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What is USDC?

US Dollar linked to a crypto token

Definition

USD Coin (USDC) is a stablecoin that runs on the Ethereum blockchain and can be exchanged at a one-to-one ratio with the U.S. 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. 

Every USDC is guaranteed to be backed by a dollar in a bank. Its goal is to make crypto payments via the blockchain more reliable by reducing price fluctuations. As of early 2021, more than $9 billion in USDC has been minted by Circle (a consortium of which Coinbase and Circle are founding members.) 

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. It was created to be a highly useful form of digital money that wouldn’t see value swing dramatically in the middle of a transaction.

Each USDC is backed by one US dollar held in a bank, enabling the stablecoin to maintain a one-to-one exchange rate with the US Dollar. You can buy USDC via exchanges like Coinbase, and hold them in any Ethereum compatible wallet. There are no fees for transferring a US dollar to USDC.  

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 USC 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.

USDC stats

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.

ETH2 staking rewards are coming soon to Coinbase

You may be able to put your Ethereum to work and earn up to 7.5% APR.

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