Introducing USDC (USD Coin)
USDC is a stablecoin pegged 1:1 to the US dollar. In simple terms, you can think of 1 USDC as a digital currency that is always equal to 1 US dollar.
Unlike typical cryptocurrencies whose prices fluctuate by tens of percent a day, USDC has minimized price volatility. Thanks to this characteristic, you can enjoy the convenience of cryptocurrency while ensuring stability.
USDC is a project developed jointly by Circle, an American fintech company, and Coinbase, a famous cryptocurrency exchange. Both companies are officially licensed and operated in the United States, so it is considered more reliable than other stablecoins.
The history and development of USDC
If you look at the history of USDC, it first appeared in the world on September 26, 2018. At that time, the cryptocurrency market was extremely volatile, making it difficult to use it as a means of actual payment or remittance.
It was initially issued only as an ERC-20 token on the Ethereum blockchain, but due to user demand, it is now available on various blockchains such as Algorand, Avalanche, and Solana.
In particular, with the DeFi (decentralized finance) boom since 2020, the usage of USDC has exploded, and it is currently the second largest stablecoin in terms of market capitalization after Tether (USDT).
How USDC Works - How Does It Maintain 1 Dollar?
The core of USDC is 'holding complete reserves'. When a user pays $100 to buy 100 USDC, Circle stores the $100 in a safe place and issues 100 USDC tokens.
On the other hand, if a user wants to exchange the 100 USDC for dollars, Circle retrieves (burns) the USDC token and returns the $100 it was storing. In this way, the total amount of USDC in circulation and the amount of dollars held by Circle always match.
Circle is audited by a famous accounting firm called Grant Thornton every month and discloses its actual assets. This transparency allows users to trust USDC.
Various uses of USDC
USDC is being used in more places than you might think. The most basic use is as a trading medium in cryptocurrency exchanges. When the price of cryptocurrencies such as Bitcoin or Ethereum fluctuates rapidly, many people use the strategy of temporarily avoiding with USDC and then buying it again.
USDC is also attracting attention in the field of overseas remittance. It is much faster and has lower fees than existing bank remittances. In particular, remittance services using USDC are gaining popularity in regions with high traditional remittance fees such as Southeast Asia and South America.
On DeFi (decentralized finance) platforms, you can use various financial services such as depositing USDC and receiving interest, or using it as collateral to receive loans. There are also platforms that offer interest rates of 5-10% per annum, so you can expect higher returns than traditional bank deposits.
Major exchanges where USDC can be traded
USDC can currently be traded on most major cryptocurrency exchanges around the world. The most representative global exchanges include Coinbase, Binance, Kraken, and Bitfinex, and in Korea, Upbit, Bithumb, and Coinone also handle it.
In particular, Coinbase is the co-developer of USDC, so it has the most USDC-related services. Coinbase allows you to exchange USDC for dollars for free, and also provides separate interest to USDC holders.
USDC trading is also very active on decentralized exchanges (DEXs). Platforms like Uniswap, SushiSwap, and Curve Finance allow you to directly exchange USDC with various cryptocurrencies, and you can even earn additional income by providing liquidity.
Active USDC Community and Ecosystem
There is a really active community around USDC. Users share information on Reddit's r/USDCoin, various USDC-related channels on Telegram, and Discord servers.
In particular, various profit-making strategies using USDC are actively discussed in the DeFi community. Methods of earning more than 20% per year with USDC through a method called 'yield farming' are also being shared.
Various applications utilizing USDC are also continuously being developed in the developer community. There are an increasing number of services that can be used in real life, such as salary payment systems, online shopping mall payment systems, and crowdfunding platforms.
Guide to Choosing a Wallet for USDC Storage
Choosing the right wallet is important to safely store USDC. Let's take a closer look at the types of wallets and their features.
Hardware wallets are the safest option. Representative products include Ledger Nano S/X and Trezor. They are completely isolated from the Internet, so there is almost no risk of hacking. However, they are expensive, around 100,000-200,000 won, and their usage can be a bit complicated.
Software wallets include MetaMask, Trust Wallet, and Exodus. It is convenient because it is installed on a smartphone or computer, but it can be dangerous if the device is hacked.
• Always store the wallet seed phrase (recovery phrase) in a safe offline location
• Avoid accessing the wallet on public Wi-Fi
• Regularly update the wallet software
• Store large amounts in a hardware wallet and daily use in a software wallet
Things to know when investing in USDC
Even though USDC is a stable coin, it does not mean that it is completely risk-free. I will summarize the risk factors that you must know before investing.
1. Depeg Risk: In rare but extreme cases, the USDC price may deviate from $1.
2. Regulatory Risk: Government regulation changes may affect the use of USDC.
3. Technical Risk: Possible blockchain network issues or smart contract bugs.
4. Circle Company Risk: You may be affected if there is a problem with Circle, the USDC issuer.
Also calculate the transaction fees in advance. When using the Ethereum network, gas fees can be higher than you think. Especially when the network is congested, the transfer fee alone can reach tens of dollars.
Tax issues are also important. Although there are still some areas in Korea where cryptocurrency-related tax laws are unclear, you may be required to report taxes on profits generated from USDC, so we recommend that you consult with an expert.
USDC is an innovative financial tool that provides the convenience of cryptocurrency and the stability of traditional currency. However, as it is a new technology, there are also risk factors. Please always make investments within your means and after sufficient study and preparation. If you have any further questions about USDC, please leave a comment at any time!