Cryptocurrencies might seem complicated to the layman investor, but understanding the intricacies of this disruptive asset class might help you generate a passive income stream. For example, you can stake your digital assets, such as the USD Coin (USDC), on several platforms and earn rewards.
The proof-of-stake consensus mechanism has risen in popularity as it is easily scalable and rather inexpensive compared to the energy-intensive proof-of-work mechanism. Via staking, network participants are selected to validate blockchain transactions and earn staking rewards in the process. In order to validate a new block on a network, developers stake their cryptocurrency, which acts as a guarantee to process these transactions.
Let’s see what USDC staking is and which platforms can be used for the same.
What is USDC stablecoin?
USD Coin, primarily known as USDC, is a stablecoin pegged to the U.S. dollar. Each unit of the USDC token is backed by $1, which is held in reserve in a combination of cash as well as short-term U.S. treasury bonds.
The USDC is governed by the Centre consortium, and the cryptocurrency is issued by regulated financial institutions. There are several use cases for the USDC. It provides a safe haven for crypto trades during periods of extreme volatility.
Further, stablecoins can be used to accept payments at a low cost and can even replace traditional payment services such as Visa or Mastercard, which charge a hefty fee to businesses.
Similar to most other cryptocurrencies, developers of the USDC aim to create an ecosystem where the widespread adoption of the token gain rapid pace across crypto wallets, exchanges, and decentralized applications.
While the stablecoin market has become crowded in recent years, the USD Coin is the fourth largest cryptocurrency with a market cap of $51.89 billion, making it the second largest stablecoin globally after Tether.
To ensure the 1:1 dollar-to-USDC peg is maintained, an accounting firm has been employed to ensure cash reserves are adequate and in line with the number of tokens in circulation.
USDC staking overview
Generally, stablecoins maintain their pegs to the underlying currencies through several mechanisms that include centralized debt issuance and algorithmic rebalancing. Every stablecoin has its set of unique risks and advantages. Moreover, they also generate interest rates that are far higher than fiat equivalents through staking.
There is significant demand for lending and borrowing solutions in the crypto world. So, let’s take a look at the top five platforms where USDC staking can help you generate double-digit returns.
Top USDC staking platforms
One of the most popular cryptocurrency platforms, Nexo, offers investors interest rates of up to 12% on USDC tokens. As seen in the below chart, staking your USDC worth $10,000 will help you derive over $2,180 in interest over 24 months. You can also get paid in NEXO Coin, increasing your yield by another 2%.
Nexo claims it offers insurance of up to $375 million, making it a much more secure platform compared to other exchanges. It offers an attractive interest rate while providing users with a user-friendly interface.
Midas.Investments is a custodial platform that offers an 11.6% interest on USDC deposits. Founded in 2018, it has more than $250 million in assets under management as over 10,000 investors earn a daily yield on their crypto deposits.
ZenGo offers users industry-leading biometric encryption, 3-factor authentication, and MPC wallet cryptography, keeping your digital assets and NFTs (non-fungible tokens) extremely safe. You can bid goodbye to manual private keys or hardware wallets that can be stolen or lost easily.
ZenGo offers an annual yield of up to 8% on USDC deposits.
The largest cryptocurrency exchange globally, Binance is a platform used by several investors and traders. You can stake your USDC on Binance and earn annual yields of up to 8%. It launched a savings product for stablecoins back in 2020. Users who subscribed to the savings scheme were rewarded with DeFi token bonuses as well.
A fintech SaaS (software-as-a-service) company that integrates software built on the blockchain and consumer lending, UnFederalReserve is gaining in popularity. Its live DeFi or P2P lending and borrowing platform is called ReserveLending.
The APY on USDC on this platform is just below 6%.
FAQs on USDC staking
Where can I stake USDC?
You can stake USDC on several platforms, such as Binance and Nexo.
Which USD stablecoin is the best?
The top two stablecoins right now are Tether and USD Coin.
Is USDC staking safe?
Similar to other investments, USDC staking also carries certain risks.