What is USDC?
Cryptocurrencies are now used to make payments, to engage with decentralized services and tools, and to store value. But they tend to have a trait that limits their day-to-day usability: volatility. Even Bitcoin, which has seen less volatility compared to its earliest years, moves too much relative to fiat currencies to be a comfortable everyday currency for most users.
A new class of cryptocurrencies called “stablecoins” have their price fixed to a reserve asset (often the US dollar) at a one-to-one ratio. USDC, as its name would suggest, is one such dollar-pegged cryptocurrency. The launch of USDC was powered by a collaboration between Coinbase and Circle through the co-founding of the CENTRE Consortium.
How it works?
USDC can be redeemed on a one-to-one basis for the US dollar and is backed by dollar-denominated assets held in segregated accounts with US-regulated financial institutions. Its goal is to make crypto payments via the blockchain more reliable by reducing price fluctuations.
USDC is an Ethereum token and can be used to facilitate blockchain payments and transfer of value in the context of Ethereum smart contracts. This allows users to keep cryptocurrencies in a wallet, ready to send to a friend or interact with decentralized financial tools and services, and with minimal any exposure to the risk of their holdings falling in price before they get a chance to spend them.
By providing assurances that token holders can redeem one USDC for exactly one US dollar at any time, the potential for price speculation is significantly reduced – resulting in a crypto asset that maintains a fixed value.
