DeFi

·

January 31, 2024

USDC by Circle

Anthony Allen

USDC is one of the most popular stablecoins thanks to wide availability across 15 networks and transparent reporting of its cash reserves. Learn how to use native USDC to trade more effectively.

USDC (USD Coin) is a cryptocurrency token 100% backed by real dollars. It is a stablecoin issued by Circle which provides regular reports on all reserve assets, making it popular and widely trusted. It is a key component in ensuring liquidity across markets and compliance with US regulations.

USDC can be used in many ways:

  • To pay and receive payments the same way you use regular dollars.
  • To trade cryptocurrencies and interact with smart contracts.
  • To avoid periods of uncertainty or market volatility.
  • To access dollars in emerging markets where native currencies quickly devalue.

Why USDC was created

Tokenization of fiat assets (unbacked currencies, like the US Dollar, Euro, Yen, and others) allows for instant transfer of value across the world, making them useful in many situations not listed above. 

Despite this, the lack of regulatory framework for cryptocurrencies has hindered adoption. Circle has been proactive in advancing regulators’ understanding of crypto assets and has made USDC to operate within local laws. 

The relationship between Circle, dollar reserves in a bank, and USDC token.
USDC is redeemable for US Dollars through Circle.

Many stablecoins created before USDC were seen as high-risk due to uncertainty about the methods used to back their price. Transparency has helped USDC to succeed as a stablecoin that is proven to be fully backed by US dollar or dollar-equivalent reserves, where highly liquid assets can be bought or sold as needed to support the token’s circulating supply. 

The original consortium that created USDC included Coinbase, Centre and Circle, but as regulatory clarity surrounding stablecoins increased, operations wholly transitioned to Circle. Coinbase is no longer involved with issuing or operating USDC, though they continue to integrate USDC tightly into their ecosystem.

What you can do with USDC

There are two main advantages of using USDC. First, it is always redeemable 1:1 for real USD, in a way that is regulated and widely accessible. Secondly, it can be quickly and cheaply sent between networks using the Cross-chain Transfer Protocol (CCTP). This is a permissionless bridging protocol that will remove USDC from circulation on one chain and reissue it as native USDC on another. 

Since USDC is issued at an equal ratio to the reserve, it can be used as a way to convert, hold, spend and receive dollars in cryptocurrency form. It also makes it easy to trade a set dollar amount for other cryptocurrencies and tokens, as each unit is almost always the same value as a single dollar. And since USDC follows the ERC-20 standard, it will be accepted in most any situation where another token is accepted.

Native USDC can be exchanged for other cryptocurrencies on different blockchains.
You can use native USDC to swap for other cryptocurrencies or redeem for cash.

While there are different ways stablecoins can derive their value, USDC is pegged to the price of a dollar through cash and cash-equivalent asset reserves. Circle adjusts the amount of assets held in its reserves to ensure 100% of USDC is accounted for using real world assets (RWAs). This is not a perfect system, however, and there are several reasons the price of USDC can fall below the price of a dollar.

  1. The supply of tokens exceeds the amount of dollar assets in reserve.
  2. A news event calls into question the value of the reserves causing widespread doubt.
  3. A bank run occurs, where many holders cash out at once, putting strain on the redemption process.

Is USD coin a good investment?

Most traders who use US dollars to transact would not consider USDC an investment, in the same way cash is rarely considered an investment. There are however cases where a citizen of another country whose own currency is experiencing high inflation may invest in USDC to preserve their wealth. 

Instead, USDC is a tokenized version of cash that opens up new opportunities through digitization. It can be used to preserve the dollar value of crypto assets in times of uncertainty or volatility. By buying USDC, expect the value of your assets to remain the same in dollar terms over time, but this means they will also be affected by inflation of the US dollar. 

Cryptocurrencies like Bitcoin and Ether are commonly seen as inflation hedges, defined as an asset which is expected to appreciate more than a fiat currency like US dollar or Euro is devalued through debasement (money printing). Investing in USDC is more or less equivalent to holding cash, but with a shorter history and involvement of non-governmental third parties in the minting process.

Is USDC safe? 

