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USD Coin (USDC) is a leading stablecoin that ties its value to the U.S. dollar. It was created by the Centre Consortium and is backed by cash and short-term U.S. government bonds. Every USDC is always backed by an equivalent amount of cash or cash equivalent, and Circle, the company behind USDC, provides reports every month to prove this.
The money backing USDC is held by big financial institutions in the U.S., like BlackRock and BNY Mellon. This makes USDC like a “digital dollar.” Since USDC is a digital asset, it can be used on the internet for all kinds of transactions, just like fiat currency.
USDC makes sending money across the world super fast, helps protect against the ups and downs of other cryptocurrencies, and makes it easier for traditional online businesses (Web2) to connect with blockchain-based systems (Web3). A popular way to use USDC tokens is to earn interest through staking.
The word "staking" can mean different things in the crypto world. At first, staking meant putting your crypto assets, like those on Cardano and Ethereum, as collateral to help secure a blockchain network. People who staked their assets would help verify transactions on the network and get paid as a reward. Over time, people started using "staking" to also mean earning interest on any crypto asset, like stablecoins or altcoins.
There are different ways to earn interest when you stake USDC. Some methods include lending and borrowing, market making, or locking your USDC holdings on crypto exchanges that offer yield.
However, putting your USDC on centralized exchanges can be risky because the yield might not be sustainable. We've seen some platforms, like Celsius and Voyager, collapse because of this. Even big crypto market companies like Circle and Coinbase, which are centralized, carry some risks.
Because of the risks, many users have moved to decentralized finance (DeFi) spaces where things are more transparent and often safer. The first option for staking USDC is through Coinbase, which is tied to the Centre Consortium. This method is considered pretty safe since you're staking directly with the issuers of USDC.
Other than centralized platforms, you can also stake USDC on DeFi protocols. In Web3, anyone can create a smart contract application, leading to many new ways to earn yield, like smart contract-based lending, decentralized exchanges, and yield aggregators.
However, you should be cautious because some of these smart contracts could be programmed with bad intentions. They could have hidden backdoors that let the creator steal the deposited assets. Even if the contract wasn’t created to be harmful, bugs and security flaws could still be exploited by hackers.
Over time, certain DeFi protocols have proven to be safe through many live tests. These protocols, known as DeFi blue-chips, have resisted hacking attempts despite holding billions of dollars in assets. Some examples of these trusted protocols include Curve, Aave, Convex, Uniswap, and Compound, which you can use to earn yield on USDC.
Though not everyone has access to Coinbase Earn, the USDC interest rate on it currently sits at 5.2% APR.
A list of DeFi USDC staking rates on respective platforms is expanded upon below, summarizing their attributes and methods of generating yield.
Aave is a platform that lets people lend and borrow crypto, and it was launched in January 2020 on Ethereum. When people lend USDC on Aave, they earn a variable 3.2% interest rate. The APY users earn for lending on Aave varies with market demand.
Compound was the first platform to create the model used by many other lending protocols today. Although Aave has become more popular, Compound is still seen as one of the strongest lending platforms in DeFi, offering around 3.4% APR for USDC lenders. Additionally, users earn can earn rewards in COMP tokens, which is the platform’s native token.
Curve is a decentralized exchange that uses an automated market maker (AMM) to facilitate trading. Users can provide liquidity to the protocol and earn trading fees along with CRV rewards. However, you can't just deposit USDC; you need to provide liquidity for a trading pair, like the USDC, DAI, and USDT pool, which currently offers around 1.9% yield.
Origin Dollar (OUSD) earns boosted yield while using the same battle-tested applications that earn between 4% to 10% APY on stablecoins. Origin Dollar is fully collateralized, doesn’t take on any leverage, and is completely liquid at all times. The enhanced APY comes from optimizing stablecoins between the most lucrative DeFi strategies.
We have established that DeFi staking is preferred over staking on centralized platforms due to its transparency and sustainability. On the other hand, DeFi yields are highly variable and can change over time. Stakers would have to spend time and transaction fees to switch protocols and optimize yields for themselves.
Instead of doing all that work, users can simply acquire OUSD, which helps users passively generate the best DeFi yields.
OUSD is a yield-bearing stablecoin that employs various DeFi strategies to earn enhanced yields. These strategies are built on top of DeFi protocols and chosen by the OGN DAO. Integrated protocols include Aave, Morpho, Curve, and Convex.
Due to the efficiency of OUSD’s strategies, holders have been enjoying yields between 7-9% APY. All of OUSD’s strategies and stablecoin reserves can be viewed on-chain, ensuring holders feel assets are safe.
Furthermore, OUSD does not require staking or lock ups, sending yield directly into users’ wallets. Like a high interest savings account, users remain completely liquid while earning the best risk-adjusted yields via DeFi.
OUSD can be bought through exchanges such as Uniswap, Kucoin, or Gate, or directly. A Web3 wallet is required to hold OUSD, and if storing more than $1000 worth of assets, it is generally recommended to use a hardware wallet like a Ledger.
What are the safest platforms to stake USDC for earning interest?
The safest platforms to stake USDC are reputable DeFi protocols such as Aave, Compound, and Curve. They’re known for their robust security measures and transparent operations. OUSD also offers a passive income model by automatically rebalancing between DeFi strategies for optimal yield.
How does USDC staking compare to traditional banking savings accounts?
USDC staking offers significantly higher interest rates compared to traditional banking savings accounts. Platforms like Aave and Compound provide rates from 2% to 4% APR. Plus, USDC staking in DeFi can be more transparent and flexible. It allows users to withdraw or reallocate funds without the typical banking restrictions.
What are the risks involved in USDC staking and how can I mitigate them?
The primary risks in USDC staking include smart contract vulnerabilities and liquidity issues on certain platforms. To mitigate these risks, choose established DeFi protocols with a strong track record and continuous audits. Diversifying across several reliable platforms can also reduce potential losses.
