USDC is a stablecoin created by Circle and Coinbase (formerly Centre) in order to compete with USDT, integrate into the payment system of both companies and, additionally, present a much more transparent operating structure than its counterparts.
| Symbol |
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| USDC |
| Logo |
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 |
| Algorithm |
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| ERC-20 Token |
| Discipline |
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| PoW (Ethereum) |
Una of the majors stablecoin or stablecoins of the crypto world is USDC. And it is not for less, since this project has become a benchmark of its kind around the world. But how did this project start? What's your objective? How does it stand in front of Tether (USDT)? Well, this and more you will be able to know below.
USDC, the arrival of a new stablecoin
Stablecoins are nothing new in the crypto world. The arrival of Tether (USDT) marked a turning point in this regard, allowing for fast transactions between those who use cryptocurrencies such as Bitcoin o Ethereum, and want to make quick changes to a currency "Less volatile" on exchanges.
However, Tether had serious problems on his shoulders. In principle, it was slow, expensive to mobilize and was not suitable for the future of decentralized exchanges because it worked on Omni Layer and Bitcoin (although a version of USDT on Ethereum has been around since September 2017).
Additionally, USDT has transparency policies that many people see as unacceptable, especially regarding audits that verify that Tether indeed has in its possession the expected 1: 1 backing for each USDT token issued.. On the other hand, the issuance of Tether tokens is only given to companies or private parties that meet the acquisition requirements, and only in amounts greater than $ 100 USD. These weaknesses led various industry giants to find a way to cope and take the emerging market that followed from their hands.
This is how Coinbase and Circle joined their efforts and created Center, a company that would be in charge of managing USDC. Thus, USDC would be a new stablecoin pegged 1: 1 with the dollar, which is actually a ERC-20 token running on Ethereum (ETH). Same company that In August 2023 it was dissolved, and now it's all under the Circle umbrella, in partnership with Coinbase.
Although Ethereum is not extremely faster than Bitcoin, certainly its scalability and the way its commissions are managed made the existence of this new stablecoin much more agile and economical. Not only that, because USDC was an ERC-20 token, it could be easily integrated into the DApps y DEX created on Ethereum, something that USDT could not do at the time.
The birth of USDC was completed on September 26, 2018, at which time the Smart contract of USDC and began its circulation in the crypto space. Additionally, USDC from the beginning guaranteed a wide development access around this cryptocurrency, something that we can see in this GitHub.
A currency without emission limits
Since USDC is a currency anchored 1: 1 to the dollar and, this fiat currency does not have an issuance limit (nor will it ever have) the USDC smart contract is special, since the issuance of USDC is infinite.
The issuance of new currencies only responds to dollar deposits in Center's protected accounts, which then enable the smart contract to create the same amount of USDC within the smart contract and release it to an ETH address where the buyer's USDC will be stored. Yes, it is the same model that Tether follows, for example, where the bank deposit in dollars is transformed into USDT for the buyer.
USDC issuance example
If a company wants to have 100 million USDC, all it has to do is go to Circle and meet the requirements for this purpose, which include:
- Possess any or all of the applicable licenses for the use of cryptocurrencies in the jurisdiction in which it is located.
- Have audited AML and compliance programs that meet FATF standards.
- Maintain reserves on a 1:1 basis with issued tokens and, provide monthly published evidence of reserves certified by certified public auditors
- Support fungible exchange and USDC token redemption of other authorized issuing members
- Comply with other reporting and review requirements established by Circle.
This is how USDC is issued so that these companies can offer small users access to USDC. Thus, for example, Daniela can buy her 1000 USDC using her dollars with this company and thus take advantage of this token in the Ethereum ecosystem. Of course, these steps are simplified by exchanges, where you can directly buy this cryptocurrency without having to go through all these requirements.
This form of issuance can certainly raise all kinds of suspicions for those who support the transparency and security of cryptocurrencies, but many institutional actors trust this system, and this is what has led USDC to become one of the great stablecoins in the crypto world. In any case, trust is what gives strength to cryptocurrencies, and as long as USDC is trusted, it will be used in the crypto space.
