Hi knircky,

The coin is based on ethereum and the technology behind it seems to be minimal. Essentially it is just a token that coinbase claims it will redeem at a 1:1 value for USD. It is supposed to be backed at 100% and requires you to trust coinbase.

While it may not sound too great, this actually is nothing new. All of your dollars in the coinbase account are not physical dollars. You already turst that coinbase will pay you out in 'real' dollars when requested. Coinbase dollars are in fact already a trusted asset, a certificate of debt that coinbase promises to pay.

Moving to USDC the only new part is that this promise to pay a debt is no longer in a central coinbase database, but now lives as a token on the ethereum blockchain.

The advantages of this approach are that coinbase does no longer need to keep a highly secure database and that the users get a huge freedom. They can freely transact USDC with everyone, without coinbase being able to interfere. Coinbase only promises that they will eventually redeem these tokens.

The cost to realise this new stablecoin is minimal. Even I could offer my own erc20 token and claim I will back it in physical dollars, the reason I am not doing it is just because nobody would trust me (or maybe I should start it with some friends??).

At this small cost they gain a lot of publicity, more user-freindly solutions and better security in their own system. Even without fees this seem like a good move by coinbase to me. This will almost certainly bring more users and that always means more profits.

Of course they could also try to cheat, issuing more USDC than they have dollar. But they could already try to do that without the USDC existing. Maybe it becomes a little easier now since the USDC can move to other exchanges and there will likely be a larger passive market cap than before.

Furthermore they may try to promote this now at 0% fees but later could always add a small fee to make even more profit.

I personally welcome the addition very much. I will not hold much USDC, but if binnance lists it then I can just use coinbase to convert USD to USDC, send these to binnance and then trade there.