Stablecoin is a term used to describe cryptocurrencies that are backed by fiat currency or other assets to maintain relatively stable price levels. Stablecoins are one of the most exciting features behind cryptocurrency. They provide a means to store value in cryptocurrencies without necessarily worrying about price volatility that affects other digital currencies.
Stablecoins are becoming increasingly popular as more traders and investors find them attractive for various reasons. In this article, we will look at some of the top stablecoins, their market capitalizations, circulating supply, and what makes each so special. We’ll also take a closer look at how these coins compare against each other, who is using them, and where they might be headed in the future.
Tether is the most popular stablecoin. It was developed by Tether Ltd., a company based in the British Virgin Islands, which issues tokens that are backed by fiat deposits. Each Tether coin is supposedly backed up by one US dollar. The idea behind tether was to facilitate transactions between exchanges with incompatible currencies without having to go through the process of converting from one currency to another at an exchange rate that is not favorable for traders.
The concept of USDT has been successful so far, especially when it comes to trading cryptocurrencies with bitcoin. The value of the coin is known to appreciate or depreciate against the USD in tandem with changes in the price of BTC, which means that an increase in BTC price will result in a decrease in the value of USDT and vice versa. Of all top stablecoins, USDT stable tokens have the highest market cap, meaning that there are many people who trust them to keep their value relatively stable. Therefore, the value of USDT stable coins is expected to rise with increased cryptocurrency adoption.
MakerDao was developed in 2017 as a decentralized cryptocurrency pegged to the US dollar through smart contracts that allow users to lock collateral assets into DAO tokens and generate Ethereum blockchain-based liquid DAO. The idea behind this stablecoin is to maintain price stability against the value of the US dollar without having to use fiat money directly. As such, one unit of Ether has always been trading for around $1, since it’s backed by real dollars held in reserve by MKR holders who are incentivized through an interest rate system called seigniorage shares.
MakerDao has managed to attract very big partners, including Andreessen Horowitz and Polychain Capital. However, despite the success of MakerDao, it has not managed to get significant traction in terms of market capitalization or trading volume. For instance, there are currently less than 1,000 transactions daily. As such, Dai coins have an extremely low market cap of just $50 million, while the total supply is only about $17 million.
This coin is also backed by the US dollar; however; unlike Tether, it does not claim to hold physical dollars in a bank account. It was developed by TrustToken in 2017, an American platform for managing assets that are supported by legal agreements rather than traditional physical assets like real estate or company shares. They allow users to tokenize various types of real-world currencies and assets on the blockchain under one standard called “legal agreements.” TUSD is intended to be used for trading on cryptocurrency exchanges, instead of Tether which is used directly for transactions between users.
TrueUSD’s primary purpose is to provide traders with a fixed price coin that is 100 percent collateralized by USD in a bank account. In other words, 1 TrueUSD is always worth $1 and the coins are redeemable for US dollars at any time. Since its inception, TUSD has been able to attract many traders from Asia who find stablecoins attractive for various reasons. Furthermore, it has not demonstrated extreme volatility like other cryptocurrencies, thereby limiting risk exposure while maximizing gains.
This coin was developed by the Gemini Trust Company and issued on the Ethereum blockchain-based on ERC20. It is also fully collateralized by the US dollar at a one-to-one ratio, so in principle, there should be no difference between GUSD and TUSD. Furthermore, it has been approved and regulated by both the New York State Department of Financial Services (NYSDFS) and the South Dakota Division of Banking.
Gemini’s newest stablecoin was launched just a few weeks ago in early September 2018. However, it has already attracted significant capital from major investors such as Andreessen Horowitz and Paradigm. Moreover, Gemini’s stablecoin has been developed to compete with Tether and TrueUSD, but it is still much smaller than either of them. The best part is that the coin’s fees are much lower than those of both Tether and TrueUSD, due to its decentralized nature.
Paxos Standard is another US dollar coin that was developed by the Paxos Trust Company last year. It has also been approved and regulated by NYSDFS and South Dakota Banking, while its primary purpose is to facilitate transactions on the Ethereum blockchain. The coin operates similarly to TUSD in terms of availability on various exchanges, but it includes additional benefits such as Paxos’ regulatory compliance procedures and established infrastructure for low volatility levels.
The total supply of PAX tokens currently stands at about 65 million units, which makes it one of the largest stablecoins available with a market capitalization of $147 million at press time. Even though the price of one PAX token remains close to $1.00, its daily trading volume is relatively low at only about $7 million.
This is yet another ERC20 token developed by CENTRE, a consortium of cryptocurrency companies led by Circle Internet Financial Ltd., which was partly funded by Goldman Sachs Group Inc… Until recently, USDC was claimed to be fully collateralized with USD held in reserve accounts managed by multiple trust companies that are regulated by the New York State Department of Financial Services (NYSDFS). However, this claim has been debunked by Autonomous research earlier this month.
USD Coin has managed to reach a market capitalization of over $160 million despite the price fluctuations associated with other stable coins. The price of one USDC token remains stable around the $1 mark without experiencing significant volatility like most other cryptocurrencies. Even though its parent company Circle Internet is backed by Goldman Sachs, it doesn’t seem to make a difference in terms of stability which might be attributed to USDC’s recent integration with various fiat currencies (e.g., Euro).
Stablecoins are gradually becoming more popular among cryptocurrency traders because they provide market liquidity while limiting risk exposure due to fluctuations associated with typical cryptocurrencies. The fact that they remain stable, even during extreme market conditions, makes them more valuable among cryptocurrency traders. At this point, it is hard to tell which will be able to hold its position at the top of the market, however, investing in multiple stable coins has proven to be a lucrative strategy. So, in case you didn’t already, it might be a good idea to start diversifying your crypto portfolio with stable coins.