Stable Coins - US Dollar and more on the way?

On Tuesday, Coinbase and Circle announced the release of a US dollar stablecoin: USDC. This is convenient timing for both platforms as stablecoins have become increasingly popular across the world. Gemini, one of Coinbase’s largest competitors announced the release of GUSD a few weeks ago.

Here on out, US-based customers on both platforms can purchase USDC the same way they purchase other currencies such as Bitcoin and Ethereum. However, customers in New York are unable to purchase the coin due to the BitLicense.

Stablecoins are much different than other cryptocurrencies. Stablecoins are not for investors looking to earn a profit, but rather for those wanting to hold value. A stablecoins strength is in its stability.

This characteristic is made possible by pegging the coin to a fiat currency (typically the US Dollar). While the ratio between USDC and the US Dollar shouldn't change, its ratio between Bitcoin and other cryptocurrencies can.

Tether is one of the most popular stablecoins and is currently #9 in terms of market capitalization. At the time of this writing, Tether is trading at $0.98 although it saw lows of almost $0.93 last week. The coin has received a lot of attention recently as people are questioning if it’s actually pegged by USD.

At its current market capitalization, Tether’s bank account would need to hold $1,926,421,736 USD. No official audits have been published, but the CEO Reeve Collins claims the coin is backed 1:1.

You may be wondering… what is the benefit of a digital dollar? One of the largest benefits on a virtual dollar is the ability to send and store value in a permissionless way. No bank account is needed in order to store the currency. While this is not too useful for users in the US, this is extremely powerful for the unbanked.

USDC will be an ERC-20 token running on the Ethereum blockchain. This means most Ethereum wallets will support the storage of the coin. The coin is already supported for buying, selling, and storage on Coinbase Vault. Because it runs on Ethereum, it is able to be programmed using smart contracts allowing it to interact with thousands of decentralized applications (dApps).

Coinbase has a great reputation in the community and is a trusted company. With the release of USDC, it’s very possible we see it pass other stablecoins such as TrueUSD, Maker, and Tether.