$USDC provides a fully collateralized US dollar stablecoin based on the open-source asset-backed stablecoin framework developed by Centre, an independent, member-based consortium founded by Coinbase and Circle in 2018.
As crypto assets have grown in importance and adoption, it’s become vital to be able to use fiat currencies for payments and trading. A price-stable currency such as the US dollar (and similar stable currencies such as EUR, GBP, JPY, RMB, etc.) is critical for enabling mainstream adoption of blockchain technology for payments, as well as to support maturation in financial contracts built on smart contract platforms, such as tokenized securities, loans, and property.
Existing approaches have lacked financial and operational transparency, have operated in unregulated offshore jurisdictions with unknown banking and audit partners, and have been built as closed-loop ecosystems and closed-source technologies.
USDC solves these problems by offering a solution with detailed financial and operational transparency, operating within the regulated framework of US money transmission laws with established banking partners and auditors, and is built on an open source framework with an open membership scheme that eligible financial institutions can participate in.
Circle started as a peer-to-peer payments technology company. It was founded by Jeremy Allaire and Sean Neville in October 2013.
At a high level, customers who onboard through a $USDC issuer can transfer funds into the system; the issuer then executes a series of commands with the Centre network to verify, mint, and validate $USDC tokens, and the customer can transfer those tokens elsewhere as they see fit (subject to the token’s compliance controls).
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.