Robert Steinadler, a year ago
USDC is one out of several stablecoin solutions available on the market and while many crypto enthusiasts remained skeptical when this particular asset class became available for the first time it is now one of the most important tools that investors and traders have at their disposal.
One fine day stablecoins might even compete with credit cards and cash since they are the digital equivalent of Dollars, Euros, or Pounds. In the meantime, they are specifically needed for driving the adoption of decentralized finance. Borrowing, lending, and providing liquidity are much easier with a tokenized cash equivalent available that is not subject to high volatility as coins or tokens.
Each stablecoin has its own merits, backing, and technology. What is USDC and how is its peg collateralized? In this article we are going to explore one of the most important stablecoins in the market.
USDC is the abbreviation for “USD Coin” as well as the official ticker of the stablecoin on exchanges and brokers as well. USD Coin is backed by actual US-Dollars in the bank account of the issuer, which is the CENTRE Consortium. CENTRE is developing USDC and was co-founded by Coinbase and the fintech Circle.
At the time of writing a total of 51,3 billion USDC are in circulation. USDC is fully backed by US Dollars and Dollar-denominated assets like U.S. treasury securities in its account. All accounts are audited by Grant Thornton, an international accounting company that also provides monthly reports to ensure as much transparency as possible.
This way USDC maintains a 1:1 peg with the US Dollar. In reality, the value of USDC varies slightly above or below 1 US Dollar. This volatility is driven by supply and demand as well as the fluctuation of underlying assets. Most of the time the price is less than 1 % above or under the value of the Dollar. Since USDC is backed by off-chain assets, its volatility is generally lowered than the volatility of algorithmic stablecoins that also face different risks.
USDC is second to USDT according to its capitalization and therefore one of the most important stablecoins in the broader crypto ecosystem. Its market share lies a little bit above 25 % at the time of writing.
Since USDC is a token, it depends on a smart contract that allows the issuer as well as user to interact with several different blockchains natively. USDC is available on:
With such high availability and the option to bridge USDC from one blockchain to another, the stablecoin has become particularly important to the global Defi ecosystem. USDC is used for borrowing, lending, settling swaps as well as collateral for decentralized margin trading and derivatives.
USDC is used for borrowing, lending, settling swaps as well as collateral for decentralized margin trading and derivatives. Here are some more examples:
What is the smallest denomination of USDC?
Like Bitcoin and other cryptocurrencies, USDC can be divided into very small units. The smallest unit is 0,000001 USD Coin which also makes a great use case for micropayments.
How do I store USDC?
One option is to simply store it in your LiteBit wallet. Depending on which blockchain you prefer you can also store the stablecoin in your personal wallet.
Which blockchain is supported by LiteBit?
LiteBit supports USDC as ERC-20 token on the Ethereum blockchain. If you like to interact with any other blockchain you’ll have to bridge USDC after receiving it in your personal wallet.
How do I earn interest on USDC?
You can use USDC in several ways to earn interest. Most blockchains on which USDC is available, offer a broad ecosystem of Defi protocols that can be used to earn with lending or providing liquidity. Please note that these opportunities also come with certain risks.
Is investing in a stablecoin less risky?
Stablecoins often face lower or no volatility, hence the name stablecoin. While this minimizes the risk of loss due to volatility other risks remain e.g., the currency risk between Euro and the underlying asset the US Dollar.
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