A Beginner’s Guide: What Is USDC and How Does It Work?

Cryptocurrencies are known for their high level of volatility, as their prices may skyrocket or dramatically drop in a matter of a few hours, let alone days and weeks. Under such circumstances, a solution is required to keep a coin’s price stable while providing users with all the other perks of decentralized payment options.

In this guide, we’re going to review such solutions with a special focus on USDC (USDC), a stablecoin issued by Centre Consortium, LLC, consisting of Circle and Coinbase.

Key Takeaways:

• The USDC (USDC) stablecoin is fully backed by U.S. dollar assets, and is designed to maintain a value of $1 by holding cash and short-term U.S. Treasuries as reserves.

• USDC offers stability in the cryptocurrency market by minimizing price volatility, making it a reliable option for trading, payments and value storage.

• USDC operates on multiple blockchain networks, benefits from transparency and regulatory compliance, and is increasingly adopted for cross-border payments, DeFi activities and stablecoin transactions.

What Is a Stablecoin?

First, a short rundown of stablecoins and how they work. The European Central Bankdefines stablecoins as “digital units of value that differ from existing forms of currencies and rely on a set of stabilization tools to minimize fluctuations in their price against a currency or basket thereof.” 

Stablecoins are a digital representation of fiat currencies on blockchains, developed to mimic the price of fiat using a stabilization mechanism. This type of cryptocurrency has a stable price, so users can always redeem a single coin for $1 (or for any other currency to which they’re pegged). Stablecoins can also be an instrument for traders to switch to a more stable digital asset when cryptocurrency markets are volatile. 

Why Use Stablecoins?

With the maintenance of a stable rate, regardless of market fluctuations, stablecoins are a financial tool that’s useful for the protection of capital and profits during periods of intense drawdowns. Also, the capability to transfer funds across exchanges without the need to convert them to fiat helps asset holders stay within the cryptocurrency ecosystem. Thus, they’re protected from negative consequences that can arise in some jurisdictions.

Stablecoins are a good solution for unregulated exchanges that don’t provide conversion to fiat currencies. The scope of their application has also been extended to customers with restricted access to foreign currencies. They’re faster and more cost-effective than fiat money. Payments are settled within a minute, as a rule, depending upon the underlying blockchain. Most stablecoins reside on the Ethereum platform. 

The challenges for the widespread adoption of stablecoins include monetary sovereignty risk, AML compliance and regulatory uncertainty. The benefits include features such as reduced cost, improved interoperability and speed. 

What Is USDC?

USDC is a stablecoin pegged to the U.S. dollar, backed by U.S. dollars held in reserve. The white paper for the USDC stablecoin says that it was developed for beginners who want to enter the world of cryptocurrencies safely and without high costs. 

Why Was USDC Created?

The governments of different countries often resort to a method called quantitative easing, or QE, which implies the issuance of a new supply of money by central banks globally. Acting in this way, they take politically motivated measures to reach certain goals and save certain beneficiaries from collapse, which would harm the economy. QE can, however, cause a range of undesirable consequences, such as inflation or deflation, as well as create favorable conditions for the crypto revolution that’s currently forming the global financial landscape. 

All these changes are actively supported by tech-savvy users, throughout the world, who have become active participants of the cryptocurrency ecosystem. However, there’s still much to do regarding the widespread adoption of this technology. People who are interested in cryptocurrencies may still prefer using traditional money systems, due to security concerns. Factors keeping them away from cryptocurrencies include: 

1. Sophisticated systems employed by different blockchains

The UI and functionalities offered by cryptocurrencies are usually so complicated that only technically skilled customers know how to operate with them. USDC was designed to facilitate the onboarding process.

2. Volatility of the cryptocurrency market 

Cryptocurrencies exhibit excessive volatility, and sudden changes in the price of an asset may be off-putting. Therefore, stablecoins attract beginners looking for a reliable store of value. This is a way to avoid the inherent price volatility of cryptocurrencies, as the essence of a stablecoin is to be an equivalent of fiat currency. As for USDC, its value is equivalent to one U.S. dollar, and its price is kept stable. 

