What is USD Coin (USDC)? Overview of the latest information about stablecoin USDC you need to know

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5 Jan 2024

USD Coin (USDC) is a stablecoin that is no longer unfamiliar to crypto investors, with the second largest market capitalization after USDT in the stablecoin segment. In this article, let's learn about USDC with Coin68 as well as the latest information about this stablecoin!

What is USD Coin (USDC)?

USDC is a type of stablecoin whose value is guaranteed 1:1 by fiat-backed Stablecoin, specifically the USD. Each USD coin circulating on the market can be converted into 1 USD in cash or assets of equivalent value such as short-term US Treasury bonds managed by Circle - the company that issues USDC.

What is USD Coin (USDC)?

USD coin was first announced in May 2018 and launched in September of the same year by Center – a joint venture between peer-to-peer (P2P) payment service provider Circle and the exchange. Coinbase cryptocurrency. Like other stablecoins, USDC was created to serve as a safe, low-volatility investment asset compared to other stablecoins.Bitcoin, Ethereumand serve as a medium of exchange between fiat money and cryptocurrency (crypto).

USDC has affirmed its position as one of the leading stablecoins in the cryptocurrency market when used as a medium of exchange on many different blockchains such as Ethereum,Polygon,Solana,Avalanche, TRON,... At the time of writing on December 1, 2023, USDC 's total market capitalization is 24.5 billion USD, ranking 2nd behind giant Tether (USDT) with a total capitalization of 89.2 billion USD in the stablecoin segment.

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How does USDC work?

USDC does not work like coins like Bitcoin and Ethereum when a new unit is added to the circulating supply by mining or staking. Instead, each new USDC is created when users and businesses deposit cash or other US government-backed assets into their Circle accounts.

Upon issuance of new USDC , an equivalent amount of USD will be held by Circle in the form of cash and short-term US Treasury bonds to ensure that the value of USDC remains pegged 1:1 to the value of USD.

How USDC works

In contrast to other stablecoins, USDC issuers are obligated to provide full transparency and work with a range of financial institutions to maintain adequate reserves of the fiat currency. or equivalent assets. Counterparties and exchanges issuing USDC are obliged to regularly report their USD holdings and have them published by Grant Thornton LLP. Users can read all USDC monthly attest reports here.

Conversion process from fiat currency USD to USDC

The conversion process from fiat currency USD to USDC will be done through 3 steps:

Step 1: Users register an account with a partner exchange that supports USDC and send the amount of USD they want to convert by bank transfer or credit card.
Step 2: The issuer uses a smart contract to create an amount of USDC equivalent to the amount of USD deposited.
Step 3: New USDC is created and transferred to users. After that, the replacement USD will be placed in the reserve.

Conversion process from USDC to USD fiat currency

Conversely, users can convert USDC to USD by performing the following three steps:

Step 1: User sends a request to the exchange to convert the desired amount of USDC into USD.
Step 2: The exchange will then send a request to the smart contract to convert the user's USD into USDC. The amount of USDC required for conversion will be removed from the circulating supply.
Step 3: The issuer will send back an amount of USD to the user's bank account equal to the amount of USDC minus additional fees such as transaction fees.

Advantages and disadvantages of USDC

USDC has the following advantages :

Stable price mechanism: USDC is an asset that helps users avoid the high price fluctuations of the cryptocurrency market. Owning a stablecoin like USDC during periods of high market volatility can help stabilize an investment portfolio.
Highly liquid thanks to adequate reserves: USDC provides instant payouts that help investors avoid the high price volatility of the cryptocurrency market. USD reserves are always 100% backed by cash and short-term US Treasury bonds. These reserves are managed by leading US financial institutions including BlackRockand BNY Mellon.
Compatibility with many blockchains: USDC has been integrated as a payment method with 55 different typical blockchains such as Ethereum, Polygon, Solana, BNB Chain, Avalanche, TRON,...

USDC has the following disadvantages :

No upside potential: Because the value of USD is always stable, it will be difficult for investors to make a profit from this stablecoin. However, this drawback is compensated by DeFi functionality such as staking, lending and yield farming to generate profits.
Centralized stablecoin: USDC is a centralized stablecoin and the issuer Circle has full control and can execute decisions regarding USDC without consulting users. Users are required to trust the proof reserves presented by Circle.
High USDC withdrawal fees : Some exchanges charge quite high USDC withdrawal fees , and this fee may be higher than a regular bank transfer. Transaction fees can also increase depending on the state of the blockchain such as whether Ethereum is congested or not.
Likely to be depeg: USDC is also likely to be depeg 1:1 against USD like other stablecoins like USDT. In March 2023, USDC experienced a decline and at one point reached $0.877 due to a sell-off directly influenced by the collapse of Bitcoin. Silicon Valley Bank.

Compare USDC and USDT

Table comparing basic information about USDC and USDT at the time of writing on December 1, 2023.

Compare USDC and USDT

From the comparison table above, we can see that USDC is considered by many people to be a safer choice because of its transparency. Circle - USDC issuer always provides periodic reserve reports every month. On the other hand, Tether does not have a specific timeline when it comes to providing information about USDT reserves and is also facing legal troubles related to the lack of transparency in USDT issuance.

Where can users trade USDC?

Users can trade USDC at Circle's platform or almost all centralized exchanges that support USD coin such asBinance, Coinbase, Huobi, MEXC, Kraken,…

Which wallets support USDC storage?

Users can store USDC on the following wallets:

Hot wallets: MetaMask, Trust Wallet, Coin98 Wallet,...
Cold wallet: Ledger, Trezor.
Exchange wallets : Binance, Coinbase, OKX,...

