USDC Lending Rates
US Dollar Coin (USDC) has been gaining strong traction within the DeFi ecosystem. With support on many of the top DeFi protocols, many have recognized USDC as the second-choice stable coin behind Dai.
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.
More commonly, USDC is largely referred to as Coinbase’s stablecoin.
Recent News for USDC
In the past year, Coinbase has helped propel the growth of USDC thanks to the USDC Boostrap Fund – an endeavor that has supplied $3.1M in capital to Compound, dYdX, Uniswap, and PoolTogether. The first tranche was deployed at launch in September of 2019 with the second round being deployed in April of 2020.
More recently, USDC was added as a collateral type to Maker – making it the first stablecoin added to the protocol since inception. This integration came as big news as users could lock USDC to borrow Dai. While the stability fee to do so was originally quite high, it’s since dropped to an appealing 0% – meaning users can mint Dai using USDC with no debt, so long as they supply and maintain a minimum of 120% collateral relative to the amount being borrowed.
Let’s examine a few reasons why USDC has seen strong adoption within the past year.
- Stability – USDC is pegged to $1 and breaks that peg far less than the leading DeFi stablecoin Dai
- Liquidity – with USDC’s market being multiples higher than Dai, it can be traded more efficiently on fiat on and offramps like Coinbase.
- Accessibility – Acquiring USDC is as simple as pressing one button on Coinbase to swap USD to USDC.
- Composability – USDC is being adopted by a growing number of DeFi protocols, most recently making headlines for it’s support in Maker’s Multi-Collateral Dai.
Top Picks for USDC Lending
Within the broader cryptocurrency lending landscape, USDC has been added to a number of centralized providers in tandem with its decentralized counterparts. For those less concerned about the trusted nature of lending, we’ve seen that centralized players have historically offered the best rates on USDC lending.
As a leading US-based cryptocurrency lending platform, BlockFi currently offers the highest returns on USDC lending in a secure and trusted manner. With support for Bitcoin, Ether and USDC, BlockFi has quickly taken lead when it comes to centralized lending for a number of reasons. With over $100M in funding according to Crunchbase, BlockFi is backed by industry giants like Coinbase Ventures and Winklevoss Capital.
- USDC supplied to BlockFi is secured using Gemini Custody – a leading US exchange praised specifically for its advanced security measures.
- Users providing capital to BlockFi can choose to collect interest in a number of different assets. This means users can choose to lend USDC and receive interest in Bitcoin.
- Interest earned on BlockFi is paid out monthly and can be withdrawn at any time.
- BlockFi recently introduced a fiat onramp with US-leader Silvergate – meaning users can now lend USDC directly with a USD wire.
- There are no minimum deposits required to lend USDC on BlockFi.
- BlockFi takes minimal fees, meaning the lion’s share of interest is earned by the lender.
Compound is the second largest lending protocol behind Maker. Users can also borrow assets from Compound, but are required to post collateral (like USDC) to increase their maximum Borrowing Power. Each asset has different lending and borrowing rates, all of which are listed as annualized percentages.
- USDC loaned on Compound is returned as cUSDC – Compound’s interest-earning version of USDC– which is commonly seen as the defacto rate for USDC lending within DeFi.
- cUSDC is supported in a number of unique DeFi products such as Set Protocol Yield Sets in which assets rebalance in cUSDC during stable phases.
- Interest rates on cUSDC can be swapped with up to 10x leverage on Swap Rate.
- When lending on dYdX, users are always collecting interest, even when used in open trading positions for cross-margin.
- Interest rates on dYdX are dynamic, meaning they can trade at different rates from Compound.
- dYdX utilizes metatransactions, meaning once USDC is deposited, there is no cost to trade it within the exchange.
Curve is a stablecoin lending aggregator supporting a suite of the industries top stablecoins. The protocol has historically offered the highest returns on stabelcoin lending, including USDC.
- Users can seamlessly add liquidity to Curve using intuitive front-end tools like iEarn
- Curve allows users to quickly swap between various stablecoins with minimal slippage
DeFi Projects Supporting USDC in 2020
Here are a list of all the projects we’ve covered here on our site which support USDC in some capacity.
- 0x Protocol
- Coinbase Wallet
- DeFi Saver
- Kyber Network
- Set Protocol
All in all, we believe that USDC is quickly rising as the second largest stablecoin within DeFi and expect this trend to continue in the coming year.
How Does USDC 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.
USDC is an ERC20 token on Ethereum. This gives USDC the stability of the US Dollar with the power of smart contracts to enable a new set of possibilities of financial services – including lending, borrowing, derivatives and payments.
While many are quick to note the centralized nature of USDC, we believe that Coinbase is the most reputable and secure exchange to issue a stablecoin in the US market. With this, we believe that USDC is multitudes more secure than an alternative like Tether, which has historically been criticized for its inability to properly prove it’s 1:1 backing with legal tender.
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.
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 (for example EURC in the case of EUR or JPYC in the case of JPY). These other currencies would also use the ERC20 standard and be backed one-to-one in an audited bank account.
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.
Cooper is the Editor of DeFi Rate and a contributor to leading DeFi outlets like the Defiant and Bankless. He is active in the DAO ecosystem through projects like MetaCartel and Raid Guild where he seeks to incubate governance models and grassroots community development. He is an ambassador of Set Protocol and the Director of Fitzner Blockchain Consulting where he authors a weekly publication called Token Tuesdays. To stay up with Cooper, follow him on Twitter.