what-is-usdc

What is USDC? How to Buy

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What is USDC? USDC, or USD Coin, stands as a stablecoin—a specialized cryptocurrency designed to maintain a steady value relative to a fiat currency, such as the US dollar. The primary goal of USDC is to seamlessly merge traditional finance with decentralized finance, introducing the stability and creditworthiness of the US dollar into the cryptocurrency realm. This comprehensive guide delves into the essence of USDC, exploring its unique features, benefits, use cases, as well as providing insights into how to acquire and securely store USDC.

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What is USDC?

Overview

USDC is a digital dollar stablecoin issued by Circle and Coinbase’s Centre consortium. Each USDC token is backed 1:1 by US dollar held in bank accounts, making it a stable store of value. USDC runs on top of several public blockchains, including Ethereum, Algorand, Solana, Stellar and TRON. It adheres to the ERC-20 token standard when issued on Ethereum.

USDC was launched in 2018 as a collaborative project between Circle and Coinbase. Circle is a global financial technology firm while Coinbase is one of the largest cryptocurrency exchanges. The partners created Centre, a membership consortium that governs USDC. Centre oversees USDC issuance and redemptions and promotes its adoption.

USDC has quickly become one of the most popular stablecoins with a market cap of over $50 billion as of January 2023. Its rapid growth has been fueled by market demand for a reliable, trustworthy stablecoin fully backed by the US dollar.

Key Features

USDC has the following key features:

  • USD backing – Each USDC is backed 1:1 by US dollar held in segregated bank accounts by regulated financial institutions. This reserves system gives USDC intrinsic value.
  • Transparency – Centre publishes monthly attestation reports by accredited auditors to prove 100% US dollar reserves backing of USDC. This provides confidence in USDC.
  • Security – USDC inherits the security of its underlying blockchains. On Ethereum, it utilizes cryptographic security to prevent counterfeiting and double spends.
  • Regulatory compliance – Centre follows strict KYC/AML policies mandated by financial regulators to prevent money laundering and other financial crimes.
  • Interoperability – USDC works across many blockchains like Ethereum, Algorand, Solana and TRON. This makes it easily transferable across different crypto ecosystems.
  • Stability – Each USDC is worth $1 USD by design. The USD backing minimizes volatility compared to non-stable cryptocurrencies.
  • Open source – USDC codebases are open source to allow community audit of its implementation. This promotes transparency.
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How USDC Maintains Its Peg to $1

USDC maintains a stable value through a combination of full USD collateralization, transparency, active management of reserves, and arbitrage.

Here’s a quick overview of how the USDC system maintains the peg:

  • USDC in circulation is fully backed by an equivalent amount of dollars held in bank reserves by Centre’s custodians. This collateralization ensures USDC can be redeemed 1:1 for USD.
  • Centre publishes monthly attestation reports by certified public auditors confirming USDC in circulation is fully backed by reserves.
  • If USDC demand increases, new coins are issued by Centre and backed with additional USD reserves. If demand falls, USDC can be redeemed for USD to reduce circulation.
  • Traders conduct arbitrage between USDC and USD when the price diverges, bringing USDC back to $1. For example, if 1 USDC trades for $1.02, traders can profit by redeeming USDC for $1 USD and buying back USDC.

This combination of collateralization, transparency, active management and arbitrage ensures market forces naturally stabilize USDC around $1.

What is USDC used for?

USDC serves three primary use cases:

1. Stablecoin for Trading

The main use case for USDC is as a stable medium of exchange and store of value for cryptocurrency trading pairs. Traders prefer to use USDC over actual USD on exchanges because:

  • USDC allows faster flow of capital in and out of exchanges compared to slow bank wires.
  • It avoids requirement to complete KYC with each exchange just to trade actual USD. USDC inherits pseudonymity of crypto.
  • Trading with USDC avoids volatility of non-stable crypto assets like Bitcoin and Ethereum when transacting.

Nearly every major exchange supports USDC trading pairs now. On Coinbase alone, over $1 billion worth of USDC changes hands daily. USDC provides stability amidst crypto’s volatility.

