USDbC is the equivalent of USDC on Base chain but is not a native version of the token. Native USDC will be launched later this year - so why have two tokens for the same thing? Let's find out!
Wondering what happened to your USDC tokens when you bridged to base? Is your USDbC on Base the same as the USDC you had on Ethereum? Here we’ll cover some of the more pressing questions you might have, so you can get comfortable with the latest Ethereum Layer-2 chain, incubated by Coinbase.
What is USDbC, is it the same as USDC?
When you bridge USDC from Ethereum onto the Base network, it will show up on Base as USDbC (USD Base Coin). This token is a wrapped form of USDC instead of a native token issued on Base.
A wrapped token is created when you interact with a smart contract that exchanges the native asset, such as USDC on Ethereum, for a tokenized version of the asset on a new chain. This tokenized asset, USDbC on Base, is pegged to the value of the native one. Native tokens are minted directly on one particular chain and do not reference the price of another token.
While the wrapped token USDbC behaves in the same way as the native token USDC, it is an abstraction tied to the price of the USDC token, and can’t be redeemed for actual US dollars. Circle, the issuers of USDC, have announced they will deploy an official native USDC token to Base in the future, which is why the USDC ticker has been reserved for their native token. Having a separate name for wrapped USDbC and native USDC tokens helps avoid the confusion of both tokens existing in parallel.
When you search for USDC on Base with Matcha, we'll bring up the right USDC token automatically so you don't have to worry about naming!
Why are my USDC tokens not the same after bridging?
If you recently bridged to Base, you might wonder what happened to any USDC you sent over, and why it is now called USDbC. That’s because when you move tokens across networks, a process known as bridging, the tokens don’t magically disappear from one network and appear on another, rather they are locked up or burned on the original network and then issued to you by a coordinator on the second network.
On Base, Circle doesn’t have the ability to issue its USDC token yet. Instead, the Base bridging protocol allows you to lock up your USDC in a smart contract on Ethereum, making it temporarily unusable, and receive an equivalent token in exchange on the Base network: USDbC. This token has the exact same value as the USDC you locked up, thanks to how the smart contract works, but the Base team simply does not want to cause confusion by giving it the same name as a native USDC that may be issued later.
Update: as of September 5, 2023, Native USDC is now available on Base network, issued by Circle. You can now swap ETH for USDC on Base using Matcha!
Isn’t there a US dollar token already? Why give two names to the same token?
Yes, USDC, USDT and other stablecoins are tokens that aim to exactly match the price of a dollar, so they serve a similar goal to wrapped forms of USD tokens such as USDbC. Where they differ is in how they work. The native USDC on Ethereum and other chains maintains its price parity by minting or burning tokens as the amount of dollars held in reserve changes, while a wrapped token simply references the price of a token which was ‘locked’ by smart contract on another chain when it was wrapped.
USDbC activity on Base chain
USDC is the second most popular asset bridged to Base network even though the native asset is not issued yet, with a 28% share of bridged volume - $100M as of August 31, 2023 - compared to Ethereum's 56%. It's interesting to note that this follows a large volume of both USDC and ETH bridged on the date this article was published, almost doubling the stablecoin market cap on Base. As shown on 0x Protocol Explorer, the traded volume of USDbC peaked at just above $2.4M at the end of August. Liquidity on Base for Matcha users is distributed across 6 liquidity providers, the top 3 being Uniswap v3, Balancer v2 and Maverick v1.
Who sets the price of USDC?
The company that tokenizes dollars as USDC is called Circle. When new USDC is minted, Circle will increase their US dollar reserves so the increase in the circulating supply of tokens does not dilute the value of existing tokens. If someone later chooses to redeem their USDC tokens for actual dollars, Circle reduces the number of USDC tokens that exist, again keeping the value the same.
At the moment, Circle issues USDC natively on 9 blockchains but Base is not one of them. Since traders need access to USDC, the Base team created USDbC as a wrapped version of USDC that performs the same function of matching the circulating supply and maintaining the peg, but only in relation to native USDC tokens on other chains, not directly to the US Dollar.
What is Base network?
Base is a new Layer-2 (L2) network built using top of the open-source OP Stack which powers Optimism. In August 2023, we gave you the power to swap on Base using Matcha, as the 9th network supported by our DEX aggregator. Since Matcha indexes every single token on each supported network, you can trade any token on Base within just 15 minutes of it going live.
How are people using Base?
Following the money flow across the Base ecosystem helps understand what people are using Base for, and what projects are taking off. As the network is still quite new, it is interesting to see the landscape change each day as certain projects take off in popularity.
For our analysis, we will be looking at statistics from DefiLlama, Total value locked (TVL) from L2Beat and a Base Bridge dashboard from Dune, and curating some of the more relevant numbers for you below.
Total value locked (TVL) on Base
Base TVL is currently at $245M USD and has been trending upwards, though it recently began to plateau. The number of users is also growing, with Base adding between 20 and 40 thousand users for most of August, though in the last few days this has begun to drop to around ten thousand. While these are both great signs, onchain volume has dropped by around 75% from last week’s highs and will be important to watch as the hype begins to settle.
Most value entering Base chain comes as native Ethereum via the Base Bridge, though four other tokens are also supported. Ethereum makes up 62% of all bridged assets on Base, while USDC follows at 25%. The remaining 13% is split between MakerDAO’s DAI stablecoin and Coinbase Wrapped Staked ETH (cbETH). Under 0.5% of assets are bridged from Compound (COMP).
Will there be a Base token?
Coinbase has been clear that they do not plan to launch a Base token. This is in line with the trend, as both Arbitrum and Optimism chose not to launch a token when originally deploying their networks. Although both these L2 networks later changed their strategy and eventually distributed tokens as airdrops, it is unclear if Base will follow their lead. One thing you can be sure of, though, is that if a Base token is launched one day, you’ll find it on Matcha within 15 minutes of launch!