How does cUSDC work?
cUSDC is a decentralized stablecoin that is built on the Ethereum blockchain.
It is an ERC-20 token, meaning it follows the same standards as other Ethereum tokens. cUSDC is a collateralized stablecoin, meaning it is backed by a reserve of other assets, such as USD or ETH. This reserve is held in a smart contract and can be audited by anyone at any time.
The cUSDC token works similarly to other stablecoins, in that its value remains relatively stable against the US Dollar. The value of cUSDC is determined by the amount of collateral held in its reserve. When users deposit USD or ETH into the reserve, they receive an equivalent amount of cUSDC tokens in return.
This process is known as minting and it helps to keep the value of cUSDC stable. When users want to redeem their cUSDC tokens for USD or ETH, they can do so through a process called burning. This process works similarly to minting but in reverse; users send their cUSDC tokens to the smart contract and receive an equivalent amount of USD or ETH in return.
Burning helps to keep the supply of cUSDC tokens limited and ensures that its value remains relatively stable against the US Dollar. Overall, cUSDC works like many other decentralized stablecoins; it is backed by a reserve of assets and its value remains relatively stable against the US Dollar due to minting and burning processes.
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