The high volatility of cryptocurrencies is a serious obstacle to the spread of digital assets as means of payment. Investors are afraid to invest large sums in projects due to sharp drops in the exchange rate; ordinary users for the same reason lose money when exchanging or paying for services.
The introduction of a stable digital currency with an artificially regulated rate could correct the situation in the cryptocurrency market. One of the possible solutions is stablecoins. The stable cryptocurrency USD Coin is able to replace the dollar in the digital asset market, increase the attractiveness of the blockchain industry and reduce user costs for trading.
USD Coin is a stablecoin (from English stable coin - stable coin). It is a digital asset whose value is artificially tied to the value of fiat currency. So, the price of USD Coin is approximately equal to the current exchange rate of the US dollar.
To simplify the work on the exchange, the stablecoin was assigned its own unofficial codifier; now the coin can be found on the largest exchanges of the market under the abbreviation USDC. The 4-letter abbreviation is standardly used to denote direct correlation stablecoins.
The system uses a special bank dollar account to support the USD Coin rate. Over time, the value of an asset may differ from the original dollar, which is associated with a delay in network nodes and changes in demand and supply in the cryptocurrency market that are unnatural for USD. According to statistics, the USD Coin stablecoin rate has never deviated from the dollar indicators by more than 2%.
To avoid problems with excessive speculation and surges in demand for the coin, the developers provided for the impossibility of trading USD Coin for dollars. You will not find the USDC / USD pair on any digital trading platform, as this would make speculation too profitable due to the constant fluctuations in the exchange rate. At the same time, users can freely convert these two currencies through exchangers.
From a technical point of view, the cryptocurrency is based on the Ethereum blockchain and the EVM virtual machine, i.e. USD Coin is not so much a digital asset as a token. This allows smart contracts to be executed alongside the stablecoin and expands the coins availability. Such a token can be stored in any wallets that support the ERC-20 standard. Stablecoins help traders and investors save money.
USDC differs from other stablecoins and cryptocurrencies:
is the digital equivalent of the dollar 1 to 1;
can be exchanged through smart contracts;
stored in any wallets suitable for ETH;
uses the Ethereum architecture for greater security;
using stablecoin, you can conduct transactions all over the world;
each USDC is backed by a dollar in a live bank account.
But the scope for stable digital coins is not limited to trading. Digital dollars are decentralized, private, quickly transferred between accounts, information about transactions is recorded on a blockchain that cannot be changed, and all this makes USD Coin an ideal asset for accounting and business.
The creation of the first stablecoins like USDC is associated with the problem of cryptocurrency volatility. In order for digital assets to truly become a working tool, and not just a resource for speculation, it is important to use them as a means of payment. It is unprofitable for most users to keep cryptocurrency for payment (at any moment its value can drop dramatically), for the same reason, online stores and businesses do not seek to use electronic coins. The cryptocurrency has to be kept in a separate account, the withdrawal of funds from which requires payment of a commission. In addition, while the funds remain in the wallet, their value may decrease and the entrepreneur will lose some of the profits.
The crypto community understood that users needed a tool with a stable, regulated exchange rate that would allow them to make trading transactions, paying for goods quickly, safely and privately. Stablecoins became this instrument. The first such coin appeared in 2016 and was named Tether; today it ranks 4th among cryptocurrencies in terms of capitalization.
USD Coin appeared relatively recently, in October 2018. The launch of the coin was announced by the Poloniex exchange, which was the first to add the stablecoin to the listing. The project was also supported by the parent company Coinbase, which also began to use USDC for intra-exchange transactions.
Developed by the Center Consortium, a subsidiary of Coinbase. In particular, specialists of the blockchain startup Circle took over the main work. The young company was founded in 2013 and was engaged in the development of a project for a platform for operations with cryptocurrencies. Circle was quickly spotted by major investors and Coinbase owners. In total, the project received about USD 250 million in funding.
Today the USD Coin stablecoin has many competitors. Among them are Tether, Dai, True USD. Unlike the listed projects, USDC has several advantages:
Tether hid its ties with the Bitfinex exchange, although it was immediately added to the listing of the trading platform, while USDC, on the contrary, was openly positioned as a decentralized coin from the Coinbase exchange.
According to the founders of Tether, only 74% of their cryptocurrencies are supported by real dollars in their accounts, while for USD Coin this figure is 99%, taking into account currency conversion errors.
The Dai project is secured by ETH and does not relate to the dollar in any way, which is why it is not backed by real currency, and USDC is exchanged in a direct ratio.
