USD (USDC) – All you need to know

What is USD Coin?

USD Coin (U.S. Dollar Coin) is a stablecoin that is tied to the value of the U.S. dollar, and its market denotation is USDC. Running on the Ethereum blockchain and backed by reserved assets, it is issued by regulated financial institutions on a 1:1 basis for U.S. dollars. You can use USD coin for peer-to-peer payments, trading on cryptocurrency exchanges, and even as a currency to store your investments as during economic downtrends.

The currency was first announced the 15th of May 2018 by a company called Circle, and it launched in September 2018. Alongside Tether, it is one of the largest stablecoin markets and is a popular choice on major exchanges like Binance and Coinbase. It is intended to be a practical currency that can be used for everyday transitions because it is much less volatile than many other cryptos.

How does USD Coin work?

The cryptocurrency functions much like any other centralised fiat currency. To turn dollars into USD Coin, users send a number of dollars to a token issuer. A smart contract is then created on the blockchain, which mints a matching amount of USDC. These coins are then delivered to users, while the dollars are held in a reserve.

When users want to go the other way, and turn USDC into USD, the process is quite similar. First, users send a request to a token issuer for their USDC to redeem USD. The issuer sends a request to the USDC smart contract, and USD are redeemed while a matching amount of USDC is burned. These USD can then be sent off to the user, minus all incurred fees.

Sources & references
Risk disclaimer

Invezz is a place where people can find reliable, unbiased information about finance, trading, and investing – but we do not offer financial advice and users should always carry out their own research. The assets covered on this website, including stocks, cryptocurrencies, and commodities can be highly volatile and new investors often lose money. Success in the financial markets is not guaranteed, and users should never invest more than they can afford to lose. You should consider your own personal circumstances and take the time to explore all your options before making any investment. Read our risk disclaimer >