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10 Feb 2023

What is USDC and how does it work?

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This article is not intended to be financial, investment or trading advice. This article is for information and solely for education purposes. It does not protect against any financial loss, risk or fraud.

What is USDC and how does it work?

What is USD Coin (USDC)?  

USDC is a stablecoin pegged to the U.S. Dollar. This means that at any given time one USDC is worth one dollar.  

What’s more, with the transfer happening almost instantly, USDC moves at internet speed.

USDC lives natively online, running on many of the world’s most advanced blockchains including Ethereum, Tron, Algorand and others.

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How does USDC work?

moblie phone showing USDC chart on screen

Unlike cryptocurrencies such as Bitcoin, USDC isn’t released into circulation through the mining process. Instead, new USDC tokens are minted when users and businesses deposit United States government-backed currency (USD) into their Circle account.

USDC is used for a variety of purposes, including as a store of value, to facilitate cross-border payments, for trading on cryptocurrency exchanges, and as a means of payment for goods and services. 

Conversely, when USDC is deposited in exchange for USD, the tokens are burned to ensure the number in circulation always matches the fiat amount held in reserve. 

So, it’s a digital dollar? 

Whereas the U.S. Dollar is issued by the U.S. Department of Treasury, USDC is managed by a consortium called Centre. Circle founded Centre, which has members from the cryptocurrency exchange Coinbase.  

At the time of writing, there is 43,984,530,106 USDC circulating in supply, representing around 5% of the total cryptocurrency market cap.  

Circle, center, coinbase chart

How can you use USDC?

phone screen showing balance

One of the main use cases of USDC is as a store of value. You can hold USDC as a digital version of the U.S. Dollar without the need for a bank account or physical cash.  

You can also use it for cross-border payments, transferring it anywhere in the world quickly and cheaply via blockchains like Ethereum.   

And if you simply want to trade or withdraw USDC, you can do it from your Skrill account. 

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Cryptocurrencies are unregulated in the UK. Capital Gains Tax or other taxes may apply. The value of investments is variable and can go down as well as up.

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