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April 25, 2022

What makes USD Coin (USDC) special?

Welcome to the cryptohunt jam where we spend one minute a day to explain crypto. In plain english.

Today is about yet another popular stable coin: USD Coin, also called USDC. 

If you are just tuning into our podcast now: Stablecoins are special types of crypto currencies that follow a real world currency in value. USDC is just like that, and it follows the US Dollar, making 1 USDC always worth 1 actual US dollar. That makes it, like other stablecoins, very usable for real-life transactions. 

What makes USDC special is not the technology, but who backs it and how they do it.

USDC was created in a joint venture of Coinbase, the popular crypto exchange, and Circle, a finance company based in Boston. Coinbase is a publicly traded and officially regulated exchange, Circle’ backers include big institutions, like Goldman Sachs.

Knowing that, you can easily see that credibility is the main goal here with those big names behind USDC. But the way it is backed also aims to create trust in the cryptocurrency: Every dollar of USDC in circulation is backed by the equivalent of real dollars in a reserve. And that reserve is officially regulated by the US government, and audited by a top 10 accounting firm.

So what are the downsides? Mostly transaction costs, as USDC is built on top of Ethereum. But that should be solved soon, as support is planned for competing blockchains like Algorand, Stellar and Solana.

And since we are on the topic, next time we’ll take a break from new coins and will talk a little more about how stable those stable coins actually are.

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