Using Bitcoin to Buy Stocks
06.09.2022
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Skeptics can say so much about bitcoins including the different seasons of plummeting and shedding…
Know something about the U.S. Dollar Coin (USDC)
Just like Tether, USDC is a stablecoin. This means that it is backed by U.S dollars. Besides, Ethereum powers it and it may be used in completing international transactions. Since cryptos were introduced into the market, they have highly gained popularity. The issue has made more people want to invest in cryptos across the world. However, they are usually afraid due to the unprecedented reduction in cryptocurrency prices. Therefore, because of this, stablecoins like USD Dollar Coin have been introduced into the market.
WARNING: Investing in crypto, or other markets, can be of a high risk for your savings. Do not invest money you cannot afford to lose, because there is a risk for losing all of your money when investing in crypto, stocks, CFDs or other investments options. For example 77% of retail CFD accounts lose money.
For investors, stablecoins are good as they assist in capitalizing on the perks linked to varied decentralized payment alternatives. Stablecoins are usually backed with reserve assets such as euros or dollars in achieving price stability. USDC is also helpful in aiding in governance. It enhances easier transfer of relief funds as it has the capacity of transferring to internet-connected individuals as well as businesses
USDC is pegged 1:1 with the U.S dollar. It means that at any given time, you may redeem 1 USDC for $1. Also, it was launched in 2018 and the aim was to maintain a stable value. Since its introduction, the highest value it had reached is $1.19 and the lowest is $0.89.
The Way U.S. Dollar Coin (USDC) Works
The USD coin works toward tokenizing the U.S dollars in a blockchain. The service entails a collaboration between financial service provider Circle and the crypto exchange. Their main aim is for traders to preserve their dollar value portfolio when there is high volatility without exchanging their cryptocurrency assets for a fiat currency. Also, through it, there is an opportunity of sending the tokenized dollars across the blockchain network. This strategy is cheaper and faster as compared to sending dollars through the banking system.
Furthermore, USDC is available in different public blockchains. They include Hedera, Tron, Stellar, Algorand, Solana, and Ethereum. The coin has all the features in the public blockchains that it exists on such as smart contracts and decentralized finance (DeFi).
The following are summarized three steps on how Stablecoins work
- Sending U.S dollars to a cryptocurrency exchange in purchasing USD Coin
- The exchange utilizes a USD Coin smart contract in minting the same amount of USDC
- You get the newly minted cryptos (USDC) then the exchange puts the U.S dollar you paid USDC reserves.
The Team Behind U.S. Dollar Coin (USDC)
Centre consortium developed USD Coin. It is a partnership between Coinbase, a crypto exchange platform, and Circle. The Centre developed governing framework as well as technology. However, Coinbase and Circle were USDC’s initial commercial users. The founders of Circle are Sean Neville and Jeremy Allaire.
Moreover, Circle is an official Money transmitter. This makes the firm an open financial book. A money transmitter refers to a US money service business, which must comply with federal regulations and laws. Therefore, it means that before USDC is an issue, the same amount of USD is with one of the accredited partners of Circle. Because of this, all the USDC tokens are verifiable, transparent, and regulated.
The Process of Purchasing USDC
As an investor, you can purchase USDC on any cryptocurrency exchange that trades it. However, remember that you should have some U.S dollars or even cryptos. Most of the exchanges have trading pairs including USDC against Bitcoin as well as other cryptocurrencies.
After getting an exchange, you need to create an account in the exchange. The next step after this is funding your account. One of the tips you should know when doing this is that depositing cryptocurrencies is faster as compared to depositing the fiat currencies such as U.S dollars. The last step is exchanging the currency that you utilized in funding your account for USDC.
The Uses of the USDC Stable coin
The first use of the USD coin is making cryptocurrency payments. For instance, the USDC crypto payments may be beneficial in paying the employees. Besides, currently, I believe you have seen on the news how some professional athletes and startup employees work on crypto payments. This is one of the indications of how fast the crypto world is moving.
The other use is offering access to DeFi. As a trader, it provides you with the opportunity of accessing the DeFi solutions. It may work as ideal leverage to capitalize DeFi features applications that may lend you crypto assets. Additionally, the U.S dollar provides flexibility in the way you invest your funds instead of just putting them in one account.
As compared to the other cryptocurrencies, USDC provides simpler accessibility to cryptocurrency markets. The reason is that USDC assists you in exchanging funds, selling, and purchasing even without leaving the crypto ecosystem. Through this system, you do not have to first change your cryptocurrency to fiat currency before using them. You can just use them in the form of cryptocurrency. The most interesting part is that every popular crypto exchange in the world accepts USDC stablecoin.
USDC also helps in making cross-border payments. The traditional methods that exist in transferring fiat currency across the world are costly. Besides, the cross-border payments may be time intensive and a bit inconvenient. For instance, the process might take a few days and you will have to pay a high transaction fee. Therefore, a reliable solution such as USDC is an effective way of conducting cross-border payments. It is a good option as it is fast and the transaction fees are low as compared to that of the bank.
The Advantages of U.S. Dollar Coin (USDC)
The first advantage of USDC is blockchain interoperability. The reason is that USDC is built on the blockchain of Ethereum. This makes it to be compatible with all the applications based on Ethereum as well as protocols. This allows for USDC’s easy integration into existing systems and platforms.
Furthermore, USDC is very stable as compared to the other assets. As I said earlier, the reason is that it is pegged on the U.S dollar. Because of this, it is less susceptible to volatility as compared to other cryptos. This feature further makes it ideal for use in applications in which stable prices are very important. Some of those applications include invoicing and processing.
There is a high level of transparency in the USD Coin. The reason being all transactions in it are recorded in the Ethereum blockchain. This kind of public ledger enhances easy verification and tracking of all the transactions. In short, it offers a high degree of transparency. Additionally, USDC gives investors the chance of viewing their monthly reports of reserve balances. When you purchase 1 USDC a new one is minted. Also, when you sell 1 USDC for fiat currency, the coin is burned. Lastly, just like the U.S dollar, USDC is dividable.
As a trader, you will get security when you invest in USD Coin. USDC being a digital currency, you can store it in the crypto wallet. This form of storage provides an extra layer of security. This is because USDC is not held by a central party. In addition, it is protected by the Ethereum blockchain’s cryptography.
The Limitations of USDC
Limited price appreciation is another benefit. Since USDC is pegged on the U.S dollar, it does not have similar price appreciation as compared to the other cryptos. Therefore, as the investors are enjoying a steady return on their assets while the value of USDC is not changed, they do not take advantage of the price increase.
The other limitation is low awareness. One of the reasons is that it is new in the market. Most investors prefer in investing in Cryptos that have been in existence for a long period such as Bitcoin and Ethereum. They do not want to take chances with the newly introduced cryptos in the market as they fear that they may lose their money.
Another issue affecting USDC is high competition in the market. Over the past ten years, hundreds of cryptos have been introduced into the market. While a few of them have unique features, some just play the same role. For instance, USDC is just the same as Tether as they are both stablecoins pegged on the U.S dollar. Therefore, the availability of other digital currencies offering the same benefits is very high.
Can USDC be Staked
Unfortunately, USD Coin is not proof of stake. Thus, it cannot be staked. The good thing is that there are some cryptocurrency lending services that give investors the opportunity of depositing USDC and then getting interest in return. Basically, they just work like banks. They lend USDC at interest and then pass some of the profits to the depositor. They are different from the traditional savings account because the interests they offer range from 8% to 12%.
