History of USDC

First issued in October 2018, USD Coin, or USDC, was developed by a consortium called Center. This consortium includes members from leading platforms like Coinbase and Bitmain with its founder being Circle, a peer-to-peer payments technology company. The stablecoin was first launched as an ERC-20 token on the Ethereum network and slowly spread its wings to other networks like Solana, Algorand, Stellar, and Tron.

USDC was mainly created to address the issues of volatility and fiat-crypto convertibility prevalent in the crypto market. Every USDC in circulation is backed by actual US Dollars held in reserve, along with other approved investments with an equivalent value. USDC quickly became the stablecoin of choice for users of several DeFi platforms.

With a market cap of over $27.4B, USDC today comfortably sits at the second position among the most valuable stablecoins by market cap.

What is USDC used for?

The primary use-case for USDC is to enable users to easily store funds in the form of a cryptocurrency and use it to execute trades across DeFi platforms. USDC holders can also use it to fund liquidity pools on DeFi protocols and earn interest on the same.

Due to its price stability, USDC also provides a stable on-ramp for new users to enter the decentralized framework without worrying about volatility. Furthermore, USDC is becoming a popular means for instant and cheap cross-border payments.

How does USDC work?

USDC is a fiat-collateralized stablecoin that is pegged to the U.S. dollar on a 1:1 basis. Users who wish to mint USDC deposit fiat U.S. Dollars on an issuer platform backed by the Center consortium. The issuer creates a smart contract and holds the fiat in reserve to create an equivalent amount of USDC tokens.

In case depositors wish to redeem their fiat, they can deposit back the USDCs on the issuer platform, where they are burned to release the U.S. dollars to the depositor’s account.

Advantages

Reduces volatility: As USDC is pegged to the U.S. Dollar, it provides users a sense of stability and security within the DeFi ecosystem and acts as an effective means of payment within DeFi.

On-ramp to DEXs: On decentralized exchanges and other DeFi protocols where fiat payments are not enabled, USDC acts as an easy on-ramp for new users to process transactions on these protocols.

Reliable cross-border payments: USDC provides a reliable way for users across the globe to make instantaneous fund transfers across the globe at a cheap cost.