Earlier this week, CoinSmart announced we will be delisting USDT (Tether) in favor of USDC. We took this step after several weeks of careful planning and consideration. We believe that USDC and CENTRE’s “transparency first” business model resonates very well with our business motivations. So, in this blog, let’s answer this question – what is USDC?
What Is USDC CENTRE?
CENTRE maintains USDC. CENTRE was founded by Circle – a peer-to-peer payments technology company started by Jeremy Allaire and Sean Neville – and Coinbase – one of the biggest public crypto exchanges in the world. This organization will be responsible for “governing USDC and is dedicated to connecting every person, merchant, financial institution and currency, everywhere.”
USDC was initially launched on the Ethereum blockchain due to its status as the market-leading smart contract platform and strong support from developers. USDC is currently available on 14 total blockchains, including Tron and Algorand.
The Importance Of USDC
Previously, in our Tether (USDT) blog, we talked about the importance of dollar-collateralized stablecoins in our current ecosystem. They are used mainly for two purposes:
- Entry into crypto: Most crypto exchanges don’t have the proper ramp required to empower users to buy tokens directly with fiat currency. Stablecoins help bridge this gap by providing an equivalent 1:1 substitute.
- Hedge: During moments of extreme price fluctuations, you could siphon your crypto deposits into stablecoins and protect yourself from losses.
However, when it comes to USDC, there is another important use case. Existing stablecoin protocols like Tether lack proper financial and operational oversight and transparency. They use (or have had a history of using) unregulated offshore jurisdictions with unknown banking and audit partners.
USDC solves these problems by offering detailed financial and operational transparency, operating within the regulated framework of US money transmission laws. In addition, CENTRE has initiated partnerships with established banking institutions and auditors. Examples of these partners include Signature Bank and Visa.
CENTRE has also appointed Grant Thornton, LLP to continually attest USDC, and one can find the monthly attestations on the CENTRE Consortium’s website. This move further increases the transparency of their USDC reserves. The company said:
“With this latest reserve attestation, we are now including a breakdown of dollar-denominated reserve assets, which are all held in the care, custody, and control of U.S. regulated financial institutions and in line with laws and guidelines from our U.S. state money transmission regulators.”
Simply put, if you are looking for a thoroughly regulated fiat stablecoin, USDC is the way to go.
How Does USDC Work?
USDC tokens are minted on a 1:1 ratio with the US dollar. The process of turning USD to USDC is called tokenization and is a three-step process.
- A user sends USD to a USDC token issuer’s bank account.
- The issuer uses the USDC smart contract to mint an equivalent amount of USDC.
- The freshly minted USDC are sent to the user, and the substituted US dollars are held in the issuer’s reserves.
The process of non-tokenization, aka going from USDC to USD, is the exact opposite.
- A user sends a request to the USDC issuer to redeem an equivalent amount of USD for USDC.
- The issuer uses the USDC smart contract to convert USDC to USD. This takes the required amount of USDC tokens out of circulation.
- The issuer sends the USD from its reserves back to the user’s account.
USDT vs USDC – A Comparison
Alright, now let’s compare the two biggest stablecoins in the world,
|Maintainers||Maintained by CENTRE.||Maintained by Tether Foundation.|
|Peg||1:1 with USD||1:1 with USD|
|Trading Pair Liquidity||Medium||Very High|
|Regulation||Operates within the regulated framework of US money transmission laws.||Has a very sketchy history with regulators. Read this article if you wanna know more.|
What Is USDC? Conclusion
CoinSmart will be delisting USDT on September 15, 2021, and adopting USDC. If you are a CoinSmart user and USDT holder, then don’t panic. You will be allowed to convert your USDT to USDC at an exact 1:1 ratio. In the meantime, if you have any questions about the process, please feel free to reach out. Our CX team is looking forward to chatting with you.