The Value of USDC
When Coinbase announced their USDC token I was surprised. Clearly, this could not be bad news among all the fud around Tether. Something that would certainly work and not have issues will help the market overall.
What I did not understand is why would Coinbase do such a thing?
To that end, I asked the community this question: https://steemit.com/coinbase/@knircky/usdc-explain-the-business-model and some interesting answers popped up.
USDC allows Coinbase to offer more markets
The other day I spoke to a friend in Europe who uses Coinbase. The service is not as nice to use over there as it is here and one of the things different is that the USD market is not available to trade. Likewise I won't be able to trade the EU market or the UK market when I live in US.
My friend showed me how all of a sudden, while he cannot hold USD in his account or trade BTC for USD the BTC to USDC market is available as is the option to hold the USDC token.
All of a sudden the business model makes sense: USDC allows Coinbase to much better offer various markets to all kinds of market participants. We can see this already: when Coinbase added BAT they did not even allow a USD market, but USDC market and BAT to BTC is tradeable.
My guess is that it must be much easier for Coinbase to offer markets globally if they use USDC vs USD from a regulatory perspective. And as a result the business case for creating such a token makes perfect sense: while it is impossible to make money of the token itself, the additional business that it makes possible will justify its efforts.
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Yes, it's also a play on dapps like Augur. Using a stable coin to make prediction markets. I bet crypto to crypto is less regulation for them too. It would also be great to see stable coins in every crypto merchant wallet so they more easily accept crypto for direct payments.
Yes but that would not be something Coinbase profits from. In fact, it would create issues and cost, as if some of these coins would be acquired illegally Coinbase would have to police it and shut down wallets and confiscate coins.
Hence I was confused since Coinbase is not doing things just for the good of the community.
I think without profit to their bottom line they would not have created this.
I believe adding USDC will help open up the Crypto order books, since every alt would have a direct USDC stable coin pair. In the future, I could not imagine a wallet not having stable coins like USDC or Dai.
They are using the 'freemium' model to drive business into their core money making products.
Yep!
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Great informational post sir
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I don't know if Coinbase is going for fractional reserve stunt with this. I mean it's a safe bet for them. The USD supply keeps on inflating. They could sell more USDC and allow more trades to take place and expect those USDC to be worth less and less in the future.
I am pretty sure that is not legal for them to do and does not make sense from a business perspective as well