USDCoin is the second-largest stablecoin in the world, after Tether USDT. USDC isn’t a regular cryptocurrency in the usual sense. It doesn’t float freely in the market, creating an excellent potential for speculation. Instead, its value is always pegged to that of the American dollar, which has plenty of its own benefits.
The other difference is that USDC doesn’t have its own blockchain, like other major cryptocurrencies. The coin was originally launched on the Ethereum blockchain, which was its main selling point. As such, the main variety of USDCoin is the USDC ERC20, the Ethereum standard.
USDCoin (USDC) was launched in September 2018 as a joint venture between Circle, a global financial technology firm, and Coinbase, one of the leading cryptocurrency exchanges. The stablecoin was created to address the need for a reliable, transparent, and regulated digital currency that maintains a stable value.
The USDC token operates on the Ethereum blockchain, adhering to the ERC20 token standard, which allows for seamless compatibility with various Ethereum-based applications and wallets.
Since its launch, USDC has gained significant traction, becoming one of the most widely used and trusted stablecoins in the cryptocurrency market. Its popularity is largely attributed to its strong regulatory compliance, transparency, and the support of major industry players, like Circle and Coinbase.
Stablecoins play a crucial role in the cryptocurrency market by addressing one of the most significant challenges faced by traditional cryptocurrencies like Bitcoin and Ethereum - price volatility. While cryptocurrencies can experience substantial price fluctuations, stablecoins are designed to maintain a stable value, usually pegged to a fiat currency like the US Dollar (USD) at a 1:1 ratio.
The primary purpose of stablecoins is to provide users with a secure and efficient medium of exchange, store of value, and unit of account, without the volatility typically associated with other cryptocurrencies. This stability makes stablecoins well-suited for various use cases, including payments, cross-border payments, etc.
Moreover, stablecoins bridge the gap between the traditional financial system and the emerging world of decentralized finance (DeFi). With stablecoins, users can enjoy the usual DeFi capabilities and blockchain benefits without the inherent risk of volatility other cryptocurrencies experience.
ERC20 is the primary standard of the Ethereum blockchain, and all tokens released on this platform adhere to this protocol. It essentially dictates how a cryptocurrency is supposed to behave on any given blockchain, which also determines the rights, benefits, and features of a token and, accordingly, the network.
To operate on Ethereum, tokens need to be adjusted to the ERC20 standard. It means that it was originally created for Ethereum, launched as an ERC20 variety of the main coin, or imbued with an ETH-compatible standard. USDC, in particular, was created specifically to work on ETH and later also ported to other chains.
The ERC20 standard grants its tokens several key advantages:
- Increased efficiency. Ethereum’s proof-of-stake protocol enables the coins to be processed much faster and easier.
- Lower costs and higher scalability. Thanks to the less demanding conditions of the Ethereum block-creation process, all transactions on ETH are cheaper, which makes it easier for users to move larger amounts of crypto.
- Interoperability with other Ethereum tokens. ERC20 tokens gain full access to the Ethereum functionality and ecosystem and can be freely exchanged with other ETH-based coins.
- Smart contracts and development convenience. A major advantage of Ethereum is its decentralized development capabilities, the most prominent in the world. ERC20 coins are used to create decentralized applications, finance solutions, and much more.
There are many reasons to launch your currency as an ERC20 token, but why did USDC developers do it?
Why USDC Chose ERC20
USDC was created in 2018, a few years after the first stablecoin, USDT, came to be. It had a lot to gain from being originally launched on Ethereum. Its whole selling point was its availability on Ethereum, which Tether didn’t have back then. A USDT ERC20 version was later created, but at that point, it was only USDC.
For a regular user, it meant that there was a stable cryptocurrency on Ethereum that could be extensively used in decentralized finance or simply to store value away from volatility. It essentially made DeFi on Ethereum viable, even though there were already many such solutions created on this network owing to its wonderful potential.
This demand for a stable way of holding money on Ethereum was what drove USDC to its current heights. At the moment, it’s one of the top-5 traded coins by market capitalization, even though it’s identical to USDT in everything that matters to many people.
After USDT was released on Ethereum, it became basically identical to USDC in terms of potential and features. However, USDC is used extensively on this platform even now. At this point, it’s largely traditional because a lot of established solutions started accepting USDC way back. Besides, there isn’t much sense in replacing or diluting it with USDT.
USDC ERC20 is one of the most prominent cryptocoins in the world. It’s used widely on its home blockchain, Ethereum. Tether made attempts to unseat it and entered prominent use through its USDT ERC20 subset, but it’s still incredibly beneficial to own at least some USDC on Ethereum.