Induction

While USDC and USDT are both stablecoins backed by the US dollar, they differ in the year of their introduction, the organisations that issue them, their ability to work with blockchain networks, the assets they back, and the auditors that oversee them.

Stablecoins USDC and USDT, which are backed by fiat and tethered to the US dollar, were launched to counteract the extremely unpredictable price swings of the cryptocurrency market. Most major cryptocurrency exchanges have USDC available.

Similar to USDT, native USD Coin can be sent and received by any ERC-20 compliant wallet or exchange and other blockchains like Stellar, Algorand, Solana, and more. Along with these similarities, significant variations between these two stablecoins could influence a user’s choice.

It is noteworthy that Bridged USDC, which functions on layer-2 blockchains, is compatible with Polygon. But Circle doesn't actually print or redeem Bridged USDC. Bridged USDC is not backed by US dollars or Circle's USDC-related reserves. Rather, Bridged USDC can only be unbridged using Native Ethereum USDC.

USD Coin: Is it secure?

Before investing any money, investors must consider the advantages and disadvantages of stablecoins, even though the USD Coin is governed by regulatory control.

While Circle is completely transparent about its operations, USDC is subject to rules and is periodically audited, in contrast to USDT. Even said, there are drawbacks to investing in stablecoins inside the cryptocurrency space. Because it is based on the US dollar, the value of the USD Coin, for example, will never increase.

The benefit of being able to make passive income by lending and borrowing USDC on decentralised platforms offsets this drawback. However, a number of factors, such as the potential for depegging, might cause the value of the USD to decline. The USDC had a sharp decline in value the day after Silicon Valley Bank (SVB) closed on March 10, 2023, falling from its pegged value of US$1 to US$0.91.

Additionally, it relies on how much money is wanted to be allocated to a specific asset as well as one's risk-return profile. Not to mention, reliable exchanges like FTX filing for bankruptcy raises concerns about the dangers associated with stablecoin and cryptocurrency investing.

What is a USD coin (USDC) ?

To maintain price parity with the US dollar, the fully-reserved stablecoin USDC was developed.

A decentralised digital asset that exists on the blockchain and is tethered to a fiat currency, in this case the US dollar, to stabilise its value against market volatility is called a fiat-collateralized stablecoin, or USD Coin (USDC). But there are other stablecoins on the market than USDC. 2014 saw the introduction of Tether (USDT), another asset-backed (US dollar) stablecoin by Tether Limited.

Who then controls the USD Coin? As a member of the Centre consortium, the Boston-based Circle and Coinbase exchange established the USD currency (USDC) in 2018. According to USD Coin's claim to be worth one US dollar, there is one US dollar kept in reserve for every USDC in circulation. To put it simply, the USD Coin is a service that tokenizes the US dollar and makes it more accessible on public blockchains and the internet.

The USD Coin, in contrast to cryptocurrencies, cannot be created. Since USDC is compatible with all other Ethereum-based decentralised applications (DApps), it may be obtained as ERC-20, the most popular standard for blockchain applications. It is not, however, limited to the Ethereum network alone. Rather, the USD Coin works with with other significant blockchain networks, including Solana, Avalanche, TRON, Algorand, Stellar, Flow and Hedera.

Since its introduction, USDC has established itself as a critical component of the stablecoin market with ample liquidity and trading across centralized and decentralized exchanges worldwide.