How to have passive income with USDC?

Users can earn passive income with USDC in the following ways:

Staking: Users can participate in staking USDC on CeFi platforms such as Binance, OKX, Nexo,... to receive flexible or fixed APR interest rates. In addition, users can also participate in staking on DeFi platforms such as PancakeSwap , Aave,... with flexible APY levels depending on market conditions.
Lending: Users can participate in lending USDC to CeFi platforms such as Binance, OKX, Nexo,... to receive flexible APR interest rates. In addition, users can also lend on DeFi platforms such as Aave, Compound Finance with flexible APY levels depending on market conditions.
Farming: Users can participate in farming as a Liquidity Provider (LP) at DeFi platforms. Users can deposit USDC into liquidity pools and receive returns based on flexible APR depending on market conditions.

Outstanding information about USDC in 2023

USDC is seriously depressed due to the impact of the Silicon Valley Bank incident

In March 2023,USDC is seriously depressedand at one point touched $0.877 due to a sell-off directly influenced by the collapse of Silicon Valley Bank. Circle - the issuer of USDC, said the amount affected by the collapse of Silicon Valley Bank is 3.3 billion USD, accounting for 8.25% of the total assets of 40 billion USD guaranteed for USDC.

USDC crashed in March 2023

Circle deploys CCTP for USDC

Cross-Chain Transfer Protocol (CCTP)is a cross-chain protocol that supports seamless USDC migration between multiple blockchains through a “burn and mint” mechanism. Circle developed CCTP to eliminate the use of USDC “lock and mint” bridge tokens.

Cross-Chain Transfer Protocol (CCTP)

Currently, Circle has deployed mainnet for CCTP on 5 blockchains including Ethereum, Avalanche, Optimism, Arbitrum and Base (as of December 1, 2023). In addition, Circle is also building an ecosystem of CCTP integration projects to use for cross-chain transactions as shown below.

Projects are integrating CCTP for cross-chain transactions

USDC launched on 6 new blockchains

With backing from Coinbase, Circle has launched USDC on 6 new blockchains including Polygon PoS, Base, Polkadot, NEAR, Optimism and Cosmos. Thus, USDC is present on 15 different blockchains if including the 6 newest blockchains that have just been launched.

Visa tests USDC stablecoin payments on Solana

In September 2023, Visa - a global online payment giant said it had chosen Solana as the blockchain to test the ability to pay stablecoin USDC. Visa has also helped partners test payments through the VisaNet network by moving millions of USDC from Ethereum to Solana.

Visa tests USDC stablecoin payments on Solana

Circle partners with FamilyMart to allow users to exchange shopping points for USDC

On October 26, 2023, Circle announced a partnership with Taiwanese cryptocurrency exchange BitoGroup and Taiwan FamilyMart. The three companies will launch a service called “points-to-crypto” that will allow customers to exchange reward points from the FamilyMart loyalty program into cryptocurrencies such as USDC through BitoGroup.

Circle partners with FamilyMart to allow users to exchange shopping points for USDC

Circle deploys v2.2 for USDC

According to the announcement on the evening of November 9, 2023, Circle has released upgrade v2.2 for USDC with the goal of improving gas fees and optimizingaccount abstractionand enhance security for transactions on the EVM blockchain.

Circle deploys v2.2 for USDC

As Circle announced, there will be 6 changes taking place to USDC smart contracts and will be deployed to each supported blockchain EVM. The upgrade is fully backward compatible so it doesn't create any conflicts with existing integrations and doesn't require any action from users or developers.

In addition, Circle will also carry out a number of other minor updates such as allowing signature authentication from smart contract wallets, improving the process of managing the blocklist of blocked transactions, and increasing resistance to duplicates. fork, remove unnecessary checks,...

Circle joins hands with SBI Holdings to popularize USDC in Japan

Circle is in the process of partnering with financial services group SBI Holdings to strengthen its USDC and Web3 expansion strategy in Japan. Stablecoin issuer USDC said it signed a memorandum of agreement (MOU) with SBI Holdings on November 27.

Circle joins hands with SBI Holdings to popularize USDC in Japan

The move comes after the Japanese government amended the Payment Services Act in June to establish stablecoin regulation, which Circle believes will "stimulate the circulation of stablecoins and boost Japan's web3 economy." ". However, SBI Holdings needs to be approved by the government to become a legal electronic payment service to be able to circulate USDC into Japan.

Circle is rumored to IPO in 2024

According to Bloomberg, Circle - the issuer of USDC plans to IPO in 2024. Bloomberg sources confirmed that Circle has had discussions with advisors about IPO prospects. While it's unclear what the company's valuation is, in a 2022 effort, Circle set its valuation at $9 billion.

Circle is rumored to IPO in 2024

Outstanding information about USDC in 2024

The USDC/USDT pair lost its peg to 0.76 USD

On the evening of January 3, the cryptocurrency community couldn't help but be stirred by the owl Bitcoin's "cellar collapse". from over 45,000 USD to a low of 40,500 USD. In a panic, it seemed that many people rushed to withdraw their money, causing the USDC/USDT trading pair to seriously lose its peg to 0.76 USD and 0.8 USD in about 15 minutes, starting at 7:00 p.m. ( Vietnam time) on Binance.

The USDC/USDT pair lost its peg to 0.76 USD after the price "dump" of Bitcoin

The cause of Bitcoin's sudden price collapse is said to come from a newly released market prediction article by Matrixport. Accordingly, the research unit speculates that the US Securities Commission (SEC) is likely to reject all Bitcoin spot ETF registration applications this January. However, the final decision on whether the SEC will approve a Bitcoin ETF will be known in the second quarter of 2024.