As the second most popular stablecoin, USDC is used to settle billions of dollars of transactions each day. Regulatory compliance makes it simpler to use USDC in the US and other jurisdictions, and reserves are held by financial institutions where they are not subject to some of the rehypothecation risk found in other unregulated stablecoins.

Be aware that there are many tokens named USDC which are not native USDC. These may be unofficial copies such as bridged USDC which uses USDC deposited in a smart contract as collateral in order to support its value, but does not have the same properties or utility as official native USDC.

How USDC compares to USDT 

Tether (USDT) is another dollar-backed stablecoin with a higher market cap than USDC. While USDC has seen success in the US, Tether is more commonly used in other jurisdictions including South America and Asia. 

Historically, there has been scrutiny about the transparency of reporting and quality of USDT cash reserves, which have in cases led to incidents where USDT value fluctuated, but Tether has since adopted regular third-party audits, the latest of which showed excess cash reserves.

There is little evidence that one token is better than another. Users based in the USA may prefer USDC due to its clear mission focused on regulatory compliance, but both assets are commonly used and widely accepted. 

How to add USDC to MetaMask 

If you have already sent USD Coin or a bridged version like USDC.e to your Metamask wallet, you may run into problems getting the token to show in your list of assets. This could be for two reasons: either the tokens haven’t arrived yet, or you haven’t manually imported the token parameters which Metamask needs to know what token to look for.

Importing USDC to your MetaMask 

To add any token to MetaMask, you will need to open your MetaMask wallet and click on Import Token then search for the token name or click on the Custom token tab and enter the following: 

  • The token contract address:  0xa0b86991c6218b36c1d19d4a2e9eb0ce3606eb48 for USDC on Ethereum 
  • The token symbol (ticker): USDC
  • The token decimals: 6 
How to import tokens to Metamask web extension

Once you have added these details, click Next to be shown a preview of any discovered balance and then confirm by pressing Import. 

Find the contract address for a token just above the trade module

You can find token contract details by looking up the token name on Etherscan and copying details under the Token Contract heading. To verify a token you want to trade, open the Matcha trade module, and click the token contract icon to be able to see the correct page for the token you have selected.

Check if your USDC transaction has confirmed

Transactions on Ethereum take some time to propagate across the network and are not considered final until they have been confirmed several times. Your USDC transfer may take up to half an hour, but the process usually only takes several minutes, longer if the network is congested. 

To check if your USDC transaction has been confirmed successfully, you can simply type the transaction ID or your wallet address into a block explorer like Etherscan. This will show you details of your transaction, where you can identify how many times the transaction has been confirmed. Once there are more than around 10 confirmations, the transaction is usually considered final.

Alternatives to MetaMask 

Losing track of your tokens is fairly common for MetaMask users. While this used to be a sort of rite of passage for new DeFi users, there are now many MetaMask competitors which offer a better user experience and are able to identify your tokens and NFTs without needing to add them manually.

Best wallets for DeFi article link

Take a look at some of the best crypto wallets and try playing around with a few of them before deciding which one is right for you. While you don’t need to create a new wallet for each of them, as you can always import the same recovery seed, if you are just testing them out it is best to create a new wallet unless you are completely certain you are using the official version of the app. 

How do you redeem USDC

To exchange native USDC tokens for dollars, there are two routes available. Qualified businesses including exchanges, wallets, institutional traders, and fintech companies can create a Circle Mint account which offers direct redemption and minting of USDC. 

The majority of regular users will not be eligible for Circle Mint and will instead need to use one of the qualified exchanges or wallets, a small list of which is available on the Circle website. This includes large centralized exchanges including Coinbase, Kraken, Binance and many more. 

Swap USDC without added fees

USDC is most commonly used to trade. You can swap any token for native USDC on Matcha in seconds at the best rates. You can put your dollars to work and swap USDC for another cryptocurrency or even trade tokens across networks on Matcha, or trade into USDC when you need to cash out through a Circle qualified exchange. 

Matcha calculates the optimal route through the aggregated liquidity of over 100 exchanges to find you the best price for your trade. There’s no platform fees involved, just the gas cost of the transaction. With over 5 million tokens to choose from, what are you waiting for? Swap now!

