What is USD Coin: 5 Important Things to Know First

What do you know about cryptocurrencies? If you’re like most people, when you hear that word you immediately think of Bitcoin. It’s no wonder why, either. Bitcoin is the oldest cryptocurrency and by far the most valuable. Since its 2017 boom, it’s been on the minds of many would-be investors.

However, there’s much more to the crypto world than Bitcoin. Another highly valuable cryptocurrency that’s much safer to use and invest in is USD Coin.

If you’re new to cryptocurrencies, you may be wondering, “What is USD Coin?” If that’s the case, then you’re reading the perfect article! In this article, we set out to explain some vital information you need to know about USD Coin before you invest in it.

1. Table of Contents

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   What Is a Stablecoins?

To understand how USD Coin works, first, you need to understand Stablecoins. When people think about cryptocurrencies, they usually think of a Layer 1 Network, such as Bitcoin and Ethereum.

Stablecoins differ from these networks for one straightforward reason: unlike Layer 1 Networks, Stablecoins link to mainstream, or fiat, currencies. Fiat currencies include official, centralized units like the US dollar or the UK pound.

Because of this link, Stablecoins retain a much more consistent value than their Layer 1 counterparts. One of the best Stablecoins on the market is the USD Coin, which is linked to the US dollar.

Don’t misunderstand, though! USD Coins aren’t US dollars themselves. Instead, each unit of USD Coin has a dollar in the Federal Reserve tied to it. Visit this page to learn more.

2. Types of Stablecoins

In learning about Stablecoins, there are three different types to understand. The first type of Stablecoin is centralized collateral custody, of which USD Coin is one. These Stablecoins are full-backed and centralized, unlike decentralized crypto assets like Bitcoin.

These types of Stablecoins function as ways of covering your dollars in a layer of crypto. For every USD Coin that a platform issues, it keeps a US dollar in its bank account. In theory, you could redeem all of your USD Coins for an equal amount of US dollars because of this system.

The other two types of Stablecoins include on-chain collateral custody and seigniorage-style stabilizing models. On-chain collateral custody crypto assets use Ethereum-based assets to leverage collateralized debt, thereby attaining price stability.

Seigniorage-style is the least popular out there, as it uses algorithms to achieve its stability. The problem with this method is that, even though several cryptocurrencies have tried it, none have achieved stability with this method.

Because of this, it’s probably best to stick with centralized collateral custody crypto assets. Of these, you’ll find the USD Coin is the wisest choice.

3. Using USD Coin Coinbase

If you’re wondering how to acquire USD Coin, one of the best places to do so is on Coinbase. Coinbase is one of the most secure online platforms for buying, selling, and storing your various crypto assets.

There are several advantages to using Coinbase. For one thing, they put a strong emphasis on your online security and backing up data. As internet platforms go, it’s fairly safe.

They also offer all the materials you need for playing the cryptocurrency market. They provide a wallet, which is an online place to store your cryptocurrencies, for free. Moreover, they also add exchange and merchant tools for your convenience.

However, if you want to investigate another platform, Circle is the next most reputable out there. Both allow you to buy and sell USD Coins on their platforms, so the one you choose depends on your preference.

4. Converting To and From USD Coin

Since the USD Coin links directly to the US dollar, we’ll assume that the dollar is what you’re converting. Thankfully, converting dollars to USD Coins is a simple process. This is true whether you’re converting on Ethereum, Solana, or Algorand blockchains.

First, purchase your USD Coin either from Coinbase or on the primary market. You can do this by registering an account with the platform, verifying your identity through KYC’s means, and linking to a legit bank account.

Second, send your money to Coinbase’s account. Their minimum amount is two dollars; anyone can afford it. There’s also no maximum amount.

Next, Coinbase will issue you USD Coins in an amount equivalent to what you gave. This should translate to one token per dollar. This transaction is subject to Coinbase’s smart contract, which you’ll sign when you sign up with the platform.

The last thing you need to know is that the money goes directly to your cryptocurrency wallet, which you can find on Coinbase. However, if for some reason you should want another cryptocurrency wallet, others exist on the internet.

If you want some hard cash in your wallet instead of crypto assets in a digital wallet, that’s okay!

You can reverse this process by asking Coinbase to convert your USD Coins back into dollars. Since Coinbase backs up all of its USD Coins with dollars in their reserves, you can receive the money in no time.

5. How to Use USD Coins

There are several ways to use USD Coins. One of the most exciting trends in the market is that banks and businesses are starting to let people use cryptocurrencies to settle transactions.

Most recently, Visa announced that it would accept USD Coins as viable means of settling payments. However, this is not the only way to use USD Coins.

Another popular way to use cryptocurrencies is as a means of passive income. To accomplish this, users simply store their assets in high-yielding interest accounts. There’s also ample opportunity to buy and sell other cryptocurrencies or to make money through crypto lending.

As cryptocurrencies continue to grow in popularity, more possibilities will open for you to use them. As it stands, they’re still worthwhile investments.

Buy USD Coins Today

If you came into this article wondering, “What is USD Coin?” we hope you’ve gotten an answer. Cryptocurrencies are an exciting way to diversify your portfolio, so take advantage of them! Buy some USD Coin today.

We hope you enjoyed this article! For more like it, check out the other articles on our site.