10 minsPublished on 4/7/2022

What is USDC? A complete guide

USDC (USD Coin) is one of the most popular stablecoins out there. Here’s everything you need to know about what it is and how it works.

By Corey Barchat

Cryptocurrencies like Bitcoin (BTC) and Ethereum (ETH) demand most of the attention within the crypto space, and for good reason: these two leading coins alone account for a combined 60.6% market dominance.

But there are hundreds more cryptocurrencies and blockchain projects working to transform the world of finance at a global scale. And though investing in BTC or ETH could yield great returns, one significant concern with the largest cryptocurrencies is the often considerable price volatility.

Price volatility is nothing new, however, and has been commonplace since the birth of crypto. For seasoned investors and crypto newbies alike, wild fluctuations in price can represent an opportunity for big returns. But for some they might make cryptocurrency assets seem too risky.

To offset these large swings in value, stablecoins were created as a digital asset with price stability. In this article, we'll explore this type of digital currency and look at USDC, one of the most popular stablecoins on the market today.

USDC: A stable cryptocurrency

Before we take an in-depth look at the stablecoin USDC, currently the sixth-ranked cryptocurrency by market cap, it's important to understand what stablecoins are.

What are stablecoins?

Stablecoins are a specific subset of cryptocurrencies pegged to a real-world asset (usually fiat) to ensure price stability. 

For example, in the case of USDC, for every one coin in existence, there is one dollar held in reserve, keeping the price steady. By design, the supply of USDC is directly correlated with an equivalent amount of USD held in reserve backing USDC. Other stablecoins can be backed by crypto and additional commodity assets as well—not just US Dollars.

A graphic showing stablecoins pegged to the US dollar.
USDC is one of the main stablecoins (Image source)

Stablecoins carry all the advantages of cryptocurrencies while essentially operating as a “programmable dollar". This versatility allows stablecoins to play a significant role in the adoption of both cryptocurrencies and decentralized finance.

What is USD Coin?

USDC is a stablecoin launched in partnership with Coinbase and Circle and operates as an ERC-20 token, meaning it runs on the Ethereum blockchain.

USDC is governed by Centre, which oversees the technical and financial standards for the stablecoin and ensures there is transparency around a true 1-to-1 backing. This means that for every USDC created, there should be $1 of USD held in reserve.

Created in 2018, there is a total supply of 51.2 billion USDC. USD Coin can be issued by approved regulated financial institutions, which allows for the growth of the USDC ecosystem. The token can be purchased and sold on a variety of cryptocurrency exchanges and cryptocurrency providers (including MoonPay).

Additionally, USDC can be sent and received by an Ethereum wallet or exchange that is ERC-20 compatible. Though the token name may suggest otherwise, this is not just limited to the Ethereum network: USD Coin is compatible with other major blockchain networks such as Algorand, Solana, Stellar, TRON, and Flow.

An image of gold USD Coin and US Dollar renderings.
USDC keeps a stable price tied to the US Dollar (Image source)

USDC can be used by virtually anyone with an internet connection. According to Decrypt:

USDC's parent company isn't shy about saying the currency is for those who want to move medium to large amounts. By becoming a more attractive way for institutional investors to get involved, stablecoins like USDC could help make cryptocurrencies more mainstream.

USDC is exactly that: a digital currency that is valued at $1 USD. Unlike USD in your bank account, however, you can transfer USDC quickly across the world to any individual for virtually zero fees.

How does USDC work technically?

So how does USD Coin work on a technical level, given it is both a stablecoin and a cryptocurrency?

Here's how the financial institution responsible for oversight of USDC explains the technical process.

Redemption follows the reverse sequence: a customer requests a redemption from an issuer, and upon successful verification and validation, the appropriate USDC tokens are irrevocably deleted from circulation ("burned"), and funds from underlying reserves are transferred back to the customer's external bank.

A chart of USDC’s reserve breakdown.
USD Coin is backed by US dollars and treasury securities (Image source)

Basically, whenever a dollar is deposited, a USDC token is created. Then, when a customer wishes to redeem USDC back for dollars, the USD Coins are permanently destroyed in order to keep a consistent backing.

For stablecoins and USDC to operate as intended, there needs to be trust and transparency from the overseeing parties to ensure that there is actually a 1 to 1 backing, which is why Centre provides routine updates from top-five accounting firm Grant Thornton.

The entire concept of stablecoins depends on there actually being a 1-to-1 backing, which is why the USDC issuers go above and beyond to demonstrate transparency on that front.

A screenshot of Grant Thornton’s USDC audits.
USDC's parent company publishes monthly reports on its reserves (Image source)

USDC use cases

So what can USDC actually be used for? Given its status as a stable digital asset, USD Coin can be used in unique ways compared to other cryptocurrencies.

1. Easier access to crypto markets

USDC allows you to buy, sell, and transfer funds while remaining in the cryptocurrency ecosystem. Instead of going through extraneous steps to cash out to your traditional bank, you can swap crypto to USDC, which is pegged to the US dollar. USD Coin is accepted on virtually every major cryptocurrency exchange, both centralized and decentralized, giving you plenty of options for where to hold or invest your money.

2. Cross-border payments

Transferring your local fiat currency to other businesses or individuals around the world is incredibly costly, not to mention inconvenient. Some bank payments can take days to process, on top of hefty fees. With USDC, you’re able to make cross-border payments, also known as remittances, to anyone with a cryptocurrency wallet and for just a fraction of the cost.