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DeFi

·

January 9, 2024

USDC by Circle

USDC symbol and the blockchain networks native USDC is supported by, with the text USDC by Circle

USDC is one of the most popular stablecoins thanks to wide availability across 15 networks and transparent reporting of its cash reserves. Learn how to use native USDC to trade more effectively.

USDC (USD Coin) is a cryptocurrency token 100% backed by real dollars. It is a stablecoin issued by Circle which provides regular reports on all reserve assets, making it popular and widely trusted. It is a key component in ensuring liquidity across markets and compliance with US regulations.

USDC can be used in many ways:

  • To pay and receive payments the same way you use regular dollars.
  • To trade cryptocurrencies and interact with smart contracts.
  • To avoid periods of uncertainty or market volatility.
  • To access dollars in emerging markets where native currencies quickly devalue.

Why USDC was created

Tokenization of fiat assets (unbacked currencies, like the US Dollar, Euro, Yen, and others) allows for instant transfer of value across the world, making them useful in many situations not listed above. 

Despite this, the lack of regulatory framework for cryptocurrencies has hindered adoption. Circle has been proactive in advancing regulators’ understanding of crypto assets and has made USDC to operate within local laws. 

The relationship between Circle, dollar reserves in a bank, and USDC token.
USDC is redeemable for US Dollars through Circle.

Many stablecoins created before USDC were seen as high-risk due to uncertainty about the methods used to back their price. Transparency has helped USDC to succeed as a stablecoin that is proven to be fully backed by US dollar or dollar-equivalent reserves, where highly liquid assets can be bought or sold as needed to support the token’s circulating supply. 

The original consortium that created USDC included Coinbase, Centre and Circle, but as regulatory clarity surrounding stablecoins increased, operations wholly transitioned to Circle. Coinbase is no longer involved with issuing or operating USDC, though they continue to integrate USDC tightly into their ecosystem.

What you can do with USDC

There are two main advantages of using USDC. First, it is always redeemable 1:1 for real USD, in a way that is regulated and widely accessible. Secondly, it can be quickly and cheaply sent between networks using the Cross-chain Transfer Protocol (CCTP). This is a permissionless bridging protocol that will remove USDC from circulation on one chain and reissue it as native USDC on another. 

Since USDC is issued at an equal ratio to the reserve, it can be used as a way to convert, hold, spend and receive dollars in cryptocurrency form. It also makes it easy to trade a set dollar amount for other cryptocurrencies and tokens, as each unit is almost always the same value as a single dollar. And since USDC follows the ERC-20 standard, it will be accepted in most any situation where another token is accepted.

Native USDC can be exchanged for other cryptocurrencies on different blockchains.
You can use native USDC to swap for other cryptocurrencies or redeem for cash.

While there are different ways stablecoins can derive their value, USDC is pegged to the price of a dollar through cash and cash-equivalent asset reserves. Circle adjusts the amount of assets held in its reserves to ensure 100% of USDC is accounted for using real world assets (RWAs). This is not a perfect system, however, and there are several reasons the price of USDC can fall below the price of a dollar.

  1. The supply of tokens exceeds the amount of dollar assets in reserve.
  2. A news event calls into question the value of the reserves causing widespread doubt.
  3. A bank run occurs, where many holders cash out at once, putting strain on the redemption process.

Is USD coin a good investment?

Most traders who use US dollars to transact would not consider USDC an investment, in the same way cash is rarely considered an investment. There are however cases where a citizen of another country whose own currency is experiencing high inflation may invest in USDC to preserve their wealth. 

Instead, USDC is a tokenized version of cash that opens up new opportunities through digitization. It can be used to preserve the dollar value of crypto assets in times of uncertainty or volatility. By buying USDC, expect the value of your assets to remain the same in dollar terms over time, but this means they will also be affected by inflation of the US dollar. 

Cryptocurrencies like Bitcoin and Ether are commonly seen as inflation hedges, defined as an asset which is expected to appreciate more than a fiat currency like US dollar or Euro is devalued through debasement (money printing). Investing in USDC is more or less equivalent to holding cash, but with a shorter history and involvement of non-governmental third parties in the minting process.

Is USDC safe? 

