Crypto Academy Homework Task 7 For Professor @Yohan2on: About USD Coin.

Hey Steemians, i am so excited to be participating in the Past 2 of the Stablecoins series and this week 7 lecture is so powerful, all thanks to @yohan2on for taking his time to make this topic understandable especially for me that is just a beginner in the crypto world. I shall be writing all about USD Coin in this week's homework task.

What is a stablecoin?

In week 6 post, i gave a well detailed definition of stablecoin but for the sake of this post, i will just give a short explanation of what stablecoin is relating to USD coin. Stablecoin is a cryptocurrency that could be pegged to one or more underlying assets. These 'stable' assets could either be other cryptocurrencies or local fiat currencies, or maybe commodities like gold. But in the case of USDC, it's pegged to just one asset which is the US Dollar. this implies that for every 1 USDC issued, the issuer holds 1 US Dollar as collateral.

Source

What Is USD Coin?

USD Coin is a stable coin that is fully collateralized and pegged to the US Dollars. It was developed by a consortium called Centre, which was in partnership between Circle and Coinbase and launched it in 2018. The partnership was in a way that Centre developed the technology and governing framework while Circle and Coinbase became the first commercial issuers of USDC. USD Coin is an Ethereum’s ERC-20 token and could be stored in an Ethereum wallet. it is also compatible with other major wallets and custody services thereby making it the second-largest stablecoin in the globe by market capitalisation.
In a nutshell, USD Coin is a service that helps to tokenize US dollars and facilitate their use over the net and public ledger system. However, USDC tokens can also be changed back to USD at any time and this system of issuing and redeeming USDC tokens is executed with ERC-20 smart contract. Bringing US dollars into the blockchain enables its movement anywhere within the world in no time, and it brings all the stability cryptocurrencies needs. Also, it allows new opportunities for trading, lending, risk-hedging and more.

How is USDC pegged to the dollar?

A USDC token is formed when someone purchases a token from an approved issuer. for each US dollar received, the issuer will apply an ERC-20 smart contract to form constant amount of USDC. this is often then sent back to the initial buyer. The US dollar that was originally sent to the issuer is then held in reserve as collateral. This guarantees that each USDC token is backed by a US dollar and it’s redeemable on a 1:1 basis.

How to buy USDC?

USDC tokens can either be bought directly from the issuer or be traded on exchanges like Luno. When USDC is bought through an exchange, the token isn't being acquired from the issuer directly but from a 3rd party, however you continue to own the token and can always be entitled to redeem it from the issuer, if you choose to.

How Does USD Coin Work?

USDC token is pegged to a single US dollar and this was guaranteed by Circle the first commercial issuers. The process of changing US dollars to USDC token is known as tokenization. So tokenizing USD in to USDC is of three step process and they are:

• US dollar is been sent to the token issuer's bank account by the user.

• The issuer then creates an equivalent amount of USDC using a USDC smart contract.

• While the exchanged US dollars are been held in the reserve, the newly minted USDC are sent to the user.

However, Redeeming USDC back to USD is as easy as minting the token, except that the process is the reversed of tokenizing:

• To redeem the equivalent of USD, the user sends to the issuer of USDC token.

• Then the issuer sends a request for the token to be exchanged to USD to the USDC smart contract and while this is going on, the issuer takes the equivalent of the amount of tokens out of the circulation.

• The user gets the amount of the USD equivalent to the USDC tokens from the issuer once the issuer sends the amount requested to the user's bank account, minus all incurred fees.

USDC are used to:

• Make short cryptocurrencies easy to buy in the future and also making the user not to cash out so fast.
• Help to avoid traditional financial tools and institutions.
• helps to avoid hyperinflation usually for people living in countries like Turkey or Venezuela.
• Enables users send money instantly, worldwide, safely and at low cost;
• Enable users buy items in various crypto dApps, exchanges, and blockchain-based games.

CONCLUSION.

Unlike the foremost popular stablecoin Tether (USDT), creators of the USD Coin are obligated to supply full transparency and work with a spread of monetary institutions to keep up full reserves of the equivalent fiat currency.

Special thanks to @steemcurator01 and @steemcurator02 for their amazing suppose.