If you look closely, you’ll see that the stablecoins are more related to the practical use cases that a currency also expects, with the benefit of being a blockchain-based cryptocurrency like USDC.
Since its inception, cryptocurrencies have had various aspects that each other cares about. Some see it as another investment asset, others take this extreme and consider it a get-rich-quick scheme, some criticize it for its volatile nature and therefore some of them do not consider it as valuable as traditional currencies. But the stablecoins are designed to bridge cryptocurrency technology and users by minimizing the flaws of digital assets.
In short, stablecoin emerged after eliminating the disadvantages of cryptocurrencies, which made them unable to replace traditional currencies. They are far better than crypto assets like Bitcoin and Ethereum etc in terms of stability, security, speed and transaction fees etc.
Start of stablecoins
With the launch of the first stablecoin, Tether, in 2014, the concept of the stablecoin took off and people took it hand in hand. Tether stablecoin is backed by the US dollar as stablecoins are pegged to all fiat assets.
Although the stablecoin is considered centralized as its development, control and the company behind the work controlled by the cryptocurrency. Knowing a little bit about Tether is important to get an idea of USDC and why it is better than USDT.
USDC
First things first, USDC or USD Coin is a stablecoin that is collateralized or pegged to fiat assets. Its offerings consist of the advantages of blockchain technology while minimizing the risk of price fluctuations.
USDC is an ERC-20 token on the Ethereum blockchain and is fully backed by US dollars. It follows that the company has an equal number of US dollars in its holdings equal to the number of USD coins in circulation.
Origin of the stablecoin
USDC was launched in October 2018 by a consortium called CENTER. It is a partnership with the largest US crypto exchange, Coinbase, and a fintech services company, Circle. Their goal was to develop price-stable crypto and related network protocols.
The stablecoin came and tapped into the significant problems as the coins previously planned. The main goal was to deal with high volatility and solve the issue of convertibility between cryptocurrencies and fiat currencies.
When the stablecoin Tether emerged, the problems that came with it. First, the USDT was unaware of how it works, the USD reserves it holds. In short, there was a lack of transparency with USDT, which was seen as a key feature of a cryptocurrency.
Circle and Coinbase, sensing industry unease due to USDT, see this as an opportunity and are pushing ahead with their stablecoin plan to fill the gap. Ticking all the necessary boxes to be a worthy stablecoin also mitigated the downside that made up USDT. The result of the efforts soon reflected USDC’s popularity among users. Despite launching years after USDT, it posed a formidable challenge for stablecoin, making it one of the top five cryptocurrencies in the world.
The gaps USDC filled in the stablecoin space
Stablecoin users were skeptical about Tether whether or not it had US dollars in reserve; USDC sensed it and removed that color dot from users. They began publicly releasing a monthly statement of 100% reserves of fiat assets on CENTER.
The rules and guidelines were also created for members to clarify USDC issuance and redemption. CENTER consortium members must follow rules related to licensing, technology and operations, compliance, accounting and custody of fiat reserves.
Exchanges have become major users of USDC as they have used it as an alternative to fiat assets and currencies. By using the USD coin, their reliance on the banking system to maintain fiat account balances was drastically minimized.
Exchanges can now hold USDC instead of having the actual physical currency as the CENTER, or USDS would do so on their behalf. An additional benefit of USDC is that it is the only stablecoin supported by the DeFi ecosystem to date.
USDC tokenomics
His way of working is not demanding at all. An ERC-20 asset based on the Ethereum blockchain owns ether and other ERC-20 cryptos.
To redeem USDC, users can send the tokens to CENTER members’ controlled addresses. After collecting the token from the users, they destroy the tokens, what they call it for burning, and transfer the amount in fiat currencies to the same user’s bank account.
As we discussed before, let’s try to identify the use cases of USDC. It is clear that the USD coin token removes the need for bank dependency for transferring funds; This feature is available to both users and exchanges.
It is an Ethereum-based token and it is also an open-source stablecoin, so it is possible to integrate it into various Ethereum-based applications, which has advantages of being in the same ecosystem.
Even if it is said that DeFi protocols can also use USDC due to the simple fact that both are connected to the Ethereum blockchain, they will follow the previously mentioned principle. On DeFi protocols, USDC can be used for lending, borrowing, staking, and trading purposes.
Final thoughts on USDC
To date, the collaboration between Coinbase and Circle has meant that USDC creation appears to be going well and has been fruitful. Also, some rumors and criticism for the token are scattered here and there, but that is the case with almost every famous and well-known crypto after all.
Previously, USDT dominated the stablecoin market with a c.74% share, while Circle’s USDC had only 16% of it. But now the former has confined itself to a 45% market share while the latter has risen to 29%.
According to the reports, Tether has gained a market cap of 275%, while at the same time Circle’s stablecoin has seen a remarkable 987% growth in 2021.
Still, it has proven to be one of the excellent and legitimate stablecoins to trust, especially when compared to other options available. Currently, USDC’s total market cap is more than $52 billion and its current token market supply is also over $52 billion.
Steve Anderson is an Australian crypto enthusiast. He has been a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralization and understanding the true potential of blockchain.
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