It is undeniable that USDC and Circle have come a long way this year.
The market value of USDC has risen from more than 4 billion US dollars to nearly 25 billion US dollars within half a year, accounting for one-third of the stable currency market.
Not long ago, USDC was issued on the TRON chain, and according to Circle’s plan for USDC this year, it will be expanded to 10 new chains.
Today, another big news was released, Circle will be listed through Concord Acquisition Corp (NYSE: CND), which is a public special purpose acquisition company (SPAC). After the listing, Circle's valuation will reach 4.5 billion US dollars.
From its founding in 2013, to focusing on the cryptocurrency market in 2016, and then launching the USD stable currency USDC,With the advantage of "compliance", Circle is advancing all the way。
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1. The attack of Circle and USDC
The issuer of USDC is Circle, and its operation depends on the CENTER Alliance.
Circle was founded in Boston in 2013. It is also known as "American Alipay" because it has a product that provides legal currency transfer services, Circle Pay.
Since 2016, Circle has focused on developing the cryptocurrency market.
In 2018, Circle's USD stablecoin USDC was officially launched.
The company's D and E rounds of financing attracted the participation of Bitmain, IDG Capital, Baidu, Everbright Group, Wanxiang Blockchain and CICC.Strong background of Chinese capital。
The principle of USDC casting is: for every dollar deposited in cash, 1 USDC will be minted. If USDC is redeemed for cash dollars, one USDC will be destroyed accordingly. In other words, the minting process of USDC is similar to paper money during the gold standard period: the upper limit of USDC coinage is the total supply of USD.
It seems to be the same thing as USDT, but Tether and Bitfinex behind USDT are often questioned and criticized because of issues such as compliance and opaque reserves; USDC is out of the circle quickly because of "compliance".
Entering 2021, Circle's layout is getting faster and faster, and it is likely to surpass USDT.
On January 1, the market value of USDC was only more than 4 billion US dollars, accounting for less than one-third of USDT.
On January 26, Circle accounts and API services officially began supporting USDC on the Solana blockchain.
On January 27, Circle launched a new API that enables seamless two-way transfers between USDC and USD through the Automated Clearing House (ACH).
On March 20, the market value of USDC exceeded 10 billion US dollars for the first time, and the stable currency market accounted for nearly a quarter。
On March 25, Circle announced a payment solution for NFT marketplaces and vendors.
Thereafter,
Thereafter,USDC's market capitalization began to reach half of that of USDT。
On May 12, former McKinsey CFO Jeremy Fox-Geen joined Circle as CFO.
On May 25, after the currency market plummeted, the market value of USDC rose to 20 billion US dollars.
On May 29, the market released news that Circle may go public through a SPAC backdoor.
On May 31, Circle announced that it had raised $440 million. Funds raised will be used to expand into new markets and grow the Circle team.
Launched on June 10, Circle Yield for institutions is now an early access version of the Coinbase Savings Program.
On June 22, the market value of USDC accounted for more than one-third of the stablecoin market.
On June 29, Compound launched Treasury, which supports USDC savings.
On June 30, Coinbase launched USDC savings service.
On July 1st, USDC was issued on the TRON chain, and the circulation on that day exceeded 100 million.
By the end of last year, USDC had expanded from Ethereum to Stellar, Solana, and Algorand. Recently, Circle announced that it will continue to expand to ten blockchains including Tron, Polkadot, and Celo.
As of this writing,The market value of USDC has reached 24.794 billion US dollars, accounting for 33.42% of the stable currency market, which is very close to 38.96% of USDT。
Circle said at the beginning that it would create a "programmable currency", stating on the official website:
"Our mission is to rebuild the basic block of the entire macro economy. We want to redefine the essence of currency and subvert everyone's understanding of value exchange, so we launched a programmable digital currency. Thanks to the blockchain, the economic system will become It is more intelligent, interconnected, flexible and efficient, capable of instant response and global connectivity, compared with better security and privacy.”
Initially, the Circle Group tried many business types of cryptocurrencies. Exchanges, wallets, payments, and investment banks all made bets, perhaps paving the way for USDC.
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2. Overtake USDT?
USDC is not the only or the earliest stable currency, but it can be regarded as the most compliant stable currency in the cryptocurrency industry, and it has gained considerable attention this year.
