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In recent years, cryptocurrencies have become infamously popular because of their increased prices and volatility. The assumption of a decline in cryptocurrency values frequently discourages people from investing in cryptocurrencies. But here is a bright side. Stablecoins like the USD Coin or USDC have become one of the best ways to ensure stability.
A cryptocurrency known as a “stablecoin” is one whose value is tied to a fiat currency, such as the U.S. dollar or the euro, though other assets may also be used. A cryptocurrency that follows the underlying asset will remain stable over time, at least for the currency it is paired with. In this article, we’ll talk about the history, origin, functioning, and unique features of the USD Coin, as well as the benefits and usefulness of stablecoins. So let’s first discuss the benefits of a stablecoin before discussing the USD Coin.
Benefits of Stablecoins
People who want to be at ease by keeping their money in a “safe” and secure setting are more inclined to adopt stablecoins. This can also make them less subject to price volatility, making it difficult to predict the future cost of an action in the cryptocurrency world. Since cryptocurrencies are based on code, their value is controlled by software algorithms, which are constantly evolving. This means that if the software is updated, the cryptocurrency could go up or down in value, which is why it is considered volatile.
USD Coin, on the other hand, is a more stable cryptocurrency since its supply is fixed. There are many other cryptocurrencies in the market, such as Litecoin, Ripple, and Ethereum, which have viable use cases for various types of businesses.
Although relatively new, stablecoins have the potential to be an extremely useful tool for those who want quick access to cryptocurrency without having to deal with the hassle of volatility, complex trading rules, liquidity concerns, etc. It’s a much safer option than other cryptocurrencies. It is also considered a digital asset, which can be stored in a digital wallet just like other cryptocurrencies. It’s a great way to broaden your investment portfolio. It’s also a wonderful way to get into cryptocurrency without worrying about making a risky investment.
A Brief Introduction to USD Coin
The first point to be discussed in any discussion about USDC is what the USD Coin is and how it functions. USD Coin is the first cryptocurrency that is backed by the U.S. dollar. It’s a stablecoin that functions like USD on the cryptocurrency exchange but is always worth $1. USD Coin enables you to spend your crypto anywhere that accepts USD. It’s a bridge between the cryptocurrency and fiat world.
Simply put, the USD Coin is similar to the U.S. dollar, but the only distinctive feature is that we can use the USD coin on the internet and a public blockchain. Not only that, it is the latest thing in the world of finance and is ideal for payments, savings, and investing. Your Crypto USD is insured by the FDIC and SIPC since it is regulated by the U.S. government. This means you can confidently buy, sell, and trade your USDC that can be used to buy goods and services.
It’s also a way for people to store and transfer money without needing a traditional bank account. Although the USD Coin was initially intended to be an ERC-20 token, Now it has been completely integrated into the Solana and Algorand blockchain networks. Before exploring more about USD coins, it is important to understand their history, including their origin and the reason behind their creation.
Origin of USD Coin
USD Coin was initially created in September 2018 with a collaboration between a circle and Coinbase called the center consortium. In the world of cryptography, it is the first stablecoin created as listed on the Coinbase cryptocurrency exchange. Later, Binance, a well-known exchange, added USDC to its listing. As it is available for trading in more than 80 countries, its popularity has increased.
The introduction to the USD coin is incomplete without discussing the reason behind its establishment. USD Coin was created to tokenize U.S. dollars and facilitate their use over the internet and public blockchains. The reason behind creating USDC was not only to provide stablecoins, but in actuality, the complexity of systems and the instability in the cryptocurrency market were key drivers in the development of USDC. For novice investors, the abrupt fluctuations in asset prices can be rather difficult.
However, stablecoins like USDC can provide a trustworthy store of value while avoiding the instability seen in cryptocurrencies.
Working of USD Coin
USD Coin is a digital asset that works as a medium of exchange using blockchain technology. The USD Coin is built on the Ethereum blockchain and is backed by the U.S. dollar. USD Coin can be used to purchase goods and services or sent to other USDC wallets. USDC is an ERC20 token, which means it can be stored in any Ethereum wallet. The exchange will then convert your fiat currency into USDC tokens, which can be traded on the exchange. Using digital currency, called the USD Coin, works similarly to traditional money. Instead of being controlled by a single nation, USD Coin is borderless and decentralized.
According to Circle, each USD Coin is backed by real fiat currency, meaning it is backed by the U.S. dollar. You may count on its stable value because it is tied to the U.S. dollar, notwithstanding the fluctuations in other cryptocurrencies’ prices. Moreover, to ensure that the USD Coin is backed by an equivalent number of U.S. dollars, Circle continues to strengthen reporting and disclosure with straightforward, concise, and regular updates of its reserves as part of its dedication to transparency and trust. The process of converting U.S. cash into USDC tokens is called tokenization. The significant steps involved in the process of tokenization are as follows:
- Open a profile on a partner exchange that accepts USDC.
- Fiat currency can be deposited into your exchange account via wire transfer, credit card, or bank account.
- With your fiat money, purchase USDC.
- On the contrary, you can do the following to exchange your USDC for fiat money:
- A user asks the exchange platform to exchange any quantity of USDC tokens for fiat.
- The exchange asks the USDC smart contract to exchange its tokens for currency and take out an equivalent number of tokens from circulation.
- The issuer returns the requested amount in fiat currency without paying fees to your bank account.
Features of USD Coin
USD Coin is one of the many ways we are striving to create a more inclusive and unbiased financial system, and it’s an innovative way to offer financial services to the unbanked. Currently, it is one of the largest cryptocurrencies in terms of market capitalization. Unlike other cryptocurrencies, USD coins can be used to make purchases and transactions without the need for a bank account or credit card.
