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Things you must know about USD Coin (USDC): A Cryptocurrency with a Stable Price
USD Coin (USDC) is a stable coin that is backed by Coinbase and is one of the most trusted existing stablecoins. It is a fiat-backed Coin, and it is the most stable crypto in the market because its target value is consistently maintained. USDC is also a cryptocurrency that exists in smart contracts on the Ethereum Network.
USD Coin, the well encrypted and protected cryptocurrency by the smart contracts, was launched in 2018 and is the first US Dollar on the blockchain. It means that the currency is redeemable on a 1 to 1 basis for US Dollars, and it can be used for all the possible uses because of its stable price. The donation process using USDC is transparent because the transactions can be tracked on the Ethereum Network.
It is considered an alternative to the other US Dollars-backed cryptocurrencies such as TrueUSD (TUSD) and Tether (USDT). The current market price of USDC is $1.00 after a decrease of 0.01% over 24-hours.
We know that virtual currencies are highly volatile. Restricting their participation as mainstream currencies mean these cannot be used for goods and services. Here, stablecoins are essential because these are common volatile cryptos. Their volatility is reduced by backing these with any stable asset. Stablecoins provide the investors with stable assets within the crypto space along with a higher transactional speed.
The process using which US Dollars are turned into USD Coins is called tokenization, and it is a three-step process where a user sends US Dollars to the issuer's bank account, then the issuer uses the smart contract to form an equal amount of USD Coins. Now, the newly formed USD Coins are delivered to the user in substitution for US Dollars.
What makes USD Coin different compared to other Stablecoins?
There are four kinds of Stablecoins:
1. Fiat backed- All the stablecoins that are pegged to reserved fiat value comes under this category. For example, TrueUSD, Tether, USD Coin.
2. Crypto-backed- The stablecoins whose value is backed by reserved crypto assets are crypto-backed or crypto-collateralized. For instance, Havven.
3. Algorithmic noncollateralized- Stablecoins, which maintain price stability by using software-based economic models instead of collateralizing the assets, fall under this category. For example, Kowala, Basis.
4. Hybrid- Stablecoins, which depend upon many approaches to maintain price stability, is hybrid stablecoins. For example, Carbon.
Now, the USD Coin comes under the category of fiat-backed stablecoins. It is centralized and has minor differences from the stablecoins of a similar type. It is mainly different in terms of its fee policies and organizations.