The Centre Consortium introduced the USDC stablecoin as a means of trying to solve these issues and to remove obstacles on the way to widespread cryptocurrency adoption. 

Who Created USDC?

In September 2018, Circle announced the release of a fiat-backed stablecoin, USDC. Previously, Gemini and Paxos had already announced stablecoins developed by their platforms. Circle designed USDC in cooperation with BITMAIN, a leading Bitcoin hardware mining manufacturer. It’s worth noting that BITMAIN led a $110 million investment round conducted by Circle in May 2018. The company presented USDC as a more regulated alternative to other cryptocurrencies.

In October 2018, USDC became the first stablecoin that was listed on the then-biggest trading platform, Coinbase. Circle and Coinbase then formed a joint venture known as the Centre Consortium to develop the underlying technology of USDC and to govern it.

The Growing Popularity of USDC

History of USDC

USDC was listed on Coinbase in October 2018, and in November 2018, Binance added it to its listing, helping to bootstrap the liquidity of the stablecoin quickly. The popularity of the USD crypto coin increased even more after it became available for trading in over 80 countries. 

This explosive growth followed amidst the reality of the coronavirus pandemic, when people started using USDC as a hedge against fiat currencies. In addition, the development of the decentralized finance (DeFi) sector helped to drive a massive amount of traffic to USDC. Innovative features such as yield farming contributed to its growing popularity. This stablecoin has become one of the leading digital assets, with amounts deposited on different DeFi platforms. By 2021, the circulating supply of USDC exceeded 9 billion after having grown by 500% in 2020, which resulted in its becoming known as the fastest-growing stablecoin in the market. 

In August 2022, Bybit announced its partnership with Circle to promote the use and growth of USDC by providing users with a range of USDC products, such as Spot Trading, Perpetual Contracts and Options. To make transactions even easier for its customers all over the world, Bybit allows instant auto-conversions between USD & USDC (as well as other Circle-issued stablecoins). 

Recent Popularity of USDC

USDC has been witnessing a notable surge in popularity, reflecting a significant shift in stablecoin market dynamics. Despite Tether's USDT holding a dominant position, with a 70% market share and a market cap of $114 billion, USDC has made impressive gains, increasing its market share by 37% since the collapse of Silicon Valley Bank (SVB) .

The recovery of USDC is particularly notable, given its strong rebound post-SVB collapse as it experienced a temporary dip in market capitalization from $48 billion to $24 billion in 2023. However, in 2024, USDC's market cap has climbed to $34 billion, buoyed by a broad increase in trading volumes — from $9 billion in 2023 to $23 billion in 2024. This recovery was supported as USDC became the first stablecoin to comply with the European Union's Markets in Crypto-Assets (MiCA) regulations, which has significantly enhanced its appeal for institutional investors and in regulated markets .

Furthermore, compliance with MiCA has positioned USDC favorably against other stablecoins, especially in European markets, where regulatory compliance is highly valued. This alignment with regulatory standards has contributed to USDC capturing 95% of large transaction volumes, indicating a strong preference among large-scale investors and institutions for regulated stablecoins .

Overall, the stablecoin market is continuing to grow, with a total market cap reaching $160 billion as of the latest data. This growth underscores the increasing reliance on and confidence in stablecoins like USDT and USDC as viable financial tools, in both stable and turbulent economic times.

As of Aug 2, 2024, the circulating supply of USDC is 32.9 billion. Its current 24-hour trading volume is $9 billion, and its market cap is $32.9 billion. Its future is likely to continue to be positive with the maturity of infrastructure around permissionless decentralized protocols. 