On the other hand, the final withdrawal of USDC funds from the smart contract of this token leads to the burning of USDC tokens. That is, if a user withdraws 1000 USDC and takes them from the blockchain to a bank, those 1000 USDC are withdrawn from the Circle accounts to make an effective withdrawal, and with this the 1000 USDC tokens are burned, balancing what exists on the blockchain with what exists in the bank accounts. This guarantees that, at all times, there is a 1:1 backup for each currency within USDC.
Circle, and its vital role for USDC
Now, Circle has the following goals regarding USDC:
- Provide R&D (research and development) capacity, support and maintenance of the Circle open source software project. This includes managing the open source code repository, facilitating and supporting external developers to participate in the project.
- Provide business development, governance, and compliance functions for the Circle Network, including the business development required to usher in new nodes on the network for consumer wallets, merchants, payment controllers, and others.
- Provide optional certification testing, trust authority, services, compliance reviews, and due diligence programs to enable node owners to choose to test, maintain and disseminate high degrees of trust to meet legal obligations and increase reputation and presence among other network participants.
- Contribute engineering and support services to the underlying distributed ledger infrastructure (such as Ethereum) on which Circle operates.
Transparency and trust within USDC
Circle is a company created jointly by Coinbase and Circle, all of which are registered in the United States, and not only that, they are under the strongest regulations in the country by being located in New York. This means that they are registered as a Money Services Business (MSB) registered with the endorsement of the Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury, and maintains money transmission licenses (or equivalents) in 48 states and territories of that country. It also has a license New York BitLicense, and endorsement by Financial Conduct Authority from United Kingdom.
In addition to this, Circle periodically publishes transparency reports on the status of USDC and its operations, which you can download from this website.
How much do you know, cryptonuta?
Is USDC a widely accepted currency?TRUE!
Since USDC is an ERC-20 token on Ethereum, this stablecoin enjoys wide acceptance in the Ethereum ecosystem, allowing it to be rapidly deployed on DEX and DApps of this network. But beyond this, Circle has worked to make USDC a widely accepted currency as a means of payment beyond DEX or DApps, including it in card payment systems and more.
Advantages and disadvantages of USDC versus other stablecoins
The main advantage of this project over other stablecoins is that being an ERC-20 token, it is quite common to see it listed in the DApps or DEX of the Ethereum ecosystem. Compatibility at this point is assured with these applications, so if there is a greater public capable of using it, the greater its recognition, its liquidity in the markets and therefore its fungibility will be better assured.
Another point in favor is that being an ERC-20 token it is easy to integrate it with wallets, hence you can find support for these cryptocurrencies in most wallets that exist in the crypto world.
Additionally, being linked to the Ethereum ecosystem, this gives it greater speed than other stablecoins, although not by much. For example, Tether on OmniLayer (using Bitcoin) may be slow, but nothing beats the security of the Bitcoin blockchain. In addition, Tether now also has versions of its token that work on Ethereum (ERC-20) and on TRON (TRX-20), the latter two being the same or faster, as well as cheap.
On its negative side, this project is still a centralized model, where trust falls on a series of individuals who may not be exactly transparent with the management of currency reserves. This is a very big risk when it comes to billions of dollars, which can disappear from one moment to another by any action in the traditional financial world. A risk that those who bet on this project should know before deciding to enter this world of stablecoins.
USDC use cases
Among the main use cases of USDC we can highlight:
- Payment system: USDC is supported by two top-tier financial companies in the United States, which opens the doors of confidence for this currency to be accepted as a secure and stable payment system. Additionally, as it is anchored to the US dollar, its acceptance is guaranteed to be global.
- Centralized exchanges and DEX: Another great use of USDC focuses on centralized and decentralized currency exchanges, serving as a hook for different pairs of exchanges, forms of exchange, savings and more within these services.
- International remittances: Together with the previously described use cases, USDC can be an excellent bridge for sending international remittances at a very low cost to any part of the world.
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