A stablecoin is a cryptocurrency that has a value tied to valuable material. Paper money, oil, silver, gold and other things can be an asset. Due to this attachment, cryptocurrency is less sensitive to fluctuations in exchange rates. Unlike conventional decentralized virtual currencies, stablecoins guarantee more accurate price values and expand trading opportunities.
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Simply put, stablecoins are digital currencies tied to the value of
trust funds Where any other asset.
Ideally, the price of a stablecoin is equal to the cost of the corresponding fiat (e.g. a dollar.)
Stablecoins are considered to be one of the best alternatives that allow you to save profit when trading cryptocurrencies during times of extreme volatility.
However, recently the stable coin market has become quite saturated. Now let’s see which are the best stablecoins.
The 7 best stablecoins
Utopia USD Stablecoin (U USD)
Utopia USD Stablecoin is the first and most secure anonymous stablecoin that guarantees an anonymous and secure payment method. It maintains a 1: 1 parity with the US dollar.
The coin is built on the Utopia serverless peer-to-peer blockchain. The value of the stablecoin is backed by the DAI pledge (it is verifiable and equal to the total volume of USD.)
The coin’s liquidity is taken care of by the ecosystem’s internal crypto exchange, where anyone can quickly convert coins to any currency. The USD maintains price stability within the Utopia ecosystem.
It prevents users from the risk of volatility or instability in the market as a whole. Utopia USD Stablecoin offers anonymous and secure financial transactions, tax-free savings and the lowest commissions in the market.
The Tether advantage is its own platform for working with trust funds using the blockchain system. Before the appearance of new coins in 2018, it held a leading position among the best stable coins. The cost of a coin equals $ 1, but it can sometimes range from 91 cents to over a dollar.
The guarantor is the Bank of Hong Kong, whose accounts contain the funds of the users. The blockchain system is used in its operation.
The management of production, liquidation and demand monitoring is implemented through the Omni Layer protocol. The company provides regular reports on the status of the accounts. The data is compared to blockchain ledgers.
USD coin (USDC)
Recently, the currency USD Coin has appeared in the market thanks to the joint work of two exchanges.
It is based on CENTER technology, which is built on the Ethereum blockchain.
The creators cooperate with financial organizations which regularly provide reports on the state of the MMF.
The creators themselves ensure all control over the functioning of the system. Users can register on the official website. The identification procedure is quick and easy. However, the ability to return funds is only available to customers of US banks.
True USD (TUSD)
The real USD coins appeared in the market in 2018. The stable coin is provided by the dollar in a ratio of 1: 1.
The creators characterize the cryptocurrency as the most manageable and the most independent. Collateral funds are stored in third party storage.
All the money goes to the trusted institution, and the developers do not have access to it and do not participate in the transfer. The creators cooperate with several financial companies at the same time. Publishing takes place using smart contracts at the request of customers.
Digix Gold (DGX)
Digix Gold is a stablecoin backed by physical gold.
Individual tokens are responsible for creating a DGX token in order to preserve the identity of the gold bar linked to it. Proof of Asset (POA) technology is used for security.
It is managed through a smart contract involved in the creation of the DGX token. Any DGX owner can cash their DGX in real physical gold bars according to the specified value. Nearly 200 million DGX tokens are currently available and the stablecoin plans to expand beyond a single repository in Singapore.
What is a Stablecoin?
A stablecoin is a cryptocurrency that has a value tied to valuable material. Paper money, oil, silver, gold and other things can be an asset.
Due to this attachment, cryptocurrency is less sensitive to fluctuations in exchange rates. Unlike conventional decentralized virtual currencies, stablecoins guarantee more accurate price values and expand trading opportunities.
photo by Zlaťáky.cz on Unsplash
Usually, they are “tied” to the price of an asset, for example, 1: 1 fiat currency. In most cases, this is the US dollar, where 1 unit of the coin is equal to $ 1. However, there are stablecoins linked to other currencies, such as Euro, Yuan, or even precious metals or other goods.
The advantage of a coin linked to fiat currency is that it will hold its value regardless of the situation in the crypto market. The mechanism of operation is the same as that of paper money.
At the same time, fiat money works on the basis of laws that
make people accept them at face value. The state is the
guarantor and fixes the price of paper money, regardless of the amount spent on their production.
Benefits of Stablecoins
Stablecoins differ from cryptocurrencies in that they have low volatility
Another difference is that the issuing organization can issue an unlimited amount of the asset, while the cryptocurrency has a limited issue.
Benefits of Stablecoins:
- They have a low level of volatility.
- These assets are provided with real value.
- They can be used to preserve value for a long period of time.
- They are not very dependent on state institutions.
- They help increase the popularity of cryptocurrencies in
Stablecoins are different from cryptocurrencies because they are not that much
exposed to the diagrams of a “pump” (artificial speculative appreciation of a
digital asset price) and “dumping” (the sale of the inflated asset,
lower the price). As a result, stable coins are resistant to
Types of stable coins
The classification of stable cryptocurrencies is based on the method of
their disposition. The price stability of virtual currency can be guaranteed
in these ways:
- Linked to other cryptocurrencies.
- Linked to ordinary money or other valuable goods.
- The cost can be defined when creating the parts.
Below is the list of stable coins with a description of the characteristics of each
This guy is decentralized, but his rate is more stable. This is achieved
thanks to the method of “seigniorage” (seigniorage is an ancient word meaning the right to profit from the minting of metal coins for the State).
The issuance of new coins is directly dependent on the demand for stable coins.
photo by Executive on Unsplash
The main difficulty lies in the process of adjusting the stability of the
change rate. The issuer uses the method of smart contracts, which affects the volume of issuance of stablecoins.
To do this, market demand and supply are taken into account. Such a system is difficult to analyze, and if a crash occurs, the currency cannot be traded. On the other hand, the advantage lies in the absence of collateral.
Supported by another digital currency
This type of stablecoin retains its decentralization. Stability is assured
by the fact that you have to spend much more than other crypto-currencies for the issuance of each coin.
Therefore, stable coins can be easily exchanged and purchases can be paid for. Even if the value changes drastically, the currency is easily liquidated. It is not necessary to involve outside companies in the audit.
Anyone can view data on the status of network accounts. Compared with other types, the exchange rate is less stable.
Secured by fiat currency
The principle of working with such a cryptocurrency is that the user
replenishes the electronic account with ordinary money. Then they are
converted to digital currency at the same price.
After the credit, the funds are transferred to a third party for storage and the stable coins are credited to the user’s wallet account. For this type of coin, the likelihood of price spikes and cybercriminal attacks is the lowest.
The difficulty lies in the fact that a third party is responsible for
system security. To prove its ability to vouch, audits of
accounts are kept constantly.
The reliability of a cryptocurrency depends on the rules and the reputation of its creator, who is responsible for the safety of trust funds. The disadvantages are the search for a repository of guarantees and the involvement of other financial institutions in the audit of the MMF.
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