And it could make trading crypto safer than ever before.
USDC, or USD Coin, is a stablecoin that has been growing rapidly in recent months. Over the last year, it has boasted a ~1000% increase in marketcap as compared to Tether’s ~400% increase — signalling increased interest from exchanges, institutions, and individuals. But why does this matter? Well, it means that soon, you’ll probably be better off converting your crypto to USDC instead of USDT.
As you may know, stablecoins are typically pegged to a price of $1 USD, and are used to purchase other cryptocurrencies or convert fiat to crypto. This is how the process works for USDC:
- A user sends US dollars to the coin issuer’s bank account.
- The issuer uses a USD Coin smart contract to create the equivalent amount of USD Coin.
- The newly minted USD Coins are sent to the user and the substituted US dollars are held in a reserve.
Bringing US dollars on the blockchain allows moving them anywhere in the world within minutes, and brings much-needed stability to cryptocurrencies. Additionally, it opens up new opportunities for trading, lending, risk-hedging and more.
Whereas its main competitor, Tether, is fraught with regulatory and ethical concerns, USDC has nearly none of these. Here’s what it have, though, and why you should use it instead:
Reliable leadership team & founders.
USD Coin is developed by the Centre Consortium, a partnership between Circle and Coinbase. The technology and governing framework are developed by Centre, while Circle and COINBASE were the first commercial issuers of USDC.
Circle is an official Money Transmitter, which makes the company an open financial book, meaning that all USDC tokens are regulated, transparent and verifiable. Additionally, Circle is one of the only crypto companies backed by Goldman Sachs
Coinbase, the other ‘half’ of the Consortium, is the world’s second biggest crypto exchange with billions of dollars in daily volume, so it is highly unlikely that they will perpetrate a stablecoin scam. Moreover, Coinbase stock is already on the market, while Circle plans to go public via a SPAC — which incentivizes them to keep running the USDC project lest their stock prices plummet.
Meanwhile, Tether, the company behind the largest stablecoin in the world, has only 13 employees and is the most valuable company on a per-employee basis in the entire world. This is eerily similar to the Madoff Ponzi scheme of the early 2000s, in which he robbed $65 billion of investors’ money.
Reserves are safe and are audited every month.
A top 5 accounting firm, Grant Thornton, releases audits of Circle’s reserves every month. Its August report revealed that:
- There were no discrepancies in the market cap of USDC and the value of Circle’s reserves.
- The reserves themselves consisted of 92% cash & cash equivalents, 1% corporate bonds, 5% USD denominated Certificates of Deposits, and 2% commercial paper.
In a crisis, there’s a strong chance that Circle would be able to meet significant USDC redemptions, if not instantly, then within a short timeframe. Putting it another way, if regulators bring in rules about the quality of assets that need to back stablecoins, it’s likely that USDC assets would easily comply. And that can’t be said for Tether by a wide margin.
The degree of transparency and quality of Circle’s assets is significantly superior compared to USDT, where the asset backing raised concernsBoston Federal Reserve
USDC has inherent utility.
Coinbase offers no fees when spending USDC using the well-known Coinbase Card, incentivising Coinbase users to utilise USDC to spend, rather than other cryptocurrencies. Might I mention that the Coinbase Card, being a VISA card, is accepted at nearly every vendor?
VISA recently became the first major payments to allow the settlement of transactions in USDC. While this doesn’t benefit consumers as of now, it allows crypto-holding companies such as Crypto.com and Tesla to natively transact USDC through VISA, eliminating the need to convert their crypto to fiat.
Compare this to Tether, whose only ‘partner company’, Bitfinex, is the entity that controls USDT itself.
Available on a variety of blockchains.
USDC is powered by an ERC-20 smart contract in the Ethereum blockchain and is also supported on other blockchains (Algorand, Solana, Tron, Stellar, Avalanche). It is an open-source project, which makes it a transparent and verifiable stablecoin on the blockchain.
In addition, in the next few months Circle is planning to add USDC to 8 more blockchains, including Celo, Flow, Hedera, Kava, Nervos, Polkadot, Stacks, and Tezos.
This will put it significantly ahead of USDT, which only supports 7 blockchains as of now.
Each network has its own benefits, all of which comprehensively make USDC more useful than it ever was.
Can be staked for interest.
By staking USDC, you can earn
- 8.6% APY on BlockFi
- 8% APY on Crypto.com
- 11.55% on Celsius Network
- Native earnings if you hold it on Coinbase
- … and many more options
On another note, you can also use USDC to mitigate liquidity risk by using it as collateral for DAI in MakerDAO.
However, nearly all stablecoins can be staked for yields, some more than others.
With exchanges like Binance, Coinbase, and FTX adding more and more support for USDC day-by-day, the power transfer from USDT to USDC seems inevitable at this point.
Granted, USDC have a few flaws too. Let me know if you want an article on them!
