on the blockchain being used.
Most of the stablecoins present in the cryptocurrency world is based on the Ethereum blockchain, and our presence in the Ethereum network.
Some of the biggest factors in ensuring the widespread acceptance of stablecoins are regulatory compliance issues and AML compliance among others. The key benefits of these coins include speedy transactions, cost, and interoperability across different blockchains.
Introduction to USD Coin (USDC)
As we’ve already mentioned earlier, the USD Coin is attached to the US dollar for its value, and its price is kept stable by a large reserve of US dollars. The main purpose of USDC was to lower the barrier to entry for new crypto investors and to help them enjoy crypto investing without bearing volatility-related risks.
Creation of USDC
USDC was introduced in 2018 by Circle. The coin was fiat-backed and was pegged to USD. At that time, other platforms like Paxos and Gemini had also announced the creation of stablecoins.
For the creation and introduction of USDC, both Circle and Bitmain collaborated. Bitmain is one of the biggest manufacturers of mining rigs for Bitcoin. A $110 million investment was done by Circle and was led by Bitmain in 2018, and thus USDC was introduced.
At the start, the company advertised USDC as a regulated and stable alternative to other cryptocurrencies.
Shortly after its launch, USDC made its way on the Coinbase listings. Circle and Coinbase teams further collaborated to strengthen the technology behind USDC, and helped scale it on the global level. CENTRE is the governing body behind USDC, and the company fully owns this subsidiary.
Governments around the globe control the reserves of their currencies and print more currency whenever they have to achieve their political goals to save government organizations from collapsing. This is done to save the economy from a lack of liquidity and capital. This method includes the issuance of huge amounts of fiat currency by the central bank of that country.
While this method successfully increases the circulation of money in our country, it has lots of disadvantages including inflation and deflation. When these consequences occur, they decrease the value of a currency.
This is what acts as the fuel for the cryptocurrency revolution we are witnessing these days. The financial landscape is being changed for the better by cryptocurrencies, and stablecoins like USDC are helping to accelerate the process.
Ever since its introduction, cryptocurrency has been adopted by many investors and tech-loving people. They are supporting cryptocurrencies by actively investing in them, and by executing regular trades. But there are still a lot of steps that need to be taken to complete the transition to cryptocurrencies.
A layman with little to no technical knowledge might still prefer using fiat currency because of security-related concerns. Here are the reasons why a common man might still not invest in cryptocurrency.
Complex Blockchain Systems
Many cryptocurrency and blockchain developers neglect the importance of user interface when developing their cryptocurrency. This makes the interface so complex that only a user with lots of technical knowledge can successfully operate and benefit from the cryptocurrency.
However, this barrier has been lowered by USDC to some extent.
High Volatility
One of the biggest turn-offs for any potential cryptocurrency investor is the sudden fluctuations in the price of cryptocurrencies which happen every day. This issue has also been resolved by USDC, since it is not volatile, and retains its value in the long run. This gives a beginner the confidence they need to make their first deposit.
Since stablecoins like USDC successfully write their value against the currency they are pegged to, you can safely make a deposit knowing that your cryptocurrency won’t decrease in value. If you choose USDC as your value storage on a crypto exchange, you’ll have one USDC for every USD you deposit.
Stablecoins were first introduced by the CENTRE consortium. This was done to solve volatility-related issues and to help lower the barrier to entry for aspiring crypto traders.
After only two months after its launch, USDC was added by Binance. This helped the stablecoin ensure liquidity and strengthened the concept even more.
As time passes, USDC got listed by more crypto exchanges and became available for trade in over 100 countries. This provided the stablecoin with more popularity and funds to maintain its operations.
Another reason for the rapid widespread popularity of USDC is its widespread use as a hedge against the inflation of fiat currencies by people around the globe during the pandemic. Moreover, DeFi applications made the onboarding process much easier and streamlined for novice users.
People simply located their assets and earned passive income through methods like yield farming. Because of this popularity, USDC has now become one of the leading cryptocurrencies by market cap. Currently, the circulating supply of USDC it’s at around 10 billion dollars.
As the decentralized finance industry strengthens in the upcoming years, USDC is expected to grow even further in popularity.
USDC 2.0
USDC got an update in 2020, and the update was termed the introduction of USDC 2.0. The later version has better functionality and support for platforms supporting stablecoins.
Before this update, USDC holders were required to pay a fee for every transaction they made. The Gas fee was only payable by using ETH tokens.
The above-mentioned drawbacks of USDC trade were keeping it from widespread adoption. So, the developer of USDC released USDC 2.0 to provide a method of making transactions without paying the Gas fees.
This way, the fees can be charged in the shape of USDC, rather than using ETH, and the commissions can also be paid by the wallets in the form of USDC directly.
A smart contract was made by the developers to make these changes possible. Third-party services can also use this feature seamlessly.
The Gas-Free send feature provided USDC with limitless expansion opportunities in terms of payments, P2P transactions, and also in e-commerce. The update is also backward compatible. This means no one connected to USDC before this update will get affected in any way whatsoever.