True USD from the Trust multicurrency wallet is characterized by high volatility during periods of increased demand, while USD Coin adequately reacts to changes in market capitalization, and the rate does not deviate by more than 2% from the original dollar.
The popularity of USDC can be tracked by metrics such as daily trading volume and market capitalization. For stablecoins, these indicators are especially important, since it is the number of transactions that determines the companys success - the price of the asset itself does not change relative to the dollar.
Despite the fact that the coin is backed by the dollar, its market performance largely depends on the general condition of the cryptocurrencies. There is a direct relationship: if the rate of digital currencies grows, then the trading volume and capitalization of USDC increases.
For example, in the first half of May 2019, there was a sharp increase in the value of BTC. At the same time, the USD Coin indices reacted positively to this - the trading volume increased 10 times, up to 500 million USD per day. The market capitalization chart also showed a positive trend, and the total amount of capital increased by 60 million USD over the entire growth period of the first cryptocurrency.
In general, there is an increase in demand for USD Coin. Capitalization and volume of daily transactions are steadily increasing. This is due to the asset being added to the three largest exchanges in the blockchain industry Coinbase, Poloneix and Binance.
As of the beginning of 2020, the market capitalization peaks were reached on October 26, 2019, when the capitalization indicator reached USD 484 million. Overall, the popularity of USDC will increase as users trust Tether less and less due to the incomplete security of this stablecoin.
Another important factor for stablecoins is the deviation from the USD value. For example, Dai has a maximum deviation percentage of 5%, which is inherent in the system architecture. At the stage of formation, with a small capitalization, stablecoins are characterized by significant deviations from the original rate, so, when launching on new exchanges and increasing the value of BTC, the USDT rate changed by 18% compared to the fiat dollar.
At the very beginning of the USD Coin system, the token rate deviated from the given direction by 5%. After that, within a year, the percentage of deviation from the original did not exceed 2-3%, which is one of the best indicators for stablecoins and cryptocurrencies in general.
Coinbases primary goal as the creator of the USDC is to develop an open, decentralized, and reliable financial system for global cryptocurrency trading. Such a step will help attract new customers to exchanges, which will improve the status of cryptocurrencies in general.
The use of a stable token based on Ethereum opens up wide opportunities for users and developers, for example, the Solidity language extends to the USDC architecture, which allows creating full-fledged smart contracts with complex conditions.
Coinbase and Circle are creating the Programmable Dollar concept. With the help of such an asset, it will be possible to receive crypto loans, build accounting systems, create reliable depositories of funds, carry out transactions in the real estate market, carry out all types of payments and transfers around the world.
The scope of USD Coin is not limited to trade and the fintech industry, it can be actively used in the search for investors, in commercial management, to create financial statements and wage distribution accounts, in government budget allocation systems, to form charitable and investment funds, to conduct online -payments in online stores and on service pages.
Blockchain allows you to reliably protect user data, save information about any account movement, balance changes. This is especially valuable for businesses and users looking to save their own savings. Together with Ethereum and USDC, you can create a personal wallet that only a limited number of users will have access to.
The USD Coin architecture is entirely based on Ethereum protocols. This allows you to build your own decentralized applications (dApps) based on EVM and USDC.
To conduct transactions through the system, as for ETH, the user must pay gas. This amount is charged in the form of a commission on exchanges for transactions with stablecoins and conducting smart contracts. In order for network members to benefit from using USDC, the commission is reduced to a minimum, just to ensure the stable operation of the system.
Transactions are completed in a matter of seconds, making the coin an ideal solution for trading on the exchange. The token can be moved and used through any wallet that supports the ERC-20 standard, but for better protection, it is advisable to use the official wallet of the company Coinbase Wallet.
Thanks to the use of the Ethereum blockchain, all information about transactions remains in the blockchain, and any user can check the fact of payment and the number of transactions performed (without identifying the identity of the sender and recipient). This is especially true when spending the state budget, implementing national projects. USD Coin supports the property of irreversibility of transactions, therefore, the seller, upon sending the transfer by the buyer, can be sure that the payment will reach him in any case.
Stablecoins are just starting to develop in the cryptocurrency market. The prospects for USD Coin and the capitalization of the project completely depend on the number of trading platforms that add the token to the listing. Today, most major exchanges work with USDC: Binance, Coinbase, Poloneix, OKEx, Bitfinex, CoinEx.
In the future, blockchain system developers will increasingly offer fixed-rate assets to crypto network participants, projects such as USD Coin and Tether are the first step towards the official recognition of the digital currency.
Added: 21.01.2020 
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