此網頁僅供信息參考之用。部分服務和功能可能在您所在的司法轄區不可用。

What is USDC? The fiat-backed stablecoin explained

Formerly known as USD Coin, USDC has successfully established itself as one of the go-to stablecoins in the crypto space. Despite launching four years later than its biggest stablecoin competitor, USDT and USDC are often compared to this day. While Tether's stablecoin (USDT) has the largest market cap, Circle's USDC offers a compelling alternative given its reputation for being always-on and offering 1-to-1 redemption for US dollars.

Curious about how USDC compares to the competition and how it stands among the best stablecoins? From USDC's origins to its current place in the stablecoin space, here's everything you need to know about USDC.

What's USDC?

USDC is a digital stablecoin that's pegged to the US dollar and fiat-backed. Launched in 2018, USDC is designed to maintain a 1-to-1 ratio with the US dollar. The USDC stablecoin aims to provide its users with a digital representation of a traditional fiat currency while taking advantage of the benefits of blockchain technology.

Who's behind Circle?

Many crypto enthusiasts know Circle Internet Financial Limited as the company managing the USDC stablecoin. However, the company's roots go beyond its USDC fame. Founded in 2013 by Jeremy Allaire and Sean Neville, Circle began as a P2P payments technology company. Back then, Circle had a guiding vision of dramatically changing the way we use money around the world with the help of digital dollars.

After multiple rounds of venture capital funding from prominent financial institutions like Goldman Sachs and securing its BitLicense from regulators, Circle worked to solidify its reputation as a go-to cryptocurrency company for any financial firm looking to deal with Bitcoin and blockchain technology. Up until 2019, Circle's mobile payment platform Circle Pay operated as a way for users to hold, send, and receive traditional fiat currencies.

After discontinuing Circle Pay and selling its digital asset trading platform, Circle set its sights on revolutionizing digital payments by creating the USDC we're all familiar with today. In September 2018, Circle formed a consortium with Coinbase Global and named it Center.

How does USDC work?

While the 1-to-1 peg with the US dollar has been marketed as USDC's strongest selling point, it's key to understand more broadly how the token works. Thanks to the US dollar peg, anyone can redeem a digital dollar of USDC for US dollars at any point in time.

Understanding USDC's peg to 1 USD

In short, the peg implies that for every USDC in circulation, there's an equivalent amount of US dollars held in reserve. This collateralization offers a sense of security, as the value of USDC is directly tied to a widely circulated and accepted fiat currency like the US dollar.

According to Circle, USDC's reserves are audited annually and these audits are filed publicly with the Securities and Exchange Commission (SEC). The public audits are all part of Circle's plans to eventually become a publicly listed company on the New York Stock Exchange.

As of November 9, 2023, the following represents USDC's reserves composition:

  • $24.1 billion of USDC is currently in circulation, while $24.2 billion is currently kept in Circle's reserves.

  • Of the $24.2 billion in reserves, the Circle Reserve Fund makes up $22.9 billion. The remaining $1.3 billion represents cash at reserve banks. The Circle Reserve Fund is an SEC-registered government money market fund. It consists of a portfolio of short-dated US Treasuries, overnight US Treasury repurchase agreements, and cash.

Due to this overcollateralization of USDC, Circle can claim that USDC is backed by an equivalent value of US dollar-denominated assets held as reserves for the benefit of USDC holders. The cash part of USDC's reserves is held at regulated financial institutions, while the portfolio of the Circle Reserve Fund is custodied at The Bank of New York Mellon, which is a regulated financial institution and is managed overall by BlackRock.

What are the use cases of stablecoins like USDC?

Now that we understand the background of Circle and the inner workings of USDC's peg, here are some everyday use cases of USDC.

On-ramping and off-ramping

Keen to enter and exit the world of crypto at will? That's where stablecoins come in. Stablecoins essentially act as the bridge between traditional finance and decentralized finance. They allow crypto enthusiasts to exchange fiat currencies for digital assets and vice versa. Thanks to stablecoins like USDC, crypto traders can easily convert their traditional fiat currencies into digital currencies at will.

Liquidity for active trading

If you're a crypto trader that's actively scalping gains and doubling down on existing positions, you'll likely need the liquidity that major stablecoins provide. With 24-hour trading volume numbers of about $11 billion on OKX, USDC provides more than enough trading liquidity to serve crypto traders when they need access to the asset while trading.

Generating bonus gains

Did you know, you can generate extra gains while passively waiting for the right trading opportunity? With products like Simple Earn, you can earn extra rewards while attempting to buy the dip or storing away your funds for a long-term trade.

From passively growing your assets with Simple Earn to rewarding you for patiently timing your entry and exit trades, OKX Earn helps you gain more each day, in a trusted space.

