What is USDC? How are USDC and other stablecoins different? Is this the largest centralized stablecoin?

USDC is the second largest stablecoin by market capitalization. In this article, we will learn what USD Coin (USDC) is and the project highlights.

What is USD Coin (USDC)?

USDC is a fiat-backed stablecoin launched in October 2018. In a word, USDC is a stablecoin that is 100% collateralized with fiat or other equivalent assets.USDC exists to solve two major problems faced by cryptocurrencies: high volatility and convertibility between fiat and crypto currencies.

Currently, USDC is the second largest stablecoin by market capitalization after USDT.

How does USD Coin (USDC) work?

USDC works under the Mint & Burn mechanism, it exists as an IOU (I owe you) that can be used to exchange an equivalent amount of dollars outside the blockchain ecosystem.

New USDC mint users by depositing fiat currency into financial institutions regulated and licensed by the Centre. If a user wants to redeem USDC, they can send USDC to an address controlled by Center members, who will burn USDC and transfer the equivalent amount of fiat to the user's bank account. Center currently has two members, Coinbase and Circle.

Whenever the USDC price starts to fall below $1, arbitrageurs buy USDC in bulk. After purchasing large amounts of USDC, arbitrageurs can redeem USDC tokens for fiat money through institutions regulated and licensed by the Centre.Pros & Cons of USD Coin (USDC)

Pros: Fully backed by fiat and equivalent assets. The Peg holding mechanism of this stablecoin is simple, stable, and easy to operate under bad market conditions.

Cons: The biggest risk of fiat-collateralized stablecoins is in the “Decentralization” aspect. In the case of USDC, they require off-chain reserves. Funds are managed by a small number of custodians, users will have to trust these custodians to act honestly.

Hope some of the above information is helpful to you!