2. Payments

USDC enables a new global, instantaneous online payments system. Individuals and merchants can use USDC for payments and remittances. Benefits include:

  • Send USDC payments globally within minutes, faster and cheaper than bank wires or services like PayPal.
  • Avoid volatility risk when transacting, unlike payments with volatile cryptocurrencies.
  • Pseudonymity enhances privacy compared to traditional electronic payments.
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USDC payments can be done through exchanges, wallets and payment apps supporting USDC. BitPay supports merchant USDC payments.

3. DeFi Fuel

Within decentralized finance (DeFi), USDC is the most used stablecoin. It powers a range of DeFi lending platforms, derivatives, margin trading, prediction markets and more. Benefits of USDC in DeFi include:

  • Avoid impermanent loss in yield aggregators and liquidity pools by pairing assets with USDC.
  • Minimize risk of liquidations in overcollateralized lending protocols by borrowing stablecoins.
  • Stable pricing of derivatives, options and swaps denominated in USDC.

Top DeFi apps utilizing USDC include Aave, Compound, Uniswap, Curve, Liquity and many more. USDC’s stability and liquidity makes it ideal for DeFi.

What is USDT? How does it compare to USDC?

USDC-vs-USDT

USDT (Tether) is another widely used stablecoin pegged to the US dollar. However, there are some key differences between USDT and USDC:

  • Reserves – USDT was historically backed by a mix of cash and commercial paper. USDC maintains 100% cash reserves.
  • Transparency – USDC publishes monthly attestation reports by certified auditors on reserves. USDT lacks similar level of transparency.
  • Regulation – Centre is a regulated financial firm while Tether has faced regulatory issues.
  • Adoption – USDC has seen rapid growth and is now the 2nd largest stablecoin by market cap behind USDT.
  • Blockchains – USDC runs on 5 major blockchains while USDT runs primarily on Bitcoin sidechains.
  • Stability – Both maintain relatively stable pegs to $1 but USDC peg seen as more robust.

While USDT pioneered stablecoins, USDC has emerged as a popular regulated alternative for traders, investors and DeFi applications needing stable USD liquidity on blockchains.

What is USDC erc20?

USDC erc20 refers to the version of USDC that follows the ERC-20 standard on Ethereum. ERC-20 is a common technical standard for digital tokens on Ethereum, providing a set of rules for tokens to follow within the larger Ethereum ecosystem.

When USDC runs on Ethereum, it operates according to ERC-20 rules. This means USDC erc20 has the following properties:

  • Fungibility – Each USDC erc20 token is exactly equal to and interchangeable with all other USDC tokens.
  • Transferability – USDC erc20 tokens can be freely transferred between addresses on Ethereum.
  • Divisibility – USDC erc20 can be divided into tiny fractional token amounts, up to 18 decimal places.
  • Enumeration – The total USDC supply is accurately tracked on Ethereum through ERC-20.
  • Gas fees – Sending USDC erc20 requires gas fees to compensate for computing resources on Ethereum.

Following the common ERC-20 standard allows USDC to smoothly integrate with decentralized applications on Ethereum like Uniswap, Compound, MakerDAO and more.

What is USDC polygon?

what-is-usdca-polygon

USDC Polygon is the version of USDC that runs natively on the Polygon blockchain (formerly called Matic Network). Polygon is a Layer 2 scaling solution for Ethereum that provides faster and cheaper transactions for assets like USDC.

When USDC is bridged from Ethereum to Polygon, it becomes USDC Polygon – a tokenized version of USDC on Polygon that can move rapidly between Polygon apps for pennies.

USDC on Polygon has the following key attributes:

  • Speed – Transactions confirm in ~2 seconds on Polygon vs. minutes on Ethereum L1.
  • Low fees – Transaction fees are a fraction of a cent on Polygon.
  • Interoperability – USDC can be bridged back to Ethereum from Polygon.
  • Stable value – USDC Polygon maintains its $1 peg since it’s backed 1:1 with USDC on Ethereum.
  • Composability – Works with Polygon DeFi like Aave, Curve, Balancer.
  • Security – Leverages Polygon’s proof-of-stake consensus.

USDC Polygon preserves the stability and credit quality of USDC while unlocking faster and cheaper DeFi transactions. Billions in liquidity has bridged from USDC Ethereum to Polygon.

What is USDC payment?

