Cryptocurrencies are one of the most volatile assets in the market. Their prices change continuously - with steep highs and lows. As someone who’s a believer of the technology and who doesn’t want to miss out on the opportunity to invest, volatility might be a big hindrance for them. Volatility reduces the usage of coins in transactions and an opportunity for long-term investing.
This problem was real and it led to the introduction of stablecoins. Stablecoins are cryptocurrencies on the blockchain, and have all the characteristics of crypto assets but are pegged to a fiat currency. These may be pegged to a fiat currency such as USD or commodities such as gold reserves etc.
For every stablecoin, there’s a reserve that acts as collateral to the same. A stablecoin may be fiat/commodity-backed, other cryptocurrency-backed, or algorithmic stablecoin. One of the most famous stablecoin is USDC.
Launched in 2018, the USD coin is a fully backed cryptocurrency with US Dollars in reserves. For every one dollar, there is one USD coin and hence the pegged ratio is 1:1. USDC is compatible with multiple blockchains including the Ethereum network, Solana, Algorand, etc. USDC is managed by Centre, an open-source technology project backed by Coinbase and Circle, a financial technology company. The coin is fiat-backed and audited and inspected by Grant Thornton. As per the official Circle website, “USDC transcends borders and banking hours. As a digital dollar with global reach, USDC can be available whenever and wherever you need it. Send USDC to friends and family, pay for goods and services, or save for the future
When you intend to buy USDC, the fiat currency by which you buy gets deposited per US Dollar and a new USDC is minted. Similarly, when you intend to sell USDC the coin is burnt and the fiat currency gets transferred to the user’s bank account. USDC can be bought and sold over any crypto exchange. As these are pegged to fiat currency, they don’t generate much returns and hence can be invested further for the same.
Stablecoins such as USDC are trying to solve one of the biggest problems in the crypto industry i.e market volatility. They have seen early adoption by investors but are yet to be tested on a very large scale. As the market is becoming mature, newer stablecoins - both fiat and algorithm backed are being launched in the market, giving investors an option to choose from a pool of coins.
If you hold USDC, you can generate passive returns on your coins by investing them on Flint. Flint allows you to earn high returns on your crypto in a safe and secured manner passively.
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