You’ve probably heard about cryptocurrency as it has exploded in popularity over the last few years. Cryptocurrencies are digitized forms of legal tender designed to enable secure online payments without using a third party. In other words, cryptocurrency functions like virtual dollars you can exchange online.
The critical difference is that the U.S. government doesn’t back crypto assets, so the crypto market is prone to volatility. For example, there was a period in November of 2021 when the world’s cryptocurrency was valued at more than $3 trillion. That sum is more than the GDP of every country in the world, except for the United States, China, Japan, and Germany.
Another cause of value fluctuations for cryptocurrency is the market is still uncertain about its future. Based on unsubstantiated rumors, prices are known to rise and fall as high as 10% in a single day.
There are virtually no financial opportunities to yield that type of immediate return. Naturally, this unique impunity has attracted a ton of investors to the world of decentralized finance (DeFi).
There are several different types of cryptocurrency out there that you can buy. Each of them will come with varying degrees of stability and investment risk. One of the most popular cryptocurrencies is the stablecoin known as USD Coin (USDC).
What Is USD Coin?
USD Coin was launched as a regulated stablecoin in 2018 by the Centre consortium, founded by Coinbase and Circle, and is currently the fourth-largest cryptocurrency on the market. Stablecoins are a unique category of cryptocurrency because their value is tied directly to another asset.
In this case, USD Coin pairs with the U.S. dollar at a 1:1 ratio. That means that every USD Coin token has the same value as a dollar and is interchangeable.
Technically, stablecoins such as USD Coin aren’t considered investments in the same way as other cryptocurrencies. The value of a USD Coin will always match that of the fiat currency, so investing in them would be similar to stuffing cash into your mattress.
You do have the option for a solid interest rate by putting USDC to work in decentralized markets, but more on that later.
The primary purpose of USD Coin is to transfer wealth between different traders and platforms online. The easiest way to explain it would be to use a real-world example. Nineteen European countries use the Euro.
If a Greek person were to visit Ireland, they wouldn’t have to exchange their currency for purchase. Apply that same concept to virtual marketplaces and digital assets, USD Coin.
How Does USD Coin Work?
As collateral, USD Coin tokens have the backing of cash and short-term U.S. Treasury bonds. For every USD Coin in circulation, $1 is held in any of these forms. The value of USD Coin ties directly to these physical assets, which helps to keep their value stabilized.
Each month, Centre releases monthly attestations issued by the top accounting firms in the U.S. These attestations provide clear information about the current state of USD Coin, including the total number in circulation and the total value of the reserve backing them.
USD Coin operates on an open-source stablecoin framework designed by Centre. A new USDC token gets minted anytime that someone buys one. It will eventually be removed from circulation whenever someone sells it in exchange for a dollar.
Here is a general idea of how the process works:
- You purchase USD Coins by sending U.S. dollars to the crypto exchange network.
- A USD Coin smart contract is developed that will mint the appropriate number of USD Coin tokens.
- You will receive the freshly minted USD Coin in your digital wallet while the crypto exchange will deposit the U.S. dollars into the federal reserve.
- The physical money will be collateral until you exchange the USD Coin.
- When that happens, the USD Coin goes out of circulation and will release the collateral.
Is USD Coin the Same as Bitcoin, Ether, and Tether?
Each of these four digital tokens is a cryptocurrency. That’s pretty much the only thing that they all have in common. We’ve already covered USD Coin so let’s get right into the other three:
Bitcoin
Bitcoin (BTC) is a decentralized digital currency not backed by any collateral. Unlike USD Coin tokens backed by the U.S. dollar, the entire value of Bitcoin comes from its limited supply and increasing demand. There is roughly 21 Bitcoin that exist, with only around 17 million in circulation.
The scarcity of Bitcoin is what investors believe will enable the overall value to increase over time. However, as more Bitcoin enters circulation, the scarcity is reduced, and the price will lower.
This is one of the many reasons Bitcoin prices can suddenly fluctuate wildly. While it’s possible to make a lot of money investing in Bitcoin, it's just as likely that you’ll lose a lot.
Ether
Ether (ETH) is a unique type of cryptocurrency because it only operates on the Ethereum network. However, that hasn’t stopped Ether from becoming the second-largest stablecoin in market cap. The only cryptocurrency with a larger market share is Bitcoin which launched six years before Ether.
Bitcoin and Ether function very similarly. It’s just that we use Bitcoin on more than just one network. The main difference between the two is that Ether has no cap, and the total amount is constantly changing based on demand.
As of April 2022, more than 120 million Ether tokens are in active circulation. The lack of scarcity with Ether severely limits its value, so it’s usually several times cheaper than Bitcoin.
