Stablecoin What it Is?
The main criticism, or rather concerns about all cryptocurrencies and their format in general – is firstly, the insane volatility, which can work both in plus and minus. The second is the lack of binding to ordinary reserve assets.
In response, a new type of coin has emerged in the crypto world that offers users greater stability through the introduction of a traditional backup asset management solution. This makes Stablecoin more reliable, and therefore more attractive for those investors who prefer small risks. Additional advantages of the new class of coins are increased security of transfers and high transfer speed.
Stablecoins list
What Stablecoins coins exist and develop in the market, what are their features, differences and advantages? Let's look at the Stablecoins list.
Tether (USDT)
Tether has been on the market for almost 7 years. From the very beginning, it was surprisingly highly appreciated by experts and users. This attitude is still relevant today. This is the absolute recognized leader among this type of coins. However, its advantage is also that it is the 3rd worldwide among all cryptocurrencies. A market cap of $25,382,878,418. 92 increases the degree of reliability in addition to the fact that the coin is backed by external assets. The Tether is pegged to the US dollar in an equivalent ratio. That is, 1 USDT = $1.
The use of USDT is extremely large-scale, because the coin is a link between crypto and the world of traditional money for us: euros, dollars, pounds, pesos, and so on. Therefore, it is used for communication between exchanges of different types of currencies.
Dai (DAI)
If Tether is pegged to fiat money, Dai is backed by an outside asset such as gold, uses smart contracts, and is backed by collateralized debt in cryptocurrency. DAI is created by blocking Ethereum. Many experts believe that at the moment it is the most interesting and promising stablecoin.
To date, Dai ranks 27th in the world ranking, which is also not bad, given the total number of currencies. The market capitalization is $ 1,637,680,304. 66.
DAI is as safe as possible, verifiable, and has huge volumes of turnover. However, there is one difficulty: the inability to exchange the coin for fiat currencies.
Gemini USD (GUSD)
The Gemini USD is not a popular enough coin at the moment, but it was among the first to provide a US dollar asset. And from the very beginning, their main task was to observe the full legality of the currency. And they still manage to stick to it. Of course, the currency is only 487th in the ranking with a capitalization of $16,142,500. 93, but it is a very reliable Stablecoin approved by the US government authorities.
USD Coin (USDC)
USD Coin is the brainchild of the co-founder of the exchange platform Coinbase. This from the very start of the coin in 3018 gave it a powerful start due to the authority of the creators. In addition, the USDC is also backed by the dollar and allows you to quickly and freely exchange for the world's main traditional currencies.
The coin is among the top 20 largest digital currencies in the world and ranks 12th with a market cap of $ 5,784,444,823. 74.
Paxos Standard (PAX)
Paxos Standard is pegged to the US dollar. Remarkably, one of the state departments in the United States accepted the coin as a working one. This coin is very reliable, is available on more than 40 exchanges and is safe.
In terms of ranking among all coins, Paxos Standard is noticeably behind, occupying the 94th line. The market cap is $244,968,439. 19. However, this does not prevent it from taking the first places in every expert Staiblcoins list.
Diem
Diem is a coin that should soon be released on the market. This is a Facebook project, which in advance provides the coin with huge support and popularity. The multibillion-dollar company plans to make several coins, each of which will be tied to different national currencies. In the very near future, we expect the release of Diem dollar.
Most stable cryptocurrency
Pegging to a reserve asset already makes the currency more stable than a conventional cryptocurrency. This means that by choosing any of the coins listed above, you reduce the risks of your deposit.
In the list of Stablecoins, there are 3 main contenders for the title of the most stable:
- Tether has faced serious attempts to destabilize the project, but despite this, it is still on the list of the world's best electronic currencies for many years.
- Dai, which is backed not only by the fiat currency, but also by the most popular precious metal, that is, gold.
- Paxos Standard, which was adopted even by the state departments in the United States.
But why does the price remain stable? Let's get this straight.
Reasons for Price Stability
In a completely new and" different " world of blockchain, there are no familiar financial systems and well-established mechanisms. Cryptomonets are mostly completely open and do not have bodies that would control their value, as is the case with fiat coins. Unnoticed by us, the work of all Central Banks does its job, protecting national currencies from strong jumps and fluctuations in exchange rates.
In a situation where the dollar is falling, the Central Bank intervenes and begins to correct the situation. This can happen, for example, by releasing an additional amount of money into circulation, etc. In addition, fiat currencies are collateralized to traditionally more stable reserves-mainly gold and foreign exchange reserves. Stablecoins brought these systems to the crypto world to add control over the crazy volatility of coins by the standards of "real world" finance.
Non-Collateralized Stablecoins
There are coins that have nothing to do with the usual assets. And when the coins are not backed by any external reserve, how can they relate to the amount of Staiblecoin? As we have already written, like fiat money, cryptocurrencies can have a control mechanism that can intervene and adjust the exchange rate when the exchange rate fluctuates. A kind of Central bank in the world of digital finance.
Such systems can operate independently. More precisely, they already operate on the basis of several cryptocurrencies. For example, depending on the demand for coins, Basecoin reduces or reduces their number in the market, thereby regulating the value of the token.
Crypto-Collateralized Stablecoins
It is important to note that some Stablecoins are linked in this way to other cryptocurrencies. More specifically, they are backed by other, usually more well-known and weighty coins that have proven themselves well. And it is also a good mechanism for price stabilization.
Risk minimization also occurs through regular checks, and a reserve of a much larger number of other tokens is responsible for one issued Stablecoin. As it roughly happens in numbers: to secure $500 worth of Staiblcoins, the counterparty reserves about $ 1 000 in bitcoins for them.
FAQ
How to buy Stablecoin?
Stablecoin, like any other digital currency, can be purchased on a crypto exchange. There is no problem with this, as most Staiblecoins are available on the main platforms for purchase and exchange. The easiest and safest way is to switch to an exchange Godex.io, select the currency you are interested in and make an exchange for it with another cryptocurrency that is in your wallet.
Do stablecoins have any drawbacks?
Of course, it looks like Stablecoins are improved versions of the usual digital currencies, but it is worth considering coins from all sides. There are several significant disadvantages that need to be mentioned.
First, of course, the exchange rate of the euro, dollar, yuan, and even the value of gold is much less volatile than the cryptocurrency, but this doesn't provide a 100% guarantee of the stability of funds. When the reserve value fluctuates, it instantly affects the price of Collateralized Coins.
The second point: if the cryptocurrency is open source, then the reserve remains "on the conscience" of the intermediary. At the moment, there is no way to check whether the coins you bought are actually physically backed up by the promised resources.
The third point: control by counterparties adds risks that are often realized in traditional monetary systems. Owners of Stablecoins get the opportunity to be left without funds, as they can be frozen (legally), and transactions are interrupted. Including by order of the authorities.
This is the main criticism that almost every coin from the Stablecoins list receives.
What are the most popular Stablecoins?
Today, the main resonance in the world is caused by the yet-to-be-released Diem coin from Facebook. It not only attracted a huge amount of attention from users. It is rumored to have encouraged China to develop its own electronic coins.
Apart from the rising star, USDT, DAI and PAX remain the main players in the market.