2018 can be considered the “year of stable coins” when more than 36 projects are launched on the market. The most prominent of them is USDC, which is considered a rival to Tether (USDT). Since its launch, it has received positive reviews from analysts and experts.
WHAT IS USDC?
Launched in September 2018, USDC (US Dollar Coin) is a stable coin backed by the U.S. Dollar in a ratio of 1:1. It is a combination of Circle, a company specializing in peer-to-peer payment technology, and Coinbase.
Currently, USDC is the second-largest stable coin in the crypto market with a market capitalization of more than $25 billion.
USDC’s issue provider is committed to financial transparency and all activities in exchange for user trust. The two companies currently managing USDC, Circle and Coinbase, have been registered and licensed as The Monetary Services Enterprise (MSB) with U.S. financial regulator FinCen. That means their financial books are subject to regular scrutiny by reputable third parties.
When it comes to USDC, it’s not mining like Bitcoin, it’s not being cast as new as Ether on Ethereum, nor is it issued at the same time or periodically like LINK or XRP. The new USDC coins will be issued according to the user’s needs when a financial institution quantizes USDC in a quantity of USD and locks them in storage.
USDC MECHANISM OF ACTION
The company issuing USDC Circle ensures that each USDC token is supported by a single USD. The process of converting USD into USDC tokens is called tokenization.
The encryption of USD into USDC is a three-step process:
- Step 1: Users deposit USD into the bank account of the token issuer
- Step 2: The issuer uses the USDC smart contract to generate an equal amount of USDC.
- Step 3: Usdc newly minted is transferred to the user. Meanwhile, the replacement dollar is stored in reserves.
If the user wants to trade USDC with USD, the process will reverse:
- Step 1: Users send a request to the USDC issue provider in exchange for an amount of USD equivalent to the USDC token they want.
- Step 2: The issuer sends a request to the USDC smart contract to exchange the token for USD and take the token out of the user’s storage wallet.
- Step 3: The publisher sends the required amount of USD to the user. The recipient will receive the same amount as the requested USDC, minus the costs incurred.
The creators of USD Coin must ensure the full transparency of the process. Besides, they have to work with a variety of financial institutions to store enough fiat equivalents to transact with users.
FEATURES OF USDC
- Stability: The most striking feature of USDC is that its value is always equal to $1. That’s a big difference from highly volatile coins like Bitcoin, Ethereum, and Dogecoin.
- Transparency: USDC’s source code is open source, so users can easily check every release activity and the amount of USDC that is in circulation on the market. In addition, USDC is regularly audited by leading auditing firms.
- High liquidity: Users can convert USD to USDC and vice versa at any time, just through the publisher’s KYC/AML process.
- Reputation: Circle is one of the $3 billion valuation technology companies, licensed to operate by the New York Stock Exchange (NYSE) and registered with FinCen. This means that it is part of the government’s anti-money laundering network.
THE ADVANTAGES AND DISADVANTAGES OF USDC
Advantage
When it comes to the most popular coin backed by USD, Tether (USDT) is the “taker of the throne”. But the USDT is facing a lot of challenges as Tether comes under the intense scrutiny of its financial situation, following an investigation by the New York Attorney General.
Therefore, this is a “one-of-a-place” opportunity for other stable coins, backed by USD with more transparent processes and audits. Such as Gemini dollar, True USD, Paxos, and US Dollar Coin (USDC).
While USDC is not really “unique”, here’s why the USDC has become more prominent than other currencies:
- First, the USDC is managed by the government’s Financial Crime Enforcement Network (FinCEN) that plays an effective anti-money laundering role.
- Second, USDC is audited by Grant Thornton, one of the world’s top 10 accounting firms, which ensures transparency for USDC, in addition to the reputation of the “backing giant” behind it is Coinbase and Circle.
- Third, USDC allows banking transactions for people without bank accounts. On the other hand, international transactions can be done much easier and faster than traditional fiat money.
In addition, the core of USDC’s reliable value is its development goals. USDC prioritizes developing a more efficient mechanism for carrying out financial activities, rather than becoming an intermediary in cryptocurrency transactions such as USDT.
Shortcoming
Along with the pros is the downside. Here are the three biggest downsides of USDC:
- USD Coin is a very new project and demand for USDC is still limited. Therefore, it is difficult to determine how it will work and develop in the future.
- Other stablecoins all face some common problems, and there is no guarantee that USDC will avoid those problems.
- In the context of a lot of stablecoins being issued, USDC encounters a lot of formidable competitors. It is not yet known whether the USDC will be able to overtake its rivals or will be just one of the stablecoins mired in countless newly formed coins.
ABOUT USD COIN (USDC)
- Token name: USD Coin
- Ticker: USDC
- Token type: Stablecoin
- Blockchain: Ethereum
- Token Standard: ERC-20
- Contract Address: 0xa0b86991c6218b36c1d19d4a2e9eb0ce3606eb48
- Total Supply: $27,790,867,189
WHERE TO TRADE USDC?
You can earn USDC by buying directly from Circle or swapping with other coins on reputable exchanges such as:
- Binance (USDC/BUSD, USDC/USDT pair).
- Digifinex (USDC/USDT).
- Coinbase Pro (USDC/BTC, USDC/ETH pair).
- CoinEx (USDC/USDT).
- OKEx (USDC/BTC, USDC/USDT).
- Huobi (USDC/USDT).
- Kucoin (USDC/BTC, USDC/ETH, USDC/USDT)
Besides the above trading pairs, USDC can also be transferred directly to USD and vice versa at Coinbase.
WHAT WALLET DOES THE USDC COIN STORE?