USDC payment refers to sending USDC coins to someone as a means of payment. USDC’s stability, blockchain-based properties, and increasing acceptance make it useful for payments.

Here are some examples of how USDC can be used for payments:

  • P2P payments – Individuals can send USDC to each other instantly for personal transfers using wallets like MetaMask. Avoid volatility risk compared to non-stable cryptocurrencies.
  • International transfers – Remit USDC payments globally much cheaper and faster than bank wires or remittance services.
  • Merchant payments – Shop at online stores accepting USDC, like those integrated with BitPay. Or shop in-person at point-of-sale systems accepting USDC.
  • Freelancer payments – Hire freelancers globally and pay them in USDC to avoid cross-border fees.
  • App payments – Apps supporting in-app USDC payments for in-game purchases, tips, unlocks etc.

USDC payments capitalize on blockchain’s global, digital nature. Payments settle in minutes, are pseudonymous, and avoid banking hurdles. Stability relative to USD keeps payments free of volatility risk.

USDC wallet address

A USDC wallet address is a string of letters and numbers that identify a destination for receiving or sending USDC payments.

USDC uses blockchain addresses rather than traditional financial account numbers. These pseudo-anonymous addresses offer certain privacy benefits.

Here is an example of what a USDC wallet address looks like:

0x9fE46736679d2D9a65F0992F2272dE9f3c7fa6e0 

This is a valid USDC address on Ethereum. Some things to note:

  • The address begins with 0x, indicating it’s in hexadecimal format.
  • It contains 40 hexadecimal characters (0-9 and A-F).
  • It’s pseudo-anonymous and does not reveal identity of owner.
  • Sending USDC to this address will credit it to the owner’s balance.
  • Each address should only be used for one transaction.

USDC wallet apps like MetaMask automatically generate a new Ethereum address for each transaction to maximize privacy and security. Users can share their public address to receive USDC payments.

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What is USDC wallet?

A USDC wallet is a cryptocurrency wallet used to store, send and receive USDC tokens. These wallets keep private keys secure which control access to USDC balances.

Some popular options for USDC wallets include:

  • Hardware wallets like Ledger and Trezor – Provide offline cold storage and support for USDC. More secure but can be cumbersome.
  • Software wallets like MetaMask, Coinbase Wallet, Trust Wallet – Offer convenient web/mobile access to USDC but more prone to hacks.
  • Exchange wallets like Coinbase, Binance, Kraken – Easy access and trading but risks exchange going down. Not your keys.
  • DeFi wallets like Argent, Zapper – Allow easy access to USDC-based DeFi protocols.

When choosing a USDC wallet, key factors are security (including private key management), convenience of usage, compatibility with platforms where you use USDC, and recoverability if you lose access.

Ideally, use a combination of hot wallets for some USDC funds and more secure cold storage for majority holdings.

What are the benefits of USDC?

Here are some of the key benefits of using USDC:

  • Stability – USDC maintains stable value at $1 per token, minimizing volatility.
  • Backing – Fully collateralized 1:1 with US dollar reserves gives confidence in its value.
  • Transparency – Attestations by independent auditors prove reserves match USDC supply.
  • Liquidity – Deep liquidity and support on most trading platforms makes USDC easy to use.
  • Speed – USDC transfers settle in minutes globally vs slow bank transfers.
  • Low fees – Sending USDC costs pennies, much less than wire transfers and remittances.
  • Interoperability – USDC works across Ethereum, Algorand, Solana and other blockchains.
  • Compliance – Centre follows regulations and KYC requirements on USDC issuance.
  • Versatility – USDC is usable for trading, payments, DeFi, token sales, investments and more.

For anyone who values stability, transparency, speed and regulatory compliance, USDC offers major advantages over other cryptocurrencies and fiat.

What is USDC backed by?

USDC stablecoin is backed 1:1 by US dollar reserves held in bank accounts. These cash reserves fully collateralize the USDC in circulation.

Specifically, USDC reserves are held in segregated accounts at FDIC-insured US banks. The banks acting as custodians include State Street Bank, Pacific Western Here is the continuation of the 3000 word article on USDC:

Is USDC fully reserved?

Yes, USDC stablecoin is fully reserved and maintains a 1:1 USD collateralization ratio at all times. This means that for every 1 USDC token issued, there is 1 real US dollar being held in reserves to back that token.

