USD Coin (USDC -0.01%) is a digital dollar. It falls into the category of stablecoins, which are cryptocurrencies pegged to another asset. In USD Coin's case, the asset is the U.S. dollar, and one USDC is designed to maintain a value of $1.
Although stablecoins aren't investments, they have a variety of other uses, and you can often earn generous interest rates on them. Since its launch, USD Coin even became one of the largest stablecoins in the world and even became the first cryptocurrency selected for settling Visa (V +0.84%) transactions.
In this USD Coin guide, we'll explain how it works and how to decide if you should buy it.
What makes USD Coin unique?
In terms of functionality, U.S. dollar stablecoins essentially all offer the same thing. They aim to maintain a value of $1, and they work like any other digital currency so they can be transferred between crypto wallet addresses.
Blockchain
Can I make passive income with USD Coin?
You can make passive income with USD Coin by lending it, and that's one of the reasons investors buy it. There are several crypto lending programs available that will pay you interest for lending your crypto. Gemini and CoinLoan are among the platforms that support USD Coin lending and offer competitive interest rates.
Since these are lending programs, they're not risk-free. There is the possibility of losing funds if borrowers default on their loans or if the lending platform goes through financial difficulties. Lending platform Celsius is a cautionary tale here. It halted withdrawals in 2022, and then filed bankruptcy, leaving users without access to the crypto they had deposited.
Another popular option is USD Coin staking on decentralized crypto exchanges. Most of these platforms allow you to deposit an equal amount of USD Coin and another cryptocurrency into liquidity pools that are used to facilitate crypto trading. This passive income method carries much greater risk, but you could earn a larger return.
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