The USDC coin is an ERC-20 token developed on Ethereum’s Blockchain platform, so you can create USDC wallets and store them on ETH wallets that support ERC20 tokens such as MEW Wallet, ImToken Wallet, Trust Wallet, Metamask, Ledger Nano S, Trezor, In particular, if the wallet is hot, ImToken is safe and the best I am using, Trust Wallet is also very good, and you want to be more secure, whether you have a Cold Wallet Ledger or Trezor.
USDC AND USDT COMPARISON
Liquidity
Liquidity and trading volume are extremely important factors in investing. Although Tether (USDT) has certain advantages, USD Coin (USDC) is doing a very good job.
Both USDT and USDC are available on most of the leading cryptocurrency exchanges. They are the two most popular stable coins by market capitalization and circulating supply.
However, USDT seems to have prevailed in this criterion as global trading volume and pairs are much more popular than other stable coins. Meanwhile, USDC’s trading volume and trading pairs are above average.
Purchases and conversions
Tether (USDT)
- Issue a minimum of $100,000 via Tether Limited.
- A minimum conversion requirement of $100,000 is required via TetherLimited.
- Users must pay a verification fee before buying or exchanging fiat money.
- Purchases and conversions do not apply to the American people.
- Users are limited to just one fiat currency exchange per week.
USD Coin (USDC)
- It can be purchased via credit card or debit card through Coinbase.
- Can be purchased through a bank account through Coinbase or directly through the publisher Circle.
- There is no limit to the minimum and maximum conversions through Coinbase.
- The conversion to a bank account usually takes 1-2 business days.
Through the above analysis, it can be seen that USDC is more convenient for users in the process of buying and converting to USD.
Financial interest rate
Both USDT and USDC have earnings accounts supported by several centralized providers such as Crypto.com, Nexo, and Celsius Network. The interest rates of both stable coins are very competitive compared to traditional finance. However, there is still a difference between them:
Tether (USDT)
- Users can earn interest on USDT account balances through cryptocurrency exchanges or Binance Lending and margin on Bitfinex.
- Decentralized organizations often do not support Tether (USDT) to make a profit.
USD Coin (USDC)
- Users can earn interest on their USDC account balance directly on Coinbase.
- USDC can be made on several decentralized platforms including Compound and Nuo Network.
Loans
The outstanding advantage of USDT and USDC in this criterion is that they both have flexible and available lockup term terms. In addition, borrowers can receive money immediately at a competitive Annual Percentage Rate. Loans are available on centralized virtual currency lending platforms such as Nexo and Celsius Network.
However, USDC proved to “surpass” USDT in two aspects. First, there are USDC loans on decentralized financial platforms, including Compound, Nuo Network, and dYdX. Second, there are private credit loans that support USDC lending.
Transparency
With regulators tightening oversight of stable coins, USDC has outpaced USDT in terms of transparency. Tether is currently in a lot of legal trouble. Tether’s system was hacked and stole $30 million in November 2017.
Meanwhile, USDC is a relatively new virtual currency, which has not encountered any attacks. In addition, all specific information and USDC transactions are publicly verifiable on the Ethereum blockchain. Moreover, USDC is Coinbase’s official stable coin — the most regulated and reputable cryptocurrency exchange in the world.
Investment subjects
Although both stable coins support 1:1 in USD, USDT and USDC are aimed at different investors and traders:
USDT: The proposed exchange is Binance
- Experienced traders want to make short-term trades.
- Experienced traders want to trade futures and margin trading.
USDC: The proposed exchange is Coinbase
- Investors are looking to make a profit on their stablecoins.
- Borrowers are looking for a cryptocurrency loan in the form of stablecoins.
- Traders are looking for temporary tools to prevent the impact of market volatility.
- Traders and investors want to trade Bitcoin and other cryptocurrencies into fiat currency.
- Traders and investors want to enter the market in fiat currency.
USDC CHALLENGES USDT’S DOMINANCE
Maker’s savior
After the liquidity crisis on the Maker protocol, one user made a difference of $8 million on the purchase price of Zero Dai. Therefore, Maker Dao has decided to add USDC stable coins to increase liquidity.
The Maker protocol can flexibly encrypt every asset added as collateral in the system, as long as it has the appropriate risk parameters and is approved by Maker Governance. USDC is seen as the solution to dai price instability and liquidity problems caused by market volatility.
The market expanded.
At the moment, USDT is “beating” all other stable coins by the large market segment. However, the increase in cryptocurrency trading pairs with USDC on leading exchanges is signaling a possible market battle between USDT and USDC in the not-too-distant future.
Business accounts using USDC
In a recent announcement, Circle announced the launch of an application programming interface (API) for business accounts. It will help businesses integrate USDC into their systems. If the APIs operate successfully, USDC will enter a new era of global development.
Prospects
Traditional investors are wary of cryptocurrencies for two main reasons: lack of regulation and volatility. This new wave of stable coins is looking for solutions to address those limitations, becoming a gateway for reputable organizations to participate. By making more attractive and convenient changes for institutional investors to participate, USDC can help make cryptocurrencies more popular than ever around the globe.
USDC Trading and Storage
U.S. citizens can trade USD to USDC or vice versa from Circle’s platform, or the Poloniex exchange has been acquired by Circle Group. In addition, most large and reputable exchanges support USDC trading.
COMMUNITY AND SOCIAL
- Official website: https://www.centre.io/usdc
- Whitepaper: https://www.centre.io/pdfs/centre-whitepaper.pdf
- Check: https://etherscan.io/
- Blog: https://medium.com/centre-blog
- Source code: https://github.com/centrehq/centre-tokens
CONCLUSION
Looking at the current development of USD Coin (USDC), it is no longer a fiction that it can replace Tether’s (USDT) position in the stable coinS world. USDC has demonstrated the possibility of a market boom in recent times. Although there are still many concerns surrounding this project, this does not hinder the USDC’s future potential to rise.