USDC’s full reserves help provide confidence in its $1 peg and overall trustworthiness as a stablecoin. Here are some of the ways USDC reserves are managed:

  • Segregated bank accounts – Reserves are held in dedicated custody accounts at regulated banks like State Street Bank. Funds are not mixed with the banks’ own balances.
  • Transparent attestations – Centre publishes monthly attestation reports by accredited audit firms like Grant Thornton LLP to prove reserves match supply.
  • Conservative investments – Reserve funds are invested conservatively in safe assets like US Treasuries to preserve capital.
  • Real-time monitoring – Centre monitors the USDC supply and reserve balances in real-time to ensure the 1:1 peg is constantly maintained.
  • Excess reserves – A small excess percentage of reserves is held to manage daily variations in redemptions and issuance.

USDC reserves are structured to enable redemptions of USDC for USD at any time. The full backing and transparency around reserves make USDC trustworthy.

What does USDC stand for?

USDC stands for USD Coin. It gets its name from being denominated in and pegged 1:1 to the United States dollar.

The “USD” part stands for US dollar, representing the fiat currency that gives USDC its value.

The “Coin” part indicates that USDC is a cryptocurrency that exists on digital blockchains, with each USDC unit fungible like a coin.

Putting it together, USD Coin is meant to convey that USDC combines the creditworthiness of the US dollar as a fiat currency with the technological advantages of a digital coin built for blockchain networks.

Other key points about the USDC name:

  • Launched in 2018 as a collaboration between Circle and Coinbase.
  • Aims to bring stability of USD to crypto markets.
  • Governed by the Centre consortium founded by Circle and Coinbase.
  • Part of a category of cryptocurrencies known as “stablecoins” whose value is pegged to a fiat currency.

So in summary, USDC stands for a digital USD Coin managed by Centre that seeks to bridge traditional and crypto financial markets.

Is USDC safe?

USDC has a reputation as one of the more trustworthy stablecoins. Here are some reasons why USDC is considered relatively safe:

  • Fully collateralized – USDC is backed 1:1 by cash reserves held in insured bank accounts, minimizing risk.
  • Transparency – Monthly third-party attestation reports provide confidence in reserves.
  • Regulated issuers – Centre follows regulations under its BitLicense and FinCEN registration.
  • Established partners – Circle and Coinbase are trusted financial firms with strong track records.
  • Enhanced security – USDC leverages layers of blockchain security plus offline storage of reserves.
  • Conservative investments – Reserve assets are held safely in cash and US Treasuries.
  • Limited supply – USDC cannot be minted arbitrarily like some algorithmic stablecoins.
  • Extensive adoption – Billions in daily USDC volume makes it battle-tested.

No cryptocurrency is 100% risk-free. But USDC’s structure and transparency make it well-suited for risk-averse crypto users relative to alternatives. Of course, USDC holders are still exposed to inherent risks of the issuing organizations and custodian banks.

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How to buy USDC

how-to-buy-usdc

There are a few easy ways to buy USDC:

1. Buy on cryptocurrency exchanges

This is the most common way to purchase USDC. You can buy directly with fiat on exchanges like:

  • Coinbase
  • Binance
  • Crypto.com
  • Kraken
  • KuCoin

You deposit fiat like USD, trade for USDC, and withdraw to your wallet. Some exchange wallets support holding USDC too.

2. Convert other cryptos to USDC

If you hold other cryptocurrencies already, you can trade them for USDC on exchanges without needing to deposit fiat.

3. DeFi swaps

Decentralized exchanges like Uniswap, SushiSwap and Curve allow swapping ETH or tokens for USDC directly through liquidity pools without needing a centralized platform.

4. OTC trading

You can trade large amounts of USDC directly with institutions through over-the-counter (OTC) trading desks. Useful for high-net worth purchases.

5. Get paid in USDC

Some companies may be willing to pay your salary in USDC or you can invoice clients in USDC if they support crypto payments.

6. ATMs

Certain Bitcoin ATMs and kiosks now support buying USDC with fiat cash. Fees are higher but provides anonymous access.