Tether
Tether (USDT) is the closest thing to USD Coin on this list because they are both stablecoins. The U.S. dollar backs both, so they hold the same value. Tether is currently the third-largest cryptocurrency on the market behind Bitcoin and Ether.
The main difference between USD Coin and Tether is that USD Coin is considered more transparent and honest. USD Coin releases monthly reports that inform the market about the number of USD Coins in circulation and the dollars backing them up as collateral.
Tether doesn’t offer this information and has been hit with multiple fines over the years due to ethically questionable business practices.
Where Can You Use USD Coin?
USD Coin recently secured agreements with both Visa (December 2020) and Mastercard (July 2021), which can dramatically help it expand. Twitter has also jumped on board the USD Coin train as it recently announced that it would be the first company to test using USD Coin to pay content creators.
USD Coin is a possible alternative to traditional currency because it’s available on a wide variety of blockchains. A cryptocurrency like Ether can only be exchanged on the Ethereum blockchain, but you can use USD Coin tokens on the following blockchains:
- Ethereum
- Solana
- Stellar
- Algorand
- TRON
- Hedera
- Avalanche
- Flow
There are many possibilities for USD Coin since it’s available on all major blockchain networks in the crypto ecosystem. The concept is still very new and constantly evolving, but here is the real-world application of USD Coin:
- Everyday Currency. The vast majority of purchases are made electronically via debit or credit card. You can use USD Coin the same way as the same currency would back it as these cards. It would mainly be beneficial for overseas purchases and payments as there would be no need for the conversion to a different currency.
- Recurring Transactions. There are lots of people that establish regular payments for their rent, subscriptions, or loan payments. The problem with this process is that it will require a third party (i.e., your bank) to initiate the transfer. USD Coin smart contracts could save time and transaction fees by automatically triggering an exchange between two parties without needing a third.
- Migrant Worker Wages. One of the most challenging things for migrant workers is trying to send money back home to their families. Transferring and exchanging currency can be slow, confusing, and expensive. Migrant workers and their families could use digital wallets to exchange USD Coin with very low cost and no price instability.
- Cryptocurrency Exchanges. Many new regulations are passing to get a handle on the cryptocurrency market and protect vulnerable consumers. USD Coin are stablecoins, making them a better trading option than other cryptocurrencies. The government is much more willing to permit USD Coin exchanges than volatile cryptocurrencies such as Bitcoin.
- Currency Stabilization. The value of a currency can plummet during periods of inflation, which can devastate local markets. The cost of essential goods such as food and gas skyrocket, furthering inflation, and everyone suffers. USD Coin can help stabilize these currencies during inflation and prevent economic disaster.
Should You Invest in USD Coin?
Investing in USD Coin isn’t the same as investing in other cryptocurrencies. The values of cryptocurrencies such as Bitcoin and Ether can fluctuate wildly. You could suddenly be up a lot of money, or you could suddenly be down a lot.
Since the value of USD Coin is tied to the U.S. dollar, it will not appreciate or change from whenever you buy it. However, there are still a few ways to make money from buying USD Coin.
It’s possible to make passive income with USD Coin by lending it to borrowers online. It’s tricky to do that on your own, but it’s fairly easy with some help from Yotta. All you’ll have to do is move your money into the Yotta Crypto Bucket.
Your dollars are automatically converted into USD Coin stablecoins and sent to decentralized markets. As a result, you’ll earn an average 4% interest rate on your investment.
There are always risks when it comes to investing your money online. One company that manages USD Coin could go bankrupt, or stablecoin regulations could affect their usage. However, these risks are minimal compared to the risks of other cryptocurrencies.
The Takeaway
USD Coin is arguably the most stable cryptocurrency on the entire market. A U.S. dollar backs every USD Coin that you own, meaning no wild fluctuations in value for better and worse. You’re unlikely to become a millionaire by investing in USD Coin, but you won’t go bankrupt.
On the other hand, there’s a path toward being a millionaire that you can take. Opening a Yotta account and moving your money to the Crypto Bucket will have unique benefits.
The 4% interest rate is already higher than most banks offer, but that’s only the beginning. You’ll receive a ticket for every $10 stored in the Crypto Bucket. So a balance of $100 will get you ten tickets.
These tickets are your path toward becoming a millionaire and enjoying early retirement. It works because you’ll be given your tickets at the beginning of each week. A new number will be drawn every night at 9 PM EST until the final number is drawn on Sunday.
If all seven of your numbers match, you’ll win the $10 million cash prize. Matching a few numbers can get you prizes ranging from a few cents to a few thousand dollars, and even a Tesla Model 3.
All you have to do to enter these weekly drawings is open a Yotta account and move your money to the Crypto Bucket. That’s it—no hidden fees, surcharges, or anything unethical. The worst-case scenario is you don’t win this week, but you’ll always have next week to try again and enjoy a 4% interest rate. You can’t lose!
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