Working of USDC
Just like many other stablecoins, USDC uses ERC-20 smart contracts as its base. This standard helps in the tokenization process.
To buy USDC, a user must pass the KYC test. After getting verified, the user then receives a bank account to transfer the USD they want to use to buy USDC. The USD received by the developer is stored in the reserve, while USDC is added to their wallet after their successful creation.
Whenever a customer wants to sell their USDC in exchange for USD, the above-mentioned process is exactly reversed. Smart contracts are used in this process to fully automate it, and make the whole process easy and fair.
Uses of USDC
As we mentioned earlier, USDC is a smart contract-based stablecoin that uses ERC-20 tokens for its creation. It is used as a value reserve, trading currency, investments, lending, and for payments. As more goods and services are becoming tokenized, the USDC ecosystem, as well as its uses will expand.
Moreover, with the smart integration of smart contracts in the case of USDC, the interaction of fiat currency with the crypto world was made possible.
Users can use USDC just like the regular USD and utilize it to make global remittances without any regulatory and security concerns. All you need is a secure crypto wallet to send and receive USDC, and you will be all set to make borderless transactions without paying a lot of fees like in the case of fiat currencies.
You can make huge transactions while paying minimal fees in return. Moreover, since every transaction gets processed in only a few minutes, USDC has become a valuable and irreplaceable asset for its holders. The immutable and irreversible nature of transactions also means transparency and foolproof security across the board.
The features and functionalities provided by USDC are unmatched by any fiat currency. For example, it provides low-cost and rapid transactions and provides high leverage in trading. You can also use your USDC to buy cryptocurrency-related products through decentralized applications.
USDC can be used as an alternative to fiat currency and can be used to provide banking solutions for unbanked people. With enhanced technology and the widespread use of USDC every passing day, it is all set to make a significant impact in the global decentralized finance industry.
Top-notch Features of USDC
Since the regulatory authorities in the United States are supporting USDC, ensuring its transparency becomes a lot easier for a new user. The developers of USDC are legally required to ensure transparency.
The reserves are maintained and looked upon by regulatory authorities, which mandate the production of new USDC, and its release into the market. An equivalent amount of fiat currency is stored in the reserve bank account which is regularly audited. Monthly reports of the reserves are made, and transparency is ensured.
Since USDC is recognized and listed by some of the biggest cryptocurrency exchanges and is monitored and maintained by the US regulatory authorities, it is very popular, this is the main reason behind the widespread adoption of USDC around the globe.
While recent investigations into other stablecoins have been initiated, USDC has successfully maintained its reliable image. These investigations provided stablecoins with more popularity and emphasized the importance of a regulated system of stablecoins around the globe.
Buying USDC from an Exchange
You can use almost any cryptocurrency exchange to buy USDC. There are multiple deposit options available, and you can even use your credit card.
Credit/ Debit Cards
Almost every popular cryptocurrency exchange supports the use of credit/ debit cards for deposits. You can either sign up for a new account with a popular cryptocurrency exchange or sign into your existing account to add your credit/ debit card and start the process of buying USDC.
All you have to do is select USDC from the list of cryptocurrencies provided by the exchange, choose a suitable deposit amount, and add your credit card info. After the amount is deducted from your bank account, USDC should appear in your spot wallet within 5 minutes. You can also buy any other cryptocurrency, and convert it into USDC on the exchange later on.
P2P Trade
P2P trade is another popular method to buy any desired quantity of USDC from advertisers on an exchange. You should visit the P2P trading page on your cryptocurrency exchange, and choose an advertiser who has the required amount of USDC at a suitable price you are willing to pay.
Use the payment method they have required, and make the payment before seeing your USDC in the P2P wallet. You can then transfer these coins to your spot or futures wallet to start trading.
A huge benefit of P2P trade is that you can make the payments directly in your native currency without paying the conversion fees to USD.
Storing USDC
You can buy and store USDC in any wallet which supports Ethereum. You can use any wallet compatible with the ERC-20 standard, or in a hardware wallet.
You can use Coinbase wallet, Bitgo, Atomic, Coinomi, MetaMask, MyEther, Alpha, or any other wallet compatible with Ethereum. However, if you do not want to actively trade USDC, you can use a Ledger hardware wallet to securely store your stablecoin.
Conclusion
While cryptocurrency is the currency of the future, high volatility is one of the biggest reasons why people are usually scared of buying any type of cryptocurrency. However, this problem can be easily solved by depositing your money in the form of USDC whenever you start using a cryptocurrency wallet with little to no knowledge of the crypto field.
By doing this, you can keep your investment safe from price fluctuations, since stablecoins like USDC are pegged to fiat currency, and can be stored securely online without worrying about any sudden price fluctuations.
However, to buy and store USDC, you will have to sign up for a cryptocurrency exchange and use fiat currency to buy it. You can also trade any other cryptocurrency in exchange for USDC.
With more advancements coming in the field of decentralized finance, the use cases of USDC are increasing, and the stablecoin is all set to disrupt the traditional financial market.