What determines a good stablecoin?

Before diving into how USDC stands out from the competition, we must first understand what makes a good stablecoin. On a fundamental level, the best stablecoins must offer transparency to their reserve of assets. In a post-FTX crash crypto era, clarity over what's backing these digital stablecoins will be especially helpful in winning over cautious crypto traders who may be skeptical of what's holding up a stablecoin's value.

Additionally, a good stablecoin has a high trading volume. This gives crypto traders the liquidity they need when entering and exiting trades as they use the stablecoin as a liquid exchange medium.

The last factor for what makes a stablecoin strong is availability. The last thing you want is to be limited when trading with a stablecoin because a certain spot trading pair isn't available on the exchange you're actively trading on.

How USDC differentiates from competing stablecoins

Putting traders' trust in the US dollar peg

Compared to non-collateralized stablecoins or those backed by cryptocurrencies, the fiat-backed stability of USDC provides users with a more reliable store of value. This stability becomes particularly crucial during periods of high volatility in the crypto market. Here, issues like trust in the stablecoin can be the difference between potential bank runs due to mass withdrawals and being a bastion of strength for traders during volatility.

Regulatory compliance and frameworks in place

The regulatory environment plays a pivotal role in the stablecoin market, and USDC has positioned itself as a compliant player. USDC adheres to stringent regulatory standards, aligning itself with financial regulation to guarantee legality and trustworthiness. This compliance adds an extra layer of security for users and businesses involved with USDC transactions. By actively engaging with regulators like the SEC, Circle is better positioned to navigate legal challenges more effectively, helping build long-term trust among its users.

Transparency through regular audits

According to Circle, transparency is a cornerstone of the USDC ecosystem. Thanks to regular public audits by reputable third-party firms, anyone can refer to these audits and verify the existence of USDC's reserve holdings. Doing so will confirm that the 1-to-1 US dollar peg is being maintained. With the information displayed on Circle's website, users can essentially trace every USDC token back to its issuance and verify the corresponding US dollar reserves. This transparency ultimately builds further trust and makes sure the USDC stablecoin operates with integrity.

Widespread partnerships and acceptance

The widespread acceptance of USDC by the end of 2023 is a testament to its reliability. According to Circle's USDC ecosystem, numerous online platforms and financial institutions have integrated USDC into their ecosystems, providing users with a range of avenues to explore USDC usage. Overall, the broader acceptance of USDC contributes to its liquidity and utility. Users can seamlessly transact with USDC across various industries, from e-commerce to decentralized finance, enhancing the stablecoin's overall value proposition.

Final words and next steps

Thanks to the rapidly developing crypto scene, an ever-growing pool of crypto traders is joining the fray and seeking the best stablecoins to convert their traditional fiat currencies into. With USDC's focus on transparency, widespread adoption, and a fiat-backed dollar peg, many consider it a top contender among all stablecoins in the crypto space.

From highlighting Circle's background to explaining the 1-to-1 US dollar peg, we hope our guide to USDC has been useful.

Keen to exchange some of your USDT for USDC? Trade our USDC/USDT spot pair and make the switch today.

免責聲明
本文章可能包含不適用於您所在地區的產品相關內容。本文僅致力於提供一般性信息,不對其中的任何事實錯誤或遺漏負責任。本文僅代表作者個人觀點,不代表 OKX 的觀點。 本文無意提供以下任何建議,包括但不限於:(i) 投資建議或投資推薦;(ii) 購買、出售或持有數字資產的要約或招攬;或 (iii) 財務、會計、法律或稅務建議。 持有的數字資產 (包括穩定幣和 NFTs) 涉及高風險,可能會大幅波動,甚至變得毫無價值。您應根據自己的財務狀況仔細考慮交易或持有數字資產是否適合您。有關您具體情況的問題,請諮詢您的法律/稅務/投資專業人士。本文中出現的信息 (包括市場數據和統計信息,如果有) 僅供一般參考之用。儘管我們在準備這些數據和圖表時已採取了所有合理的謹慎措施,但對於此處表達的任何事實錯誤或遺漏,我們不承擔任何責任。OKX Web3 功能,包括 OKX Web3 錢包和 OKX NFT 市場都受 www.okx.com 單獨的服務條款約束。
© 2023 OKX。本文可以全文複製或分發,也可以使用本文 100 字或更少的摘錄,前提是此類使用是非商業性的。整篇文章的任何複製或分發亦必須突出說明:“本文版權所有 © 2023 OKX,經許可使用。”允許的摘錄必須引用文章名稱並包含出處,例如“文章名稱,[作者姓名 (如適用)],© 2023 OKX”。不允許對本文進行衍生作品或其他用途。
展開
相關推薦
查看更多
查看更多
立即註冊並領取獎勵