An easy and cheap way to buy and store USDC is through a crypto exchange such as Firi. Firi makes it easy to both buy, sell and store your USDC and other cryptocurrencies.

What is USD Coin (USDC) and how does it work?

The purpose of this article is to give you a simple but thorough review of what stablecoin USD Coin (USDC) is and how USD Coin works.

USD Coin is a centralized cryptocurrency that is linked to the US dollar. That is, it aims to maintain a stable 1:1 value against the USD, and is thus a so-called "stablecoin".

USDC is an ERC-20 token and is thus built on the Ethereum blockchain. USD Coin was launched in September 2018 as a collaboration between Circle and Coinbase. Like other stablecoins, USDC can be defined as a tool to tokenize the US dollar.

Tokenize is the process of converting something of value into a digital token that can be used on a blockchain application.

USDC aims to make it easier to use US dollars on the internet and blockchains. By moving US dollars to the blockchain, one can easily send them anywhere in the world in minutes and, in addition, it contributes to stability in a volatile crypto market.

Firi explains: What is a stablecoin?

Stablecoins are a type of cryptocurrency where the price must remain stable. With stablecoins, the price is often pegged 1:1 against a FIAT currency such as EUR, USD or Norwegian kroner. The most common form of stablecoins are "crypto versions" of the American dollar (USD), such as DAI or USDC that we offer here at Firi. In other words, stablecoins are less exposed to the large fluctuations in price that you can get in the rest of the crypto market, such as for example in Bitcoin and Ethereum.

In other words, such “stable cryptocurrencies” want to offer the best of both worlds; the fast transaction times, the security and privacy you get from using cryptocurrency, and the stability you get from traditional currencies. The risk of stablecoins is then linked to the reserve and its value, rather than the crypto market in general.

Summary

The traditional currencies, such as NOK, DKK, EUR, USD are known as FIAT currency.
Stablecoins are designed to be stable and often hold a 1:1 value with an underlying FIAT currency.
Firi offers two stablecoins called DAI and USD Coin (USDC), and these should always be worth 1 USD (US dollar).
Stablecoins can also be linked to a commodity (e.g. gold) or another currency or cryptocurrency. A stablecoin is always directly linked to another stable asset, which is why they can remain so stable.

How does USD Coin work?

First of all, it is important to be aware that the USDC is not being pushed up in the same way as the US central bank has done with the dollar. Circle, which together with Coinbase has founded Centre, the developer of USDC, guarantees that there is one US dollar in their reserves per The USDC token.

The transformation, or tokenization, of US dollars into USDC takes place in three stages:

A customer sends USD to the token issuer's bank account.
The issuer uses the USDC smart contract and creates a corresponding amount of USDC.
USDC is delivered to the customer, while USD is kept in the reserves.

To redeem USDC for USD, the process is just as simple, but in reverse.

A customer sends USDC to an issuer.
The issuer uses the USDC smart contract to exchange USDC for USD and take the corresponding number of USDC tokens out of circulation.
The issuer sends USD from its reserves to the customer's bank account. The customer receives the same amount of USD that was exchanged for USDC, minus any fees.

One of the factors that has made USDC so popular is that, unlike the largest stablecoin Tether (USDT), they are committed to being 100% transparent and working with a number of financial institutions to maintain full reserves of fiat currency. In addition, all USDC issuers are required to regularly report their USD holdings, which are then published by Grant Thornton LLP. These monthly reports can be found here.

Who made USDC?

USD Coin is developed by Center Consorium, which is founded by Circle and Coinbase. The framework and technology behind USD Coin was developed by Centre, while Circle and Coinbase were the first commercial issuers of USDC.

Coinbase was founded by Brian Armstrong and Fred Ehrsam in 2012, and is today one of the world's largest crypto exchanges. Coinbase has over 98 million private users, 13,000 institutions and more than 230,000 partners in over 100 countries. In Q1 2022, they had a turnover of 309 billion dollars and the exchange is one of the most trusted crypto exchanges in the world.

Circle is a so-called official Money Transmitter. A Money Transmitter is a company that offers money transfer services or payment instruments and these are required to comply with federal laws and regulations. It also means that all USDC tokens are regulated, transparent and verifiable. In addition, Circle is backed by the investment bank Goldman Sachs.

Firi explains: What is a centralized cryptocurrency?

Although decentralization is much of the foundation of cryptocurrency, there are certain tokens that may deviate from this in order to expand the infrastructure of the crypto market. These include stablecoins such as Tether (USDT) and USD Coin (USDC).

These innovations have allowed users to exchange their crypto holdings for a digital asset tied to the dollar without having to exit the crypto market entirely. Moreover, they have also made it possible to list markets against USDT or USDC, which has provided additional liquidity and meant that cryptocurrencies cannot be exclusively traded against Bitcoin.

Other examples of centralized cryptocurrencies are so-called "security tokens". These are what are called securitized cryptocurrencies. These derive value from an external asset that can be traded as an ordinary security, and are therefore used to tokenize securities, such as properties, bonds and shares. Examples of security tokens are Blockchain Science, Sia Funds and Bcap (Blockchain Capital).

As mentioned at the outset, USDC is a centralized cryptocurrency. Some have thus also expressed their dissatisfaction about the level of control the creators have over USD Coin. In their terms of use under section 13 "Blocked Addresses & Forfeited Funds", it is clearly stated that the developers have the right to blacklist addresses and freeze funds, either temporarily or permanently, if it is suspected that USDC tokens are being used for illegal activities.

However, this is something that most other stablecoins also have in their terms of use. The only stablecoin without these terms is DAI, which we also offer at Firi.

How to buy and store USDC?

An easy and cheap way to buy and store USDC is through a crypto exchange like Firi. Firi makes it easy to both buy, sell and store your USDC and other cryptocurrencies.

When you create an account on a crypto exchange like Firi, a digital wallet is automatically generated for you where you can store your USDC.

Storing USDC with us is easy. Firi safely stores your cryptocurrency for you and you don't have to deal with securing your own private keys or looking after the security of your digital wallet.

You get access to your wallets by logging in to your user account with e-mail or Vipps, and by verifying yourself with BankID. You can easily send and receive cryptocurrency to your wallet in Firi from other crypto exchanges or decentralized wallets.

Cryptocurrency can be bought 24/7, and Firi makes it easy to exchange between USDC and NOK. You can also sell your USDC and several other cryptocurrencies for NOK to your bank account if you wish.

If you wish to use a private wallet, it is important to be aware that USDC is an ERC-20 token issued on the Ethereum blockchain and that it cannot therefore be stored in wallets that do not support ERC-20 tokens.

Examples of wallets that can be used to store USDC are MetaMask, MyEtherWallet, Ledger Nano S or X, Trezor and Rainbow Wallet. If you want to learn more about crypto-wallets, you can find information here.

Why use stablecoins like USDC?

There are many reasons to own and use stablecoins like USDC. Here are some:

Hedging against market volatility.
By holding USDC, you have the opportunity to quickly buy "dips" without having to wait for a bank transfer.
Traders use stablecoins to short or long cryptocurrencies, which means betting on whether they will go up or down in value.
You can use stablecoins to take out loans from various providers, such as Aave.
Buy goods on various crypto platforms, exchanges, blockchain-based games and more.

Lasse Schultz04/07/2022