Launched in 2014, USDT was four years earlier than USDC, capturing the most important early window for cryptocurrencies. For a long time, USDT was the only USD stablecoin in the market. It was not until the birth of TrueUSD in March 2018 that the monopoly was broken.
TrueUSD once shared the world equally with USDT, and even surpassed USDT for a long period of time in 2018, becoming the leader in the stablecoin market.
Earlier this year, after New York prosecutors sued TEDA, Bitfinex and Tether reached a settlement with the New York State Attorney General (NYAG) office by paying $18.5 million, ending the legal dispute that began in mid-2019.
But the market is still worried about USDT. USDT has a first-mover advantage, but the risk of thunderstorms is also well known.
USDC surpassed USDT, and it happened in history. At that time, USDC had just been launched, and its development momentum was very fierce. In Q1 of 2019, it even surpassed TrueUSD to become the leader of the stable currency, with a market value more than five times that of USDT.
In the past two years, the stablecoin market has grown exponentially, and competing products have become more diverse.secondary title。
1. Compliance license
The "compliance" of USDC seems to be very attractive. When the investment research platform Blockfer compared USDT and USDC, it expressed a clear tendency: the total score is 10 points. Due to non-compliance, USDT only has 5 points, and USDC can There are 9.5 points.
In fact, in the past year, USDC has been used more and more widely, and its liquidity is already very close to that of USDT. Blockfer gave USDT a score of 9.5, but USDC was only 0.5 lower.
Obviously, the weakness of USDT is the advantage of USDC. USDC is "strong in liquidity, open and transparent, easy to use, trustworthy, low in fees, and high in security."
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2. Free and flexible redemption
Compared with USDT using the Omni chain, USDC was issued on the Ethereum chain from the beginning, and everyone can supervise the process of casting, circulation and trading, and can be easily transferred to a personal encrypted wallet.
However, the real advantage of USDC is not in the chain, but in the interaction between the chain and the chain.
Most retail investors buy and sell USDT through over-the-counter transactions, so they may rarely pay attention to the "redemption" conditions.
In fact, the operation on the OTC platform belongs to the secondary market, which will affect the price to a certain extent, but will not shake the supply.
In the primary market, if USDT is to be redeemed into USD, a minimum amount of USD 100,000 must be met. This is why USDT has higher liquidity - most people can only transfer ownership of stablecoins in the secondary market.
As for USDC, as long as you have a Circle account, you can directly exchange it back to USD at a ratio of 1:1. Correspondingly, USDC will be destroyed and the supply will be reduced. The overall management is similar to an open-end fund, which is more flexible.
Of course, since all countries have certain foreign exchange controls, whether it is USDT or USDC, there are very few people who actually "redeem" and most of them are directly "transferred" off-site to exchange for domestic legal tender. But at least, the flexibility of USDC is a signal that cannot be ignored.
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3. The ecosystem continues to expand
At present, USDC has been listed on multiple exchanges, and its liquidity is second only to USDT.
In the promotion of USDC, the role in cross-border transfers is also particularly emphasized.
In addition to being used as a payment method for cryptocurrency transactions on the chain, USDC can also be used for real-world transactions.
In March of this year, Visa announced that it would allow the use of USDC for transaction settlement on its payment network, and cooperated with digital asset bank Anchorage to complete the first transaction: Crypto.com transferred USDC to Visa's Ethereum address in Anchorage.
Not long ago, the cigar store UndergroundCigars also announced that customers can use USDC to purchase cigars in the store.
To promote USDC, Circle even partnered with Compound and Coinbase to launch a 4% APY savings plan. Compared with the 0.05% APY of traditional banks, this interest rate is very attractive. If it is on a DeFi platform, the rate of return can reach 8% or even higher.
On June 30, the Coindesk TV channel First Mover interviewed Circle CEO Jeremy Allaire. At that time, Allaire was quite confident in the development of USDC.
It is generally believed that if the United States releases digital legal currency, it will have a huge impact on USDC. However, he feels that it is precisely because of the active participation of the private sector that USDC has developed well, so there is no need for the United States to issue a digital legal currency (CBDC).
This point is also recognized by the U.S. government. At the end of June this year, at the annual meeting of the Utah Bankers Association in the United States, Randal K. Quarles, vice chairman of the Federal Reserve Supervision, mentioned in a speech that "stable coins in the private sector may facilitate faster and cheaper cross-border payments", and To launch a CBDC, it is necessary to consider anti-attack and increase the speed of small transfers. The cost and risk are higher than the potential benefits.
