USDC SOL: Solana’s take on USD Coin summarized
USD Coin (USDC) is obviously one of the more practical and lucrative tokens on the market. It can be used to make money, but the main value of this coin is in its financial capabilities. Since it always costs the same, it can be used to store value, fund financial operations, and be an overall reliable resource in DeFi.
It’s a stablecoin, meaning that, through a variety of measures, the value of this coin is always identical to that of USD. In practical terms, it means you have a digital dollar that follows all the same rules and principles of a cryptocurrency without all the unwelcome difficulties associated with owning this type of money.
USDC, however, doesn’t have its own blockchain. Stablecoins rarely do; they are created with this financial inclusivity in mind. This means that you can access some of these more popular stablecoins (USDC, USDT, DAI) on many different blockchains, including the Solana blockchain.
About USDC
USD Coin is a stablecoin with pegged value, whose price is kept at all times on the same level as the American dollar. It’s done via a simple process of collateralizing each and every minted USDC with an actual touchable dollar or a security expressed in dollars. Basically, by owning USDC, you own an essence of a dollar held someplace else.
This naturally brings immense advantages to individual holders but also to the finance sector in general.
The decentralized finance (DeFi) sector in particular wouldn’t be as grand as it is now without stablecoins and USDC in particular. See, decentralized financial institutions don’t really like to operate with regular crypto because of its instability. USDC, on another hand, never changes, so you always have the same amount of money on hand.
USDC in DeFi
USDC’s place in DeFi is incredibly significant. USD Coin was created for Ethereum. This stands in stark contrast to the preceding stablecoin, USDT, which was initially launched on Bitcoin. However, it’s on Ethereum that stablecoins found their calling.
With the assent of Ethereum and its smart contracts, it became possible for crypto-aligned entrepreneurs to create sprawling, decentralized, and highly automated institutions. It meant an increase in crypto stores, apps, various service providers, and, most notably, crypto banks.
A stablecoin hosted fully on Ethereum meant that people with the vision of advancing decentralized financial services — be that giving credit, moving money in large amounts, or building interest — could fund and fuel their projects with an incredibly stable coin (hence, stablecoin).
That’s when Solana enters the picture.
On Solana and SOL
Solana is an independent blockchain with plenty of unique and curious features that help with scalability, performance, affordability, and throughput. It was created in 2020, making it one of the newer projects. Its token is called SOL, which is the 9th biggest coin by market capitalization.
The reason this network is so popular is that it makes all the same aspects of crypto that Ethereum improved even better. Here are several key characteristics of this blockchain:
- High throughput and efficiency. Solana uses a unique proof-of-history mechanism in addition to a more common proof-of-stake consensus. The latter is already very good at processing transactions, while the former makes it even better by complementing it with huge banks of historical data.
- Scalability. The type of scalability model employed by Solana is called horizontal scalability. In this case, the network is fragmented in such a way that different shards of the same system can process information in parallel. That’s why this method is called sharding.
- Smart contracts. Like Ethereum and most recent networks, Solana uses the smart contracts functionality. There’s little reason not to include it, seeing how it allows for automated, programmed solutions to be created on the blockchain. That means DeFi, dApps, and NFT.
- Interoperability. Solana was also designed to accommodate interchain operations, which allows developers and individual users to create multi-network projects and supply chains.
- Lower transaction fees. It takes a lot less time, thanks to the PoH mechanism and scalability measures, for a Solana transaction to go through. Hence, it has lower transaction fees.
The result is a highly comfortable environment that allows transactions of any complexity to be processed fast. In addition to the cutting-edge smart contracts functionality, it’s one of the most convenient, cost-effective, and highly-efficient networks you can work with at the moment.
USDC on SOL
USDC was ported to Solana in 2021. Accordingly, it’s now a fully integrated token within this system with all the same applications and rights as the native token, SOL. It was achieved by merging the USDC with the local standard, called SPL. The resulting variety of USDC is called USDC SOL or USDC SPL.
The standard makes sure that any token present within the network conforms to its rules and principles. Without adjusting said token exactly to the standard of the blockchain, it’s impossible to store it on the said blockchain. If it is, you can move it around freely and use it for the same purposes as the native token, SOL.
USDC SPL is notably a separate token from the ‘original’ USDC ERC20, the Ethereum type. They have the same core principle and functionality. While Solana’s interoperability feature makes them somewhat compatible, there are enough small differences. It doesn’t mean that it’s a completely new token, though. It’s still the same USDC, and you can freely exchange your other USDCs for this standard, and vice versa.
The reason USDC is on Solana in this form is, once more, the local DeFi potential — it’s huge. USDC remains the most popular currency to be used on DeFi even now, and there’s great demand for this currency on the SOL blockchain. For this reason, it’s one of the most commonly found tokens on Solana, and for a good reason.
