What’s USDC? How to Use It

What are stablecoins?

Stablecoins are cryptocurrencies that have a value attached to real-world assets like the U.S. dollar or gold. The purpose of stablecoins is to have a cryptocurrency that combats the volatility of the most popular cryptocurrencies.

Any given “traditional” cryptocurrency might experience fluctuations in value that make it unreliable as an everyday medium of exchange. For example, today’s price of one bitcoin (BTC) may not remain consistent in a month; it may either double or halve in value.

By minimizing this unpredictability, stablecoins provide an alternative that’s more suited for everyday use. Stablecoins are appealing because they facilitate international payments at minimal transaction costs, self-custody, and a balance of a traditional fiat currency's stability and crypto-like benefits.

What’s USDC?

USDC is a stablecoin. As its name suggests, USDC’s value ties to the U.S. dollar, where each stablecoin attempts to maintain a value equal to $1.

USDC initially operated on Ethereum’s (ETH) blockchain. However, it currently functions on the Algorand and Solana networks with it supporting more networks over time. USDC allows users to tokenize the U.S. dollar, making it usable across blockchains, crypto exchanges, and other transactions. Additionally, USDC tokens are convertible to USD. It’s a vital component of the crypto world and significantly impacts DeFi (decentralized finance) and other financial instruments.

If you’re looking to invest in USDC, it’s important to compare it to different types of crypto to find out if it’s the best crypto investment for you. Read on to learn about USDC and how to use it.

How does USDC maintain its peg?

Circle and Centre's open-source fiat stablecoin infrastructure created serves as the basis for USDC's design.

USDC is completely backed by reserves and is redeemable for USD on a 1:1 ratio, which you can find on the world's best crypto trading platforms. It maintains its peg by employing a straightforward collateralization method. Each coin is pegged to $1. Accordingly, there's a reserve of $1 for each coin in use.

Circle even has a trust and transparency website that you can visit to keep track of USDC's reserves and audit reports.

Highlighted  characteristics

• USDC is audited monthly by one of the world’s leading accounting firms. Since USDC's inception, Circle has released monthly audits via Grant Thornton, one of the world's leading accounting firms. The audits prove that users can access the equivalent amount of fiat-backed reserves as the total circulatory USDC supply.
• USDC is regulated by the Financial Crimes Enforcement Network in the U.S. As a provider of financial products and services, Circle is a legally recognized business in the U.S. As a result, it's regulated by the Financial Crimes Enforcement Network (FinCEN), which aims to combat financial fraud.
• It’s quicker and easier to send USD through USDC than through a bank. The key benefit of USDC is that it makes it possible to exchange crypto without requiring users to transfer fiat currency in and out of cryptocurrency exchanges. Sending USDC is quicker than sending fiat currency since payments happen instantly, and it's possible to do so around the clock. In fact, its minimal transaction fees make it cost-effective.
• It’s NOT decentralized. Unlike cryptocurrencies such as Bitcoin and Ether, USDC is issued by a centralized authority that must answer to the government. If the government decides action is required against a USDC holder, all their crypto will be frozen. This has led to recent drama with the potential freezing of assets, which interact with crypto mixer Tornado Cash. 

How to use USDC

USDC can be used via two methods. If you want to buy USDC, you’ll have to convert your fiat currency into crypto. Alternatively, you can convert your USDC into fiat currency.

Converting your fiat currency into USDC

1. Open a cryptocurrency exchange account: Look for a cryptocurrency exchange that accepts USDC. A few USDC-compatible exchanges include Coinbase Pro, Bitfinex, Kraken, and Huobi Global.
2. Add fiat money to your account: Deposit your fiat currency into your exchange account. You can do so via bank transfer or your credit card.
3. Use your funds to buy USDC: You’re all set to buy and convert your fiat currency into USDC.

Converting your USDC into fiat currency

1. Find a platform to convert your USDC: Find a crypto exchange that can convert your USDC into the fiat currency of your choice. Link the exchange to your bank account.
2. The exchange removes USDC from circulation: Once you’ve entered an amount, the crypto exchange will send a request to USDC’s smart contract, enabling the blockchain to remove the necessary amount of USDC from global circulation.
3. Receive the money in your account: The USDC smart contract will approve the transaction, and the crypto exchange will send the converted fiat currency to your bank account. You may have to incur transaction charges, so your final amount could differ depending on the rate at the time of transfer.

Other stablecoins

While USDC is one of the world’s most popular stablecoins, it’s not the only one on the market. Tether (USDT), Binance USD (BUSD), and Dai (DAI) are other stablecoins that are in and around the world’s 10 largest cryptocurrencies by market capitalization.

Tether (USDT)

Tether was the world's first stablecoin and is the most popular today. At the time of writing, its market cap sits at around $67.5 billion.

Here are some of the key differences between USDT and USDC:

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Binance USD (BUSD)

Binance USD is a collaboration launched by Binance and Paxos in 2019. At the time of writing, BUSD is the third-largest stablecoin by market cap and the sixth-largest cryptocurrency overall.

Here’s an overview of the main differences between BUSD and USDC:

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Dai (DAI)

DAI is another cryptocurrency pegged to the U.S. dollar at a 1:1 ratio. It operates on Ethereum's network via The Maker Protocol. At the time of writing, DAI is the fourth-largest stablecoin by market cap and the 12th largest cryptocurrency overall. It has a self-governing organization called MakerDAO, making it a decentralized autonomous organization (DAO).

Let’s look at the differences between DAI and USDC:

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USDC is a relatively stable asset in a volatile crypto world, so you don’t have to worry about losing all the hard-earned money you’ve invested. The only thing better is receiving free cryptocurrency. Fortunately, you can do just that with Worldcoin. At Worldcoin, we aim to share our cryptocurrency with the world by offering a free share to each individual on the planet.

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