USDC Upgrades

The journey of USDC has been marked by significant technological advancements, starting with the release of USDC 2.0 in August 2020. This version was a pivotal upgrade by the Centre Consortium, introducing functionalities designed to enhance the usability of digital wallets and services supporting stablecoins. USDC 2.0 featured an innovative gasless Send feature that allowed wallet developers to manage network fees directly in USDC instead of ETH, thus removing a significant barrier to mainstream adoption. This upgrade ensured full compatibility with existing infrastructures, facilitating seamless integration into payment systems, peer-to-peer transactions and e-commerce.

Building on this foundation, Circle introduced USDC v2.2 in November 2023, with the upgrade being rolled out across various networks into early 2024. This latest version introduces substantial improvements, such as reducing gas costs, bolstering security measures and supporting account abstraction on EVM-compatible blockchains. 

Notably, v2.2 adopts EIP-1271 to enable transactions from smart contract wallets, expanding usability within the decentralized finance (DeFi) ecosystem. This version further optimizes blocklist checks and enhances efficiency, resulting in reduced transaction costs and an improved user experience. All changes in USDC v2.2 are fully backward-compatible, require no action from users or developers and have been rigorously audited to ensure the highest standards of security and reliability.

These upgrades reflect USDC's commitment to innovation and its desire to maintain a leading edge in the rapidly evolving digital currency space. By continuously enhancing its features, USDC is setting a standard for stablecoin functionality, paving the way for more widespread adoption and integration into global financial systems. For developers and users eager to dive deeper into the technical details or engage with the community, Circle encourages joining the discussions on their Discord channel or exploring further through their community resources.

How Does USDC Work?

USDC upholds its 1:1 parity with the U.S. dollar by guaranteeing that each circulating USDC token is supported by an equal amount of U.S. dollars or comparable assets. Circle achieves this equilibrium by holding both cash and cash equivalents that match the circulating supply of USDC, thus maintaining the reserve balance.

The process of creating new USDC is known as minting, whereby businesses deposit U.S. dollars into their Circle Accounts and receive an equivalent amount of USDC. Conversely, when USDC is redeemed for U.S. dollars, the process is called burning, which removes the equivalent amount of USDC from circulation.

USDC operates as an ERC-20 token on the Ethereum blockchain, but has expanded its presence to other blockchain networks as well. This broad compatibility makes USDC a versatile digital currency, suitable for a wide range of applications.

What Uses Does USDC Have?

The USDC ERC-20 token creates payment, lending, investing and trading possibilities. The ecosystem grows with the addition of other tokens and tokenization of goods and services, while the smart contract facilities become the fundamental building blocks of value exchange. The open-source framework developed by the Centre Consortium team enabled the interaction of fiat money with smart contracts, thus providing the possibility of using real-world currencies in blockchain applications. 

The USDC token is used for quick remittances and payments throughout the globe. Customers only need to have wallets and internet access to take advantage of uncensorable interoperable transactions. It’s possible to send large amounts to any location at a low fee. Since it’s a matter of minutes, this type of cryptocurrency asset is irreplaceable for holders. Apart from almost instant settlement, the benefits include round-the-clock availability, irreversibility and lower counterparty risks. 

In comparison with fiat currencies, USDC offers a wide range of uses, including higher leveraged trading and low-cost and secure transactions. The asset can also be used in the DeFi sector when buying cryptocurrency products in DApps. 

With this cryptocurrency asset, banking becomes available for the unbanked. It is often regarded as an alternative to traditional finance that brings the democratization process to the international financial system via blockchain technologies. 

Other Properties of USDC

Transparency of USDC is guaranteed due to their regulation and full support by U.S. institutional bodies. The issuers of USDC issuers are obliged to deliver transparency to customers. 

The stablecoins developed by Centre Consortium — USDC and Euro Coin — are issued by regulated, licensed financial institutions that maintain full reserves of the equivalent fiat currency. The USDC reserves are kept in a special bank account that is monitored and regularly audited. You can find monthly reports on these holdings on the official Circle website. 