In this way, USD Coin can provide the unbanked population with a new way to access financial services. In addition, USD Coin is more stable than other cryptocurrencies, making it a great store of value in times of economic disruption. When there is economic uncertainty, people often turn to the fiat currency of their country. The following are some features that make the USD Coin distinguishable from other stablecoins in the market.
The foremost characteristic of the USD Coin which makes it stand out from other stablecoins is that the issuer of the USD Coin, Circle, is a registered company registered with FinCEN and 46 state regulators. The only way to keep investors and customers safe from money laundering is through proper regulation of financial services, which must involve thorough control of the goods and services of those companies’ offices.
Secondly, the USD Coin has been listed under audited coins which makes it distinct from other stablecoins. Since its creation, the USDC reserve has undergone yearly audits. It is being done by Grant Thornton, a popular accounting firm, to ensure the veracity of financial records as well as the proper working of the internal record system over financial data that guarantees the accuracy of the financials once a year.
Another striking feature is the availability and speed of the transaction through the USD Coin, which makes it different from other coins. It is available 24/7, and the transaction can be made at the speed of the internet. Sending USDC is quicker than sending traditional currencies because payments happen instantly, and it is possible to do so around the clock. Moreover, the USD Coin is cost-effective with the lowest transaction fees. Using it to do transactions saves us time and money.
Uses of USD Coin
As of now, you are aware that USD Coin is the name of an ERC-20 token built on the Ethereum platform enabling faster, cheaper, and more efficient transactions on the Ethereum platform. It is a digital coin that can be sent from one person to another person or used to make a payment on the Ethereum platform. Now let’s have a look at some of the potential uses for USD Coin. The following are the reasons why someone should use USD Coin in crypto.
USD Coin is a popular coin in the crypto market. Almost every cryptocurrency exchange chose the USD Coin. Due to its universality, transparency, and stability on the main crypto exchanges and public blockchains around the world, a large percentage of crypto platforms selected and promoted cryptocurrencies. A feasible choice for the majority of traders, USDC is an ERC-20 token that can be exchanged directly for U.S. dollars, which gives liberty to the traders to shift their gains to the dollar-pegged USDC, a suitable option to protect against unanticipated market declines.
As mentioned above, the USD Coin is linked to U.S. dollars. It gives liberty to the traders to use it for cross-border payment. Cross-border payments are one of the most complex parts of international trade.
USD Coin aims to make this process easier by providing a digital currency that can be used to make instant, private, secure, and fee-less payments anywhere in the world. The first place we’ll use USD Coins is in our cross-border payment flows. This will allow us to save on fees and provide a faster experience for our customers, which will ultimately improve their experience and increase their likelihood of continuing to use our platform. This is a game changer for the way we do business.
USD Coin is a cryptocurrency that can be used to power the lending and borrowing functionality of the cryptocurrency lending platform. Users will be able to use USD Coin to secure loans and make small, short-term investments. Comparing lending USDC to regular savings accounts, you might be able to increase your profit. In addition, the U.S. Dollar gives you the option to invest your money, unlike banks where you must keep it locked.
One of the most promising use cases for USD Coin is on-chain purchases. Right now, in order to conduct an on-chain purchase, you must transfer your coins to an exchange where you can swap them for the desired currency. With USD Coin, you can keep your coins and use them just like cash to make purchases. This means that you don’t have to worry about the price of a currency fluctuating and losing money when you use it to buy everyday items.
After discussing the origin, specialty, and uses of the USD Coin, the question that arises here is whether the USD Coin is a good investment or not. Although USDC is a stablecoin, it is not suitable for investment. Investing in it won’t result in any rewards for investors.
Nevertheless, there are many ways to make money using USD Coins. It is a fantastic option for a passive income stream, despite the fact that it is not an investment. You may easily earn an annual percentage income of more than 5% on USD Coin through lending it to other cryptocurrency investors. However, no investment is risk-free; you must assume some risk related to borrowers.
Before investing your USD Coin, make sure that the exchange you use is reliable and reputable to minimize the risk. Crypto.com, Voyager, and BlockFi are trusted and reputable exchanges. BlockFi is the biggest exchange platform and offers a 7% interest rate and has no minimum account balance requirement, unlike crypto.com, which has a minimum one-month deposit term.
Moreover, it provides interest between 4-8% depending upon the number of coins present in the account holder. If it is less than $30000, you earn up to 8%, and if it is more than $30000, then you can earn a 4% return. You must be thinking about why the incentives are less for a larger deposit. It is not clear, but the interest rate on crypto.com is a bit complex.
Investing USDC coins in voyager can help you make an interest of between 6-9%, but there are some restrictions, like the initial investment must be more than $10, the monthly investment must be more than $100, and just like on crypto.com, the incentives decrease as the deposit increases. Voyager is among the best ways to earn income thanks to its low criteria and high-interest rate. These exchanges are among the most reputable exchanges that offer a good interest rate on USDC coins.
In a nutshell, USD is the world’s first fully decentralized digital currency and has a well-known reputation for being the world’s most stable digital currency. Besides that, it has included laws and audits that boost the confidence of investors in the USDC stablecoin. It can be utilized as a potential digital currency, which is a viable option for trading crypto, making payments across borders, for On-Chain purchases, or for investment in cryptocurrency lending platforms to generate passive income.
The value of a USD coin is determined by the supply and demand of the coin. The demand for USD coins increases as the economy grows and more people want to use USD to store their wealth. As the USD coin continues to grow, it will become a driving force for the crypto-verse. It will be accepted by many merchants and aid in the digital economy. It will provide investors with security and hope for the future. The future of the USD coin is bright, and it is my hope that more people are able to take advantage of the benefits it has to offer.