Hello Publish0x community and welcome back in this new article of my “Easy & Short Cryptocurrencies Made Accessible” area.
With this article we are going to introduce the 50th cryptocurrency of this section with the 106th “E&S” article.
We reached 50 crypto analyzed in our “Easy & Short”!
Today we start to see another crypto. As probably have you already read from the title, we will talk about a stablecoin: USDC!
In the last review, I talked about DAI, If you missed my last review, you can recover it here: https://www.publish0x.com/easyshort-cryptocurrencies-made-accessible/e-and-s-dai-the-world-s-first-unbiased-currency-xmygwlr
USD Coin (USDC) is a stablecoin, which is a digital "currency" pegged to a stable reserve asset. Its value is tied to that of the U.S. dollar and therefore does not experience the fluctuations that other cryptocurrencies do.
Stablecoins are nothing new in the cryptocurrency world. The arrival of Tether (USDT) marked a before and after in this regard, enabling fast transactions between those using cryptocurrencies such as Bitcoin or Ethereum who want to make quick changes to a "Least Volatile" currency on exchanges. However, Tether had serious problems behind it. In addition, USDT has transparency policies that many people find unacceptable, particularly regarding audits verifying that Tether has in its possession the 1: 1 support expected for each USDT token issued. The issuance of Tether tokens, on the other hand, is granted only to companies or individuals that meet the acquisition requirements, and only for amounts over $100 USD. These weaknesses led various giants in the industry to look for ways to address it and take over the nascent mercado that came next.
That is how Coinbase and Circle joined forces and created Center, a company that would be tasked with managing USDC. USDC has been in circulation since September 26, 2018. It can be seen as a viable alternative to other stablecoins pegged to the dollar, such as Dai (DAI), Tether (USDT), and Binance USD (BUSD). USD Coin tokens can be converted back into dollars at any time, making their use quite convenient.
How does USD Coin work?
For every $1 held in a bank account by Centre, 1 USDC is issued. To maximize transparency and accountability, regular audits are conducted to prove that Centre holds the USD equivalent that it should hold. The results are then published on its official website. As a result, although USD Coin is a cryptocurrency, it is not as decentralized as Bitcoin because a small group of companies control its issuance.
Image source: CoinMarketCap
A currency with no issuance limit
Because USDC is a currency pegged 1: 1 to the dollar and, this fiat currency has no issue limit (nor will it ever have one), the USDC smart contract is special in that the issuance of USDC is infinite.
The issuance of new currencies responds only to dollar deposits in the Center's protected accounts, which then allow the smart contract to create the same amount of USDC within the smart contract and release it to an ETH address where the buyer's USDC will be stored. Yes, this is the same model followed by, for example, Tether, where the dollar bank deposit is transformed into USDT for the buyer.
This form of issuance can certainly generate all kinds of suspicions for those who support the transparency and security of cryptocurrencies, but many institutional players trust this system, and this is what has led USDC to become one of the world's great stablecoins. For its part, the ultimate withdrawal of USDC funds from this token's smart contract leads to the burning of USDC tokens. That is, if a user withdraws 1,000 USDC and withdraws it from the blockchain to a bank, that 1,000 USDC is withdrawn from the Center accounts for cash withdrawal, thus burning the 1,000 USDC token, balancing what exists on the blockchain with what exists in the bank accounts. This ensures that there is always 1:1 support for each coin within USDC.
Next week we'll see new details about USD Coin!
I invite you to follow me so you don't miss the second part of the article that will be released next Sunday.
What’s your favorite stablecoin and why?