In the last several years, the cryptocurrency market has seen an emergence of stablecoins. These currencies are supposed to combine the stability of fiat with the technical advantages of digital money.
However, while the basic idea behind them is the same, stablecoins are certainly not created equal. To help you navigate this newly emerging segment of the market, here is a primer on the top ten stablecoins along with their strengths and shortcomings.
The article prepared by TheJingStock.com — Bitcoin OTC Broker
What Are Stablecoins?
In a nutshell, the main purpose of stablecoins is to resist volatility. The cryptocurrency market is in its earliest stage of development, which means, among other things, that prices of coins change dramatically within a short timespan. These changes are due to multiple factors, with some prominent examples including:
- Technological advancements
- Recognition by authorities
- Adoption by services
- Media highlights
- Political events
In the past, volatility has actually played a major role in driving the popularity of cryptocurrencies. However, as time went by, it became clear that it can work both ways, which is not exactly a good thing.
Imagine using a currency that may devaluate in a matter of days — naturally, not something you’d subscribe to if you had a choice. Enter the idea of a stablecoin — an asset whose price remains unchanged, so you can always be sure it’ll worth the same amount you paid for it.
To an extent, this concept defeats the purpose of cryptocurrency (as defined by Bitcoin), yet it is undeniably useful for daily as well as more niche applications like trading.
How to Choose the Best Stablecoin?
When it comes to stablecoins, the market offers multiple options to choose from. However, while nearly identical in stability, their defining feature, upon a closer look, they reveal a lot of differences.
Depending on what you need those coins for, you’ll have a different idea of the best coin for your demands. Broadly speaking, there are three main criteria you might want to consider:
- Technical aspects
So, for instance, daily traders who value transaction speed over long-term stability will be more concerned with technical considerations rather than long-term reliability. Investors, on the other hand, may not care about things under the hood as long as they get their money back, whereas those looking for a convenient payment option would also prefer solutions with decent software support.
A Word on Market Capitalization
Seasoned cryptocurrency enthusiasts have probably noticed the absence of one particularly important aspect on the list — the market capitalization.
The reason for this is simple — when it comes to stablecoins, the market cap doesn’t work the same way as for other cryptos like Bitcoin. “Classic” cryptocurrencies usually have their total amount locked but change their price depending on supply and demand, which is reflected in the market cap.
Stablecoins, on the other hand, have their price locked, so their total capitalization can only change if their total amount is changed. Coincidentally, that is not what you’d want to happen unless the company behind the coin can afford it — otherwise, we’re entering the territory of shady financial operations.
In fact, such it is sometimes considered as the most troubling aspect of stablecoins. So, while you may factor in the market cap, be sure to understand what you are looking at.
Top 10 Stablecoins
Below is a list of the noteworthy stablecoins currently on the market. These were selected based on their general popularity in the media and on cryptocurrency services. However, we did not rank them from worst to best and arranged them alphabetically. As explained above, it is nearly impossible to rank them in a way that would work for everyone.
Instead, we have summarized the reputation, usability, and technical aspects of each coin so that you could make an informed decision based on your expectations.
Binance USD (BUSD)
The BUSD was created by an exchange giant Binance, which should already clue you in regarding its intended purpose. On its native platform, the coin is used for trading, which is more convenient and less restrictive than its fiat alternative.
Binance describes its stablecoin as highly regulated, which, considering the amount of attention to it from financial authorities, sounds trustworthy enough.
In terms of usability, it is something of a mixed bag. Being essentially an asset for exchange, its support by wallets outside Binance is scarce. However, it is really difficult to hold against the coin as it was never meant to become actual money.
The same goes for its technical background — while not state-of-the-art technology, it does what it is expected to do, which is what matters in the end.
Of all the entries on the list, Dai stands out as one of the more interesting ones. Dai is a part of the Maker ecosystem — an organization that maintains a stablecoin’s software platform, which makes Dai a community-managed cryptocurrency. In a truly decentralized manner, it is governed by token holders, which is a huge benefit in terms of reputation.
Dai is supported by numerous platforms and services, from exchanges and governance platforms to games. Moreover, the platform has built-in support for lending funds to receive interest.
While its price is locked to the USD, Dai is not backed by fiat — instead, it leverages the market fluctuations to maintain value and does it in an open manner. In other words, it is a stablecoin that uses the technological potential of cryptocurrencies to provide the desired stability.
EOSDT is the stablecoin based on the EOS platform. While its price is tied to USD, it is backed by cryptocurrency, namely the Equilibrium stability fund, which makes it ultimately transparent.
Perhaps its main strength is technical sophistication. In broad terms, it does everything every other stablecoin can do and more. The EOS network itself is positioned as a successor to Ethereum, so faster transaction speed and more robust technological basis are to be expected. However, because EOS is still less popular than Ether, the support of wallets is limited.