The combination of cryptocurrency properties and a guarantee of USDC’s value granted by leading cryptocurrency giants (Coinbase, Circle and Bybit) contributes to the adoption of USDC in the world. 

The transparency of USDC is highly assessed by experts, especially after the reputations of Tether and Bitfinex were compromised by the investigation initiated by the New York Attorney General’s office. However, it didn’t blemish the reputation of stablecoins. On the contrary, this case emphasized the need for a legitimate and regulated stablecoin. 

How to Get USDC on Bybit

Bybit supports multiple check-out methods to help you get your hands on USDC.

Buy USDC With Credit or Debit Card

Sign up for a Bybit account, or log in to your existing Bybit account to buy stablecoins via the Bybit One-Click Buy portal. Select USDC through the drop-down box, choose a preferred fiat currency, then go to your cart and check out with your preferred payment method. Upon any successful purchases, the USDC should reflect in your Spot Account within five minutes. Alternatively, you may also purchase USDT directly using your credit or debit card via the One-Click Buy portal and then convert the purchased USDT to USDC via the Bybit Convert function.

Buy USDC via Bybit P2P Platform

Select a preferred advertiser with your ideal USDC price listed on the Bybit P2P platform, then proceed with the selected payment method. The purchased coins should reflect in the asset wallet once the seller has successfully released the coins.

Enjoy competitive P2P trading prices for purchases, with 0% trading fees and multiple payment methods. Users can buy and sell USDC with local currencies to choose from, such as HKD, IDR, JPY, MYR, PHP, RUB and UAH.

How to Store USDC

When USDC gained popularity in 2020, users started storing their USDC in personal wallets. Since USDC is powered by Ethereum, there are many ways to store the asset, with the two basic types being either ERC-20–compatible wallets or hardware wallets. 

Any Ethereum wallet can be used for this purpose, for example Atomic Wallet, Coinbase Wallet, MyEtherWallet, Coinomi, AlphaWallet, MetaMask, BitGo and others. As for hardware wallets, the Ledger wallet is the most secure option.

Trading USDC on Bybit

Bybit has just introduced its latest USDC Euphoria campaign, featuring four events that offer you a chance to win a share of the 130,000 USDC prize pool and earn up to 500% APR. The campaign runs through Aug 22, 2024, 10AM UTC.

Event 1: Newcomers Deposit Delight

New to crypto? Make your first deposit of at least 100 USDC via the following eligible methods to claim your share of 40,000 USDC in airdrops! Please note that rewards will be distributed on a first-come, first-served basis to the first 4,000 users.

Event 2: USDC Lucky Raffle — 30,000 USDC Up for Grabs

Participate in the USDC Lucky Raffle for a chance to win a share of 30,000 USDC. Simply complete a series of tasks to earn lucky draw tickets, which you can use to enter the Raffle.

Event 3: USDC Splash — Claim Your Share of the 60,000 USDC Prize Pool

Looking to trade USDC? Now’s the time! Make a deposit of at least 200 USDC after registration, and trade at least 1,000 USDC worth of assets on USDC Spot pairs or USDC-settled Perpetual and Futures contracts to win a share of the 60,000 USDC prize pool. The more you deposit, the bigger your share of the prize pool!

Event 4: Bybit Savings New Users Perk — Enjoy Up to 500% APR

Interested in earning more crypto? The USDC Euphoria campaign allows you to earn up to 500% APR when you stake USDC on Bybit Savings. Simply make a first deposit of at least 100 USDC after registration, and stake between 100 to 300 USDC with our exclusive three-day USDC Flexible Savings plan to earn up to 500% APR. 

For more information regarding the events, visit the official USDC Euphoria campaign page.

The Bottom Line

While Bitcoin’s currently high volatility makes the future of its mass adoption for daily payments questionable, there are high hopes that stablecoins such as USDC have a chance to change the situation. This stablecoin is a great solution, with many possible use cases and a bright future.

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