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3. Is "compliance" worthy of full trust?
Compliance belongs to compliance. For USDC, this is both an advantage and a disadvantage.secondary title
1. Whose property is it?
The casting and operation and maintenance of USDC all rely on Circle. This means that user assets may be frozen or confiscated by Circle at any time on the grounds of "violation of regulatory regulations" or "illegal activities".
KYC is required for purchase and redemption. Users have to hand over all their identity information to Circle, which is not a good thing for people who value privacy.
Although USDC is minted on Ethereum, the CENTER alliance behind it has built a very special blacklist. If you appear on this blacklist, congratulations, the assets inside will be "completely and never recoverable". USDC can neither be transferred out nor transferred in. In other words, there is no difference between the USDC "wallet" and the wallet of the exchange.
On June 16 last year, CENTER activated the blacklist function for the first time, blocking 100,000 USDC from an address. At that time, this program was opened by the address 0x5dB0115f3B72d19cEa34dD697cf412Ff86dc7E1b controlled by CENTER.
The Block did some research when reporting and found that the frozen address was banned because it was suspected of stealing other people's tokens. CENTER said that the assets were frozen at the request of "relevant departments", but it never responded to which department, who requested the freezing, and what legal basis it had.
On April 23 this year, CENTER froze 7 more addresses, the largest of which contained more than 1,700 ETH。
Judging from the code, it can be frozen or unfrozen. But if this is the case, it seems that there is a problem with the saying that the USDC freeze is "unrecoverable". And CENTER has never mentioned or enabled the function of unfreezing. All in all, on the issue of freezing assets, the issuer of USDC has been vague and has not responded positively to questions.
As we all know, the U.S. government likes to impose sanctions, and the most famous method is to freeze bank assets. This seems to be inconsistent with the admiration of property rights in the American Declaration of Independence, but as long as it is a centralized entity, this problem cannot be avoided.
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2. Why is the audit report not on time?
By convention, Circle should issue an audit report within half a month after the end of each natural month to disclose the US dollar cash reserves to users. But recently, it takes two months to see the monthly audit report. The latest audit report is the April report released in June.
In fact, the audit process is not as complicated as imagined. Paxos and Gemini were released very slowly, but within a month; TrueUSD can provide audit results in real time 7*24.In contrast, USDC's "compliance audit" seems a bit slow.
Moreover, careful investors will definitely find many interesting details when they read the accounting reports.
For example, in two recent reports,Specific dollar reserve figures are no longer published, replaced by an intriguing formula:
“As of the publication of this report, the amount of Circle’s U.S. dollar cash in custody at third-party banks,Greater than or equal to the number of issued USDC。”
This year's USDC has indeed developed rapidly, but it also faces problems similar to USDT in terms of "compliance".
For example, Doomberg analysts based on the market capitalization data in Coinmarketcap and superimposed the release time of the audit report, and found that the months of delay in the release of the audit report coincided with the time when USDC was issued in large quantities. Lenovo, is there really enough US dollar support behind the additional issuance?
Another concern is what Circle does with the dollars entrusted by users after receiving them. After all, $25 billion is not a small amount.
From the start, Circle promised full custody of its cash reserves. However, during the epidemic period from March to April last year, when Bitcoin fell by 50%, Circle changed the content of the terms and became:
"The amount of U.S. dollars in custody, which refers to Circle's cash held in banks in the United States participating in the Federal Deposit Insurance Program, and 'approved investments' made on behalf of USDC holders, as of the date of this audit report, records The amount of dollars on the balance sheet."
Circle said it was used to make "approved investments", but it never stated in the audit report what exactly it invested in。
Coindesk conducted an analysis based on Circle’s 44-state policy for obtaining a banking license:
The ideal is that Circle invests in government bonds or money market mutual funds in Texas, where the regulations are stricter, and its assets are relatively safe; however, if it is in Pennsylvania and New Hampshire, which are looser, Circle will not be subject to any restrictions.
Retail investors who are used to OTC may not be too sensitive, but it is different for large position holders. They have to buy and redeem in the primary market. If Circle’s investment fails, it means that the balance of USD reserves corresponding to USDC will actually be broken, USDC will depreciate sharply, and investors will be hurt in the end.
