What is USDC?
USDC is a stablecoin pegged to the price of a US dollar. Its goal is to make transactions faster and cheaper than traditional payments while reducing the volatility typically associated with cryptocurrencies like Bitcoin.
Stablecoins, which have their price fixed to a reserve asset (often the US dollar), are one of the most popular and versatile classes of cryptocurrency to emerge in the last few years. USD Coin (USDC), as its name would suggest, is one such dollar-pegged cryptocurrency.
USDC is always redeemable on a one-to-one basis for US dollars. As of August 2021, more than $20 billion in USDC has been minted.
How does USDC work?
USDC runs on Ethereum, which is a decentralized, programmable blockchain that allows developers to create a huge range of apps and tokens. USDC was created to be a highly useful form of digital money that wouldn’t see value swing dramatically in the middle of a transaction.
It is backed by dollar-denominated assets of at least equal fair value to the USDC in circulation, in segregated accounts with US regulated financial institutions. You can buy USDC via exchanges like Coinbase, and hold it in any Ethereum compatible wallet. There are no fees for transferring a US dollar to USDC. The launch of USDC was powered by a collaboration between Coinbase and Circle through the co-founding of the CENTRE Consortium.
Stablecoins like USDC have a wide range of uses. You can:
Send money cheaply and near-instantly anywhere in the world without a traditional bank account (a huge improvement over wire transfers which can be expensive and take days).
Earn rewards on USDC held in a Coinbase account.
Earn even higher yields by lending your USDC via a variety of decentralized finance (or DeFi) applications.
Think of USDC as being a programmable dollar. Being programmable unlocks a whole new world of applications and businesses: developers can create accounts to store money with one line of code; lending that is faster, cheaper, and more transparent; faster and cheaper payments, including payroll; global crowdfunding; transparent and stable donations to charity.
As of March 2021, more than $2 billion a day was sent via USDC on Ethereum network on average, from around 20,000 active addresses — numbers that have vastly increased over the last year.
Keep in mind
As the Ethereum economy has grown, the blockchain has seen a huge spike in the number of transactions, resulting in higher “gas” fees and potentially making USDC more expensive to use. There are a number of solutions on the horizon — including the ongoing upgrade to the Ethereum 2.0 (or ETH2) blockchain, which is designed to be faster, cheaper, and potentially even more secure.
What’s next for USDC?
Billions of people around the world are locked out of the global economy because they don’t have bank accounts. USDC allows unbanked individuals in any country in the world to hold dollar value with nothing more than a mobile phone and a digital wallet — making USDC a crucial link between traditional finance and the blockchain-powered open financial system. It’s not necessary to buy an entire USDC — you can hold as little as 0.000001 worth of USDC.