What is USD Coin (USDC)?
USDC is a stablecoin linked to the value of the US dollar. It launched via cooperation between Circle and Coinbase on 26 September 2018. Its objective is to make transactions quicker and cheaper than traditional payments while eliminating the volatility associated with digital currencies like Bitcoin.
In short, USD Coin has to be utilized on the web or in public blockchains, which tokenizes US dollars. In addition, at any time, USDC tokens are converted to USD. The smart ERC-20 smart contract guarantees that USDC coins are issued and redeemed. Putting US dollars on a blockchain lets them send in minutes to the world and creates much-needed stability for cryptocurrencies. It also provides new trading, credit, risk prevention and other options.
How Does USD Coin Work?
USDC runs on a decentralized blockchain, Ethereum, using developers to build a wide range of apps and tokens. USDC is a highly usable type of digital money whose value would not fluctuate drastically in the middle of a transaction.
It supports separate accounts with the US authorized financial institutions by the dollar-denominated assets of at least equal fair worth to the USDC circulating. You may purchase USDC via exchanges like Coinbase and keep them in a wallet compatible with Ethereum. The transfer of a US dollar to USDC does not require fees. The USDC launched through the co-founding of the CENTRE Consortium through cooperation between Coinbase and Circle.
Tokenization refers to the process of converting US money into USD currencies.
The USD to USDC conversion is a three-stage process:
- A user will send USD to the issuer’s bank account.
- Using the USDC smart contract, the issuer produces the same amount of USDC.
- The user receives the newly emitted USDC, while the US dollars replaced are kept in reserve.
It is just as simple to exchange USDC for USD as it is to produce the token; the only difference is that the process is backward:
- A user contacts the USDC issuer and asks for a comparable amount of USD to be swapped for USDC tokens.
- The issuer orders the USDC smart contract to exchange the tokens for USD and delete an amount equal from circulation.
- The issuer uses its reserves to refund the needed amount of USD to the user’s bank account. The user gets the net amount equal to the number of USDC tokens minus any expenses.
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