What is USD Coin (USDC)?
USD Coin (USDC) is a stablecoin
. This is a cryptocurrency whose value is always equal to an underlying product. In the case of USD Coin, this is the US dollar. Thus, one USDC token is equal to one US dollar. The value of the coin will never rise or fall, so you can assume the same value at all times.
The makers of USD Coin cannot simply make the value equal to the dollar. To do this, the USDC token must be backed by underlying assets. The creators have solved this by keeping a US dollar (or assets equal to this value) for each USDC token. Even if everyone sells their USDC token, and demand completely collapses, the token will still retain its value. After all, the assets that serve as collateral protect the crypto currency.
USDC runs on the blockchain of Ethereum
. This means that it also uses the ERC20 protocol. This is a token protocol used for Ethereum tokens. A token protocol ensures that all tokens are programmed in the same way so that they can also communicate with each other. If such a token does not comply with the protocol, the systems within the blockchain network cannot consider the tokens as full tokens.
In December 2021, it became clear that there were 42.5 billion USDC tokens in circulation. According to the founders of USDC, all tokens are covered, which means that there is collateral of $42.5 billion.
In general, USDC is known to be a safer stablecoin than many other types because they are more transparent about how they operate. For example, in 2021 it came out that Tether (USDT) had backed almost all of its tokens with commercial bank money. This caused a lot of outrage within the crypto world.
What can you use USD Coin (USDC) for?
Despite the fact that USD Coin cannot be used as an investment, this type of crypto currency is one of the most important cryptocurrencies in existence. Stablecoins are also called the cornerstone of Decentralized Finance (DeFi)
, as such coins represent an important function within a large number of blockchain protocols.
It is often said that cryptocurrencies can become new means of payment. Yet we see that many cryptocurrencies are too volatile to be used as a means of payment. If you pay with Bitcoin today, its value could be halved tomorrow. For many businesses, this is not a sustainable form of business, as revenue and profit is effectively exposed to the high-volatility of a currency like Bitcoin.
A stablecoin like USD Coin would be an ideal payment method. It would allow everyone to experience the benefits of blockchain
technology while not suffering from the volatility of cryptocurrencies.
Protecting your profits
Do you own Ethereum and see that its value has gone up by 200 euro? You could sell Ethereum for another crypto currency, such as Bitcoin. However, after selling, the price of Bitcoin could fall, which would also make your profits from Ethereum disappear like snow in the sun.
By selling crypto coins for stablecoins, you can secure profits. Many crypto traders therefore use USD Coin to protect their assets from falling prices.
What are the pros and cons of USDC?
Below you will read what the main advantages and disadvantages of USD Coin are.
- The price of USDC is always stable to the US dollar, which allows you to use the token as a means of payment or protection against volatile cryptocurrencies;
- USDC has a good reputation within the crypto market and has been used by a large number of crypto traders for a long time.
- You cannot use USDC as an investment for profit;
- Because USD Coin runs on Ethereum, you often pay high transaction fees for sending USDC tokens.
Who are the founders and developers of USD Coin?
The initial launch of USDC took place in September 2018. This stablecoin is managed by Centre. This is an organization set up by Circle, members of Coinbase and Bitmain (a Bitcoin mining company).
Regulation regarding stablecoins is a lot stricter than for normal cryptocurrencies. USDC's reserves are therefore regularly (monthly) audited by Grant Thornton LLP. This is one of the largest accounting firms in the United States. They monitor whether the number of USDC tokens issued is sufficiently covered. This is because the collateral must be equal to the value of the tokens issued.
Where can you buy USD Coin (USDC)?
You buy USD Coin at Coinmerce by paying with iDeal, SEPA, Bancontact, MyBank, Giropay, EPS and Sofort. You do this on the coin page of USD Coin
. For the use of these payment methods you pay no additional deposit fees.
Before you can buy USDC at Coinmerce you will need to be in possession of a Coinmerce account. You can create an account here
. After creating an account we will validate it after which you can immediately start purchasing USDC tokens.
It is also possible to send USDC from Coinmerce to another wallet address. You will need to validate the wallet address within your Coinmerce account first. For sending USDC you will pay network fees (Coinmerce has no influence on the amount of these fees).
In which crypto wallet can you store USDC?
Coinmerce's crypto wallet offers support for USDC. After purchasing USDC from Coinmerce, you will find your USDC tokens immediately in the wallet. We take good care of the security of the wallet and keep most of it in cold storage. In addition, we always recommend using additional security features, such as a strong password and two-factor-authentication (2FA)
It is also possible to store USDC in an external wallet. Make sure that this wallet supports Ethereum tokens. Well-known wallets that do so are Metamask, Ledger and Trezor.