An image of crypto being used for international remittances.
Stablecoins like USDC play a major role in remittances (Image source)

3. Get paid in crypto

Another useful benefit of USDC is that it can help make it easier to pay employees in crypto. While far from being a common request, professional athletes and startup employees are beginning to negotiate to be paid in cryptocurrency.

While being paid in Bitcoin and Ethereum can certainly have upside, the volatility in price makes it a difficult option to consider for many. Using USDC, employees can get paid in crypto while being protected against the downside of price swings. Additionally, with USDC users can then purchase the cryptocurrency of their choice with ease.

4. Earn interest

You can also earn rewards with your USDC by lending your tokens on a variety of DeFi platforms.

Current interest rates for lending USDC.
USDC can be used to earn rewards on many DeFi platforms (Image source)

While interest rates change on a regular basis, in most cases you can earn more by lending USDC than you would with a traditional savings account. Additionally, it’s easier to choose where to invest your money compared to being stuck with your standard bank.

5. Government aid

USDC and other stablecoins are also seeing more usage in the case of government policy as well. Given its ability to transfer to individuals and businesses who have access to the internet, USDC makes it easier for governments to transfer relief funds.

It also facilitates international donations, bypassing the roadblocks that accompany transfers between banks in different countries. Residents of countries experiencing high inflation rates can also gain exposure to the US Dollar.

Pros and cons of USDC

USDC pros

Hedge against volatility

Instead of holding a cryptocurrency that fluctuates wildly, investors can swap to a more stable asset like USD Coin. For those trying to time the top of the market and buy back in later, USDC can be held until the time comes to swap back to the cryptocurrency of choice.

An illustration of USDC’s earning potential.
USD Coin can be used to stay in the crypto economy (Image source)

Staking to earn interest

USDC can be staked to provide generous APY generally in the ballpark of 2-2.5%. It can also be used in trading pairs on DeFi platforms to earn a percentage of total network fees.

USD Coin’s staking rewards APY.
Staking rewards for all digital assets change frequently and should not be seen as guaranteed returns (Image source)

Multi-chain compatibility

You can quickly and cheaply send your USDC to a variety of blockchain ecosystems like Ethereum and Solana, and then use it to purchase a variety of cryptocurrencies and NFTs.

Fully-backed reserves

USDC is by all measures a reliable and trustworthy digital asset pegged to $1 USD. Centre consistently publishes audited reports of its reserves and is seen as a trusted parent company of the stablecoin.


Limited price appreciation

Due to its stable value, USDC lacks the price appreciation that investors come to expect from other cryptocurrencies. However, this limited upside is offset by DeFi functionality such as staking, liquidity pools, and yield farming.

Stablecoin competition

USDC is not the only stablecoin, and actually ranks second in market cap among stablecoins pegged to the dollar. USDT (Tether) is currently in the top spot, with a market cap 61% higher than USDC’s. While Tether was released with a four-year head start on USD Coin, the latter has gained ground and is vying to be the top stablecoin.

Read our USDT vs USDC comparison article to learn more.

Is it safe to buy USDC?

As with any investment or cryptocurrency purchase, you should always do your own research. It’s also important to buy only from trusted exchanges and services, and store your crypto in the right wallet.

That being said, USDC is about as safe a crypto investment you can make. There is little reason to doubt the USDC reserves and the reputation of its auditing firm. 

On the other hand, Tether, the parent company of competing dollar-backed stablecoin USDT, has long been more hesitant to release reserve backing reports, although they have since started publishing daily updates.

Frequently Asked Questions (FAQ)

Why use a digital dollar?

Dollar-denominated assets like USDC open a realm of possibilities to investors inside the United States and around the world. It can be sent anywhere at any time, and used as a hedge against inflation from fiat and cryptocurrencies alike.

Will USD Coin hold its value?

Centre regularly publishes reports of its backed reserves with audits from Grant Thornton LLP. So long as there is an equivalent value of its reserves and circulating supply, the price of USD Coin will remain constant at $1.

Is USDC the only stablecoin?

Although it is one of the most widely used stablecoins, USDC is not the only one in existence. Stablecoins can be pegged to any asset, and other national currencies such as the Brazilian Real (BRL)

There are also many other dollar-backed stablecoins, such as USDT (Tether), Dai (DAI), Binance USD (BUSD), TrueUSD (TUSD), and Terra USD (UST).

For a more detailed explanation of stablecoins, see our article USDT vs USDC: Which stablecoin should you use?

Is USD Coin divisible?

Like the fiat currency it’s pegged to, USD Coin is divisible to the cent. It’s actually even more divisible than the dollar and transactions can be sent for as low as 0.000001 USDC.

Final thoughts

USDC is one of the top stablecoins available and continues to play a large role in the adoption of cryptocurrency globally.

Built through a partnership with Coinbase and Circle, and overseen by leading open source project Centre, USDC remains one of the most trusted stablecoins and digital assets on the market today.

How to buy USDC (USD Coin)

You can buy USDC via MoonPay or through any of our partner wallet applications with a credit card, bank transfer Apple Pay, Google Pay, and many other payment methods.

Just enter the amount of USDC you wish to purchase and follow the steps to complete your order.

A screenshot of MoonPay’s buy USD Coin widget.
MoonPay allows you to buy USD Coin in seconds (Image source)

How to sell USDC?

MoonPay also makes it easy to sell USDC when you decide it's time to cash out. Simply enter the amount of USD Coin you'd like to sell and enter the details where you want to receive your funds.

Corey Barchat
Written byCorey Barchat