USDC Lending Rates Compared
In light of the shortcomings of the original first stablecoin, Tether (USDT), dozens of companies have now introduced their own versions into the market.
US Dollar Coin (USDC) appears to have become the most prominent of this new generation of stablecoins, gaining traction within the DeFi ecosystem.
USDC was created by CENTRE, a consortium founded by Coinbase and Circle. CENTRE is responsible for the issuance, governance, and administrative tasks surrounding USDC, and remains one of the reasons that the token is so highly trusted.
Why USDC over Tether?
DeFi protocols, especially those focused on lending, prefer stablecoins which are highly reliable in maintaining their collateral backing. Users of platforms like Compound Finance need to know that their stablecoin collateral is going to retain its complete value, for the entire duration of its use. If a stablecoin goes under – so does their investment.
This has led to DeFi protocols being highly selective of which stablecoins to offer.
A major issue with Tether has been a lack of transparency, mismanagement of reserves, and the absence of legitimate banking relationships. USD Coin offers a highly sought-after solution to the above problems, by offering a well-trusted alternative to other stablecoins.
USDC tokens are issued by well-known and regulated financial institutions, based in the United States. Formal attestation reports are also published on a monthly basis, regarding their US dollar reserves. These reports are written by Grant Thornton LLP, an independent accounting firm.
CENTRE is well-connected and influential in the cryptocurrency space, and has done well in integrating USDC with several exchanges, DeFi protocols, and wallets.
USDC DeFi Uses
Compound is one of the leading DeFi lending platforms. It allows users to earn interest when supplying assets to the pool and for borrowers to access loans in a permissionless fashion. Compound currently supports a number of assets with more being added each quarter.
While the vast majority of loans are in Ether, Compound is one of the leading places to lend and borrow USDC, with over 7-figures in gross supply of USDC loans. USDC is currently the third most popular crypto to lend on Compound behind Ether and Dai.
dYdX is a decentralized exchange which offers margin trading. It also has a lending function, where users can lend or borrow USDC using a web3 wallet such as MetaMask. Borrowed tokens can be utilized anywhere, including off the platform – as long as the associated wallet is adequately collateralized.
Although the lending and borrowing rates are competitive, dYdX is most popular for its margin-trading capabilities.
Set Protocol is a unique asset exchange which allows traders to purchase sophisticated trading strategies as a single ERC20 token called Sets. Virtually all of Set Protocol’s “Robo Sets” rebalance to USDC when in a stable period, with a couple Sets leveraging Compound’s version of USDC – cUSDC – to enable tokenholders to earn passive interest whenever the Set is in a stable phase.
Biggest USDC Exchanges
Binance is a top exchange in the world by total trading volume, measuring over $700M as of February 2020. Binance is headquartered in Malta and is known for listing hundreds of different coins for trading. Binance has recently faced some regulatory scrutiny from US regulators. It recently shut down service for all US customers, and launched a Binance US exchange. USDC has a large number of trading pairs on the platform, though it has to compete with several other stablecoins listed as well.
USDC Trading Volume: ~$18M (February 2020)
Number of USDC Trading Pairs: 31
Other Stablecoins: Tether, Paxos, TrueUSD, Binance USD, Russian Ruble, Nigerian Naira, StableUSD
Coinbase is one of the leading crypto exchanges in the US. It was started in 2014 and is recognized as one most user-friendly exchanges in the US – making for an ideal launchpad for USDC. With over $1billion in annual revenue and over 13 million users on its platform, USDC is currently the only fiat-backed stablecoin on the platform.
USDC Trading Volume: ~$19M (February 2020)
Number of USDC Trading Pairs: 10
Other Stablecoins: Dai
Top USDC Wallets:
How Does is Work?
As with most fiat-backed stabelcoins, a trusted entity (CENTRE in the case of USDC) holds $1 USD in cash for each USDC token issued. As mentioned above, CENTRE is backed by strictly-regulated US financial institutions and publishes a monthly attestation report by an independent accounting firm to prove its capitalization.
The token utilizes the Ethereum blockchain and follows the ERC20 standard, which is very common among stablecoins. In this way, USDC provides the stability of the US Dollar but also leverages the power of smart contracts to enable a new set of possibilities of financial services – including lending, borrowing, derivatives and payments.
USDC is integrated into a plethora of exchanges, wallets, apps and other platforms. CENTRE intends for consumers to use USDC for trading, investing, payments, lending and other virtual use cases. Their partner network is already solid and expanding quickly. USDC is offered in over 85 countries around the world.
Can only CENTRE issue USDC?
For the time being, only CENTRE will issue USDC. However, the long-term plan is to establish an open-source framework that would allow any financial institution to issue USDC to its own customers. The financial institutions would just have to meet certain financial and technical requirements, but would join a global network of traditional banks and new fintech startups using the same USDC currency.
Is USDC only for the US Dollar?
CENTRE foresees this model of stablecoin being used on other global currencies, such as the Euro, Yen, and any many other currencies. While the name may vary slightly, these currencies would be part of the same open-source framework and rely on a similar pegging mechanism. These other currencies would use the same Ethereum-based technologies and similarly be backed one-to-one in an audited bank account. For instance, a European may soon be able to start to issue a Euro stablecoin through CENTRE.
What merchants accept USDC?
Because Coinbase is one of the backers of USDC, it is integrated into their suite of products. Coinbase has one of the most popular crypto merchant products in Coinbase Commerce, which is a POS software that allows businesses to accept payment in crypto.
Coinbase Commerce has accepted over $50M in crypto transactions and has over 500 different merchants using it. Coinbase Commerce is integrated with other may payment processors, such as Shopify. Additionally, other crypto payment processors, such as Bitpay, provide USDC support.
Overall, USDC provides a more transparent, reliable store of value than other major stablecoins. It is more reputable and transparent than Tether. It is backed by fiat assets, rather than cryptoassets, which is how the Dai model works. It has notable backing from financial institutions and already seeing a healthy rate of adoption. With the robust ecosystem supporting USDC, users can use, trade, loan, and store USDC at a plethora of different websites.