What are the benefits of using USDC in the Optimism network?
USDC on the Optimism network
USDC is a stablecoin and, like any token, can exist in multiple blockchain networks at once. Each network runs a separate smart contract for the stablecoin, and Optimism (also known as OP Mainnet) is no exception.
Issuer Circle added Optimism network support for its USDC token in August 2023 to provide institutional investors with access to stable assets. In addition, adding support for the new network increases the issuer's influence in the cryptocurrency market.
The USDC on the Optimism network is an original token created according to the ERC-20 standard defined in the Ethereum blockchain. Still, it is different from the stablecoins issued on other networks.
There are two versions of the stablecoin in the Optimism network — USDC and USDC.e, and they are worth distinguishing. The point is that USDC is precisely the original token issued and maintained by Circle. New tokens appear on the Optimism network when investors purchase them from the issuer. Circle has complete control over the issuance and circulation of USDC tokens on the Optimism network, including the ability to block transactions with stablecoins for addresses on the OFAC sanctions list.
USDC.e is a stablecoin issued by third-party application developers, including Bridges, even before the original contract from issuer Circle. This version of the stablecoin was initially used by the Ethereum bridge and was called USDC, but after Circle added support for the Optimism network, the token had to be renamed USDC.e.
In this case, the issuance and circulation of tokens, as well as the pegging of the stablecoin's value to the U.S. dollar exchange rate, is provided by the developers of the USDC.e smart contract. However, its use carries certain risks because, unlike Circle's stablecoin, USDC.e is not audited, has no reserves, and, in addition, has less liquidity than the original USDC.
On the Optimistic network, USDC has quite a bit of liquidity. According to blockchain observer Optimistic Etherscan, only 174 million USDC were issued in the Optimism network as of November 2024, which is only 0.5% of the total stablecoin issuance.
However, judging by the dynamics provided by the reviewer, the number of USDC token holders in the Optimism network is increasing, as well as the capitalization and liquidity of the stablecoin.
Advantages and disadvantages of using USDC on the Optimism network
The first disadvantage concerns users who transfer USDC tokens from Optimism to other blockchain networks. Due to the security mechanism that allows validators to scrutinize and block malicious transactions, there can be significant delays in crypto asset transfers.
The second disadvantage is related to low liquidity. In the case of mass sales of the USDC token on centralized or decentralized exchanges, there is a risk of de-peg — deviation of the USDC exchange rate from the value of the U.S. dollar, to which the stablecoin is pegged. However, unlike Arbitrum, Circle's issuer supports the Optimism network token, meaning USDC investors are protected.
Among the pros is the ability to protect investors from cryptocurrency volatility in the Optimism network. When cryptocurrency prices fluctuate sharply, their holders can quickly convert their digital assets into USDC stablecoin to lock in profits or wait out the fall.
Optimism is also a second-layer network that provides high speed and low transaction costs. USDC on the Optimism network is best suited for users who often make small transactions, which would cause them to incur relatively high costs on the Ethereum blockchain.
Another benefit of using USDC on the Optimism network is the security provided at the first layer, i.e., the Ethereum blockchain. All transaction packets sent to Ethereum from the Optimism network are validated by validators at the base level.