What is USDC Stablecoin? Cryptocurrency Beginner’s Guide
While the world of cryptocurrency has definitely revolutionized the way transactions are done, it is no surprise that many fiat currencies would also jump onto the digital coin bandwagon. When it comes to making investments in high volatility cryptocurrency markets, there is always a risk for slippage and mass loss of profits.
To prevent slippage, some people choose to immediately trade their cryptocurrencies for those that are, for the most part, reliable or hold significant trading value. Many investors will choose to exchange their altcoins for those that are easy to exchange, make trades for Bitcoin, Litecoin or Ethereum, or choose other alternatives.
For a while, it wasn’t even possible to exchange cryptocurrency back into fiat currency. Because of this many new investors didn’t feel comfortable with the idea of investing their hard cash into digital currency without any real tangible return of investment. As cryptocurrency gained popularity, so to have the options for how to use, trade, and earn real profits from digital currencies.
So how do cryptocurrency investors trade their digital currencies for safer, less volatile assets to avoid slippage and other losses? Is there a method that is both secure and reliable?
Of the few cryptocurrencies out there, there are some that are dedicated to being the very answer so many traders are looking for. One of these cryptocurrencies is USDC stablecoin.
USDC Stablecoin: Converting US Dollars into a Usable Digital Currency One Click at a Time
Developed by the cryptocurrency finance firm Circle, the USDC stablecoin is a digital currency that has the equal trading capacity with the dollar. This means one USDC stablecoin is worth exactly one US dollar. This allows traders who invest in high volatility cryptocurrencies such as Ethereum, Bitcoin and so on a reliable way to convert their profits into a low volatility cryptocurrency.
This gives investors a sense of security over their investments instead of having to worry about market drops, slippage, and other issues related to cryptocurrency exchanges. Basically, you can make a cryptocurrency to cryptocurrency trade and have your final trade backed up by actual dollars.
What is a Stable Coin?
Now you might be wondering about what stable coins are exactly. Like the USDC stablecoin, these digital coins are a type of cryptocurrency that is backed by a reserve asset. This makes them volatility-free and they can act as a stable valuation of fiat currencies. These digital currencies are not handled by financial institutions and are often global.
There are a few major types of stable coins that are backed by fiat currency, cryptocurrencies and those that are non-collateral.
Cryptocurrency collateral stablecoins
These are the type of stable coins that you would see backed by another cryptocurrency. Usually, a high amount of a cryptocurrency will have to be withheld as a reserve. This means there would have to be double the worth of cryptocurrency in reserve and half of it would be issued as stablecoins.
Unfortunately, this makes them the more highly volatile stablecoins. Ethereum is a cryptocurrency that offers a stablecoin backed by Ether.
Fiat collateral stablecoins
This type of stablecoin tends to be the more reliable option since it is heavily dependent on maintaining a reserve of the asset that is backing it. Stablecoins can be backed by silver, gold, oil, fiat currencies such as the US dollar, and other commodities. These stablecoins are subjected to audits and are often maintained by an independent custodian of the reserve.
The USDC stablecoin is a prime example of a fiat collateral stablecoin.
This is a type of stablecoin that operates using a working mechanism to maintain stable prices. In essence, these stablecoins work like a bank does when it prints currency to back the valuation of a fiat currency. The stablecoin maintains stability by either decreasing or increasing the supply of tokens on an as need basis.
How this is done is through the use of smart contracts.
How Does the USDC Stablecoin Work?
USDC stablecoins are an ERC-20 token. This means it will operate on the Ethereum blockchains. Users first download a USDC stablecoin compatible wallet, establish a digital wallet address and then transfer tokens from other wallets or buy USDC tokens.
This cryptocurrency is handled with strict policies defined by the CENTRE consortium. This determines how the stablecoins are exchanged, who has authority to issue USDC and making sure all users send monthly audits. The audits are used to determine that the number of dollars you hold on the account matches up to the number of USDC issued to you.
How users can hold dollars is through their Coinbase accounts. However, like with any digital wallet, these accounts can be potentially hacked. It is recommended to use other ledger wallets for long-term storage.
USDC Stablecoin Wallets
The USDC stablecoin currently uses the Coinbase wallet. The firm Circle hopes to include Coinbase Pro as another alternative to their main option. Both of these wallets will allow you to exchange your USDC interchangeably.
This is the primary wallet used to hold USDC. It is the basic trading platform for Circle’s USDC stablecoins.
This is the more advanced wallet option and allows users to trade for various cryptocurrencies like the original coinbase wallet, but with the addition of 0X.
What are the Benefits of Using USDC Stablecoin?
There are few other benefits to using USDC stablecoins other than backing up your cryptocurrency profits. Some of these other benefits include:
- Users will not have to worry about any fees when they deposit and convert US dollars into their Coinbase accounts.
- Users will be able to immediately receive and send other users USDC to each others Coinbase Pro accounts.
- After a period of at least 12 hours has passed, users can then start making trades for Bitcoin and Ethereum using their USDC stablecoins.
What are the Drawbacks of Using USDC Stablecoin?
While USDC stablecoins do have many benefits, there are some drawbacks to using these types of cryptocurrencies.
- Some users may experience limitations with USDC due to jurisdiction restrictions.
- They are not adequate for short-term trading and/or exchanges due to the limitations with the liquidity of reserve fiat currency.
Final Thoughts on the USDC Stablecoin
Using stablecoins as a way to safely store cryptocurrency for long-term prospects definitely clears up many fears people have with cryptocurrency in general. USDC stablecoin is the bridge that traders can rely on for security and reliability for long-term investments and easy exchanges with well-known cryptocurrencies.