To sum up, this is a promising solution that is yet to reveal its potential.
Gemini Dollar (GUSD)
As its name suggests, Gemini Dollar is created by Gemini, a platform for managing cryptocurrency funds. It’s best described as Internet money — a solution that combines utility with stability, two properties that modern crypto still lacks.
As a part of the Gemini infrastructure, the GUSD is supported by its own wallet and works perfectly for trading, lending, and storage of value — as long as the platform itself satisfies your needs.
The website also lists an impressive number of exchanges and services that support their stablecoin. In this light, Gemini Dollar is among the most accessible cryptocurrencies on the list.
JustStable is a part of the Just Network, which aims at becoming an all-in-one financial solution for everyone. The emphasis of this stablecoin is on accessibility, ease of use, and profitability for users.
USDJ runs on the Tron network, which has its advantages and downsides. On the one hand, Tron is vastly superior to Ethereum technologically, at least according to some experts. On the other hand, it is not supported as well, so, for instance, it is supported by only two wallets.
Overall, as its name suggests, JustStable capitalizes on fairness and freedom, which, together with its exotic technical background, limits its adoption potential for daily use.
Paxos Standard (PAX)
PAX is a stablecoin created by Paxos — a financial institution that specializes in bridging the gap between psychical and digital assets. Paxos Standard is just one of many components of the company’s financial ecosystem.
The website lists more than 150 wallets, exchanges, and OTC desks that support their coin, which ranks it high on usability. Such adoption is partially due to it using the ERC20 protocol.
So, while it does not push the boundaries of technical innovation, the Paxos Standard enjoys considerable financial and regulatory support, making it an attractive choice for organizations involved in banking and commerce.
STASIS EURO (EURS)
This coin stands out from others featured on the list as the only one not being tied to the US dollar. It is the first product by Stasis — a company that aims at connecting traditional finance with the blockchain one. EURS is the first of their products and, being oriented at the European market, is fully compliant with EU financial regulations.
Stasis is backed by funds in Euro held in reserve accounts that are regularly verified by an external party with the possibility of additional verification streams such as on-demand audits.
As a part of a larger ecosystem, Stasis offers its own wallet for managing funds. Overall, it is a promising solution that may well displace other contenders as a reliable daily use payment service.
This coin was unfortunate enough to have a name starting with a T, which sent it to the bottom of the alphabetical list. Make no mistake, however — Tether is one of the leaders in the domain of stablecoins, and one that arguably paved the way for the very idea of stable cryptocurrencies.
Because of its high profile, Tether was subject to controversy in the past, being unable to demonstrate its financial legitimacy and experiencing several technical issues. Nevertheless, it remains available on the market for $1 per coin, which is a reassuring factor in its own right.
Tether is supported by many popular desktop, online, and hardware wallets. It is also used by several high-profile exchanges, including Binance and Huobi, so it is a fairly usable solution.
On a technical level, Tether, like most entries on the list, works on top of existing networks like Ethereum and Omni Layer, making it reliable and easy to implement. Despite some hurdles in the past, it remains among the most trusted and used stablecoin.
Like most currencies on the list, TrueUSD is claimed to be backed by US dollars. Unlike many other entries, it has actually taken measures to demonstrate its trustworthiness. Created by a US-based startup TrustToken, it uses funds held in escrow accounts by trusted third parties. This allows subjecting the company’s financial operations to regular audits.
TrueUSD is powered by the Ethereum network, so it is supported by many wallets with ERC20 support. On top of that, several services accept deposits in TrueUSD, offering generous annual interest rates. The official website lists four such platforms:
As can be seen, TrueUSD has already made its first steps in becoming a trusted stablecoin that is both reliable and actually usable.
USD Coin (USDC)
There is another formidable contestant with a name that sends it to the bottom of the list. USD Coin is developed and maintained by Circle — a consortium formed by several major players in the cryptocurrency market, including Coinbase and Bitmain.
According to the website, the coin is clearly oriented at business adoption and has already succeeded in terms of transparency.
The coin runs on the Ethereum network and is supported by most major wallets that work with ERC20 tokens.
Because it is intended as a business solution rather than an everyday payment option, its usability should be measured based on its smart contract and API support, where it is actually quite competent, claiming to have a full-fledged stablecoin ecosystem behind it. In summary, a promising entry in the corporate segment of the crypto market.
Stablecoins are an attractive concept and the one that is clearly in demand both among people and organizations. Fortunately, there are plenty of solutions on the market to choose from. Some excel at technical sophistication; others provide regulatory compliance and scalability necessary for business adoption. As long as you know what to look for, there are more than enough options that will suit your needs perfectly.