As the second most popular stablecoin, USDC is used to settle billions of dollars of transactions each day. Regulatory compliance makes it simpler to use USDC in the US and other jurisdictions, and reserves are held by financial institutions where they are not subject to some of the rehypothecation risk found in other unregulated stablecoins.

Be aware that there are many tokens named USDC which are not native USDC. These may be unofficial copies such as bridged USDC which uses USDC deposited in a smart contract as collateral in order to support its value, but does not have the same properties or utility as official native USDC.

How USDC compares to USDT 

Tether (USDT) is another dollar-backed stablecoin with a higher market cap than USDC. While USDC has seen success in the US, Tether is more commonly used in other jurisdictions including South America and Asia. 

Historically, there has been scrutiny about the transparency of reporting and quality of USDT cash reserves, which have in cases led to incidents where USDT value fluctuated, but Tether has since adopted regular third-party audits, the latest of which showed excess cash reserves.

There is little evidence that one token is better than another. Users based in the USA may prefer USDC due to its clear mission focused on regulatory compliance, but both assets are commonly used and widely accepted. 

How to add USDC to MetaMask 

If you have already sent USD Coin or a bridged version like USDC.e to your Metamask wallet, you may run into problems getting the token to show in your list of assets. This could be for two reasons: either the tokens haven’t arrived yet, or you haven’t manually imported the token parameters which Metamask needs to know what token to look for.

Importing USDC to your MetaMask 

To add any token to MetaMask, you will need to open your MetaMask wallet and click on Import Token then search for the token name or click on the Custom token tab and enter the following: 

  • The token contract address:  0xa0b86991c6218b36c1d19d4a2e9eb0ce3606eb48 for USDC on Ethereum 
  • The token symbol (ticker): USDC
  • The token decimals: 6 
How to import tokens to Metamask web extension

Once you have added these details, click Next to be shown a preview of any discovered balance and then confirm by pressing Import. 

Find the contract address for a token just above the trade module

You can find token contract details by looking up the token name on Etherscan and copying details under the Token Contract heading. To verify a token you want to trade, open the Matcha trade module, and click the token contract icon to be able to see the correct page for the token you have selected.

Check if your USDC transaction has confirmed

Transactions on Ethereum take some time to propagate across the network and are not considered final until they have been confirmed several times. Your USDC transfer may take up to half an hour, but the process usually only takes several minutes, longer if the network is congested. 

To check if your USDC transaction has been confirmed successfully, you can simply type the transaction ID or your wallet address into a block explorer like Etherscan. This will show you details of your transaction, where you can identify how many times the transaction has been confirmed. Once there are more than around 10 confirmations, the transaction is usually considered final.

Alternatives to MetaMask 

Losing track of your tokens is fairly common for MetaMask users. While this used to be a sort of rite of passage for new DeFi users, there are now many MetaMask competitors which offer a better user experience and are able to identify your tokens and NFTs without needing to add them manually.

Best wallets for DeFi article link

Take a look at some of the best crypto wallets and try playing around with a few of them before deciding which one is right for you. While you don’t need to create a new wallet for each of them, as you can always import the same recovery seed, if you are just testing them out it is best to create a new wallet unless you are completely certain you are using the official version of the app. 

How do you redeem USDC

To exchange native USDC tokens for dollars, there are two routes available. Qualified businesses including exchanges, wallets, institutional traders, and fintech companies can create a Circle Mint account which offers direct redemption and minting of USDC. 

The majority of regular users will not be eligible for Circle Mint and will instead need to use one of the qualified exchanges or wallets, a small list of which is available on the Circle website. This includes large centralized exchanges including Coinbase, Kraken, Binance and many more. 

Swap USDC without added fees

USDC is most commonly used to trade. You can swap any token for native USDC on Matcha in seconds at the best rates. You can put your dollars to work and swap USDC for another cryptocurrency or even trade tokens across networks on Matcha, or trade into USDC when you need to cash out through a Circle qualified exchange. 

Matcha calculates the optimal route through the aggregated liquidity of over 100 exchanges to find you the best price for your trade. There’s no platform fees involved, just the gas cost of the transaction. With over 5 million tokens to choose from, what are you waiting for? Swap now!

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