Where to buy USDC

Here are some of the best places to buy USDC:

Exchanges

  • Coinbase -supports USDC purchases by bank transfer, debit card, or sending other crypto assets.
  • Binance – buy USDC directly with credit/debit cards or via P2P trading.
  • Crypto.com – purchase USDC with credit/debit cards and bank transfers.
  • Kraken – trade USD or EUR for USDC after depositing fiat via wire transfer.

DeFi platforms

  • Uniswap – buy USDC by swapping ETH or ERC-20 tokens in a liquidity pool.
  • Curve – swap assets like DAI for USDC on Curve’s stablecoin AMM platform.
  • Slingshot – place limit orders for USDC that get filled in batches through Uniswap.

Brokers

  • Gemini – purchase USDC directly using ACH bank transfer or wire.
  • Voyager – fund account via bank transfer and then buy USDC commission-free.

OTC desks

  • Circle – high net worth individuals can trade large amounts of USDC OTC.
  • Genesis Trading – institutional broker with deep liquidity in USDC and other stablecoins.
  • Coinbase Prime – caters to institutions trading USDC OTC in large blocks.

How USDC is different from other stablecoins

Here are some of the key ways USDC differs from other leading stablecoins like USDT, DAI, BUSD etc:

Collateralization

  • USDC – Fully backed 1:1 with cash reserves (USD).
  • USDT – Historically mixed reserves of fiat, commercial paper, corporate bonds.
  • DAI – Crypto-collateralized through over-collateralized lending.

Issuer

  • USDC – Centre consortium founded by Circle and Coinbase.
  • USDT – Issued by Tether.
  • DAI – Issued decentralizedly by MakerDAO protocol.

Transparency

  • USDC – Monthly attestations by auditors on reserves.
  • USDT – Lacks public attestations on reserves until recently.
  • DAI – Fully transparent on-chain.

Regulation

  • USDC – Issuers registered with FinCEN and hold BitLicenses.
  • USDT – Has faced regulatory scrutiny over reserves.
  • DAI – Decentralized so minimally regulated.

Technical Architecture

  • USDC – ERC-20 token on Ethereum plus other chains.
  • USDT – Omni Layer token on Bitcoin.
  • DAI – ERC-20 on Ethereum.

Stability Mechanism

  • USDC – Fully reserved collateral + arbitrage.
  • USDT – Controversial, fractional reserves historically.
  • DAI – Dynamic supply via overcollateralized smart contracts.

How to convert USDC to USD

There are two primary ways to convert your USDC holdings into US dollars:

1. Redeem USDC for USD via exchanges

Many major exchanges like Coinbase, Circle, and Gemini allow you to directly redeem USDC 1:1 for fiat USD that is sent to your bank account.

You trade in USDC, withdraw dollars to registered bank, and receive funds typically within 1-3 business days via ACH or wire transfer.

2. Sell USDC for USD on exchanges

The other option is to sell your USDC for USD directly on any exchange that has a USDC/USD trading pair, like Coinbase, Kraken, Crypto.com, and Binance.US.

You can sell for USD and either withdraw the dollars, or reinvest them in other tokens on the exchange.

Other options

  • Sell USDC for fiat cash locally via peer-to-peer marketplaces.
  • Use USDC debit cards that auto-convert USDC to fiat for spending.
  • Find merchants accepting USDC directly for purchases.

So in summary, going through centralized exchanges is the easiest way to cash out USDC holdings into old-fashioned USD that you can deposit into your bank account.

Conclusion

USDC (USD Coin) is a stablecoin backed 1:1 by US dollars held in reserve by Centre, a consortium founded by Circle and Coinbase. It was created to provide a stable and reliable digital asset that can be used for payments, trading, and other financial activities within the crypto ecosystem.

USDC is an ERC20 token on the Ethereum blockchain, but it has also been launched as a TRC20 token on Tron. It can be purchased on various exchanges, used for DeFi swaps, traded OTC, and even received as payment or salary from certain companies.

Compared to other stablecoins, USDC stands out for its full collateralization, transparency, and regulation. It also offers the convenience of fast and low-cost transactions on the Ethereum network.

Whether you’re looking to use USDC for trading, payments, or simply as a store of value, it provides a stable and secure option within the volatile world of cryptocurrency. With its growing adoption and integration into various platforms and applications, USDC is poised to become a key player in the digital economy.

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