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In simple terms, stablecoins are digital currencies tied to the value of
fiat funds or any other asset.
fiat funds or any other asset.
Ideally, the price of a stablecoin is equal to the cost of the corresponding fiat (for example, one dollar.)
Stablecoins are considered one of the best alternatives that allow you to save profits when trading cryptocurrencies during periods of extreme volatility.
However, recently the stablecoin market has become quite saturated. Let’s move on to find out what the top stablecoins are.
The best stablecoins:
The Utopia USD Stablecoin is the first anonymous and the safest stablecoin that ensures an anonymous and secure payment method. It maintains a 1:1 parity with the U.S. dollar.
The coin is built on the serverless Utopia peer-to-peer blockchain. The value of the stablecoin is supported by the pledge of DAI (it is verifiable and equal to the total volume of USD.)
The coin’s liquidity is supported by the internal crypto exchange of the ecosystem, where everyone can quickly convert coins into any currency. USD maintains price stability within the Utopia ecosystem.
It saves users from the risk of volatility or the instability of the market as a whole. The Utopia USD Stablecoin provides anonymous and secure financial transactions, tax-free savings, and the lowest commissions on the market.
Tether (USDT)
The Tether advantage is its own platform for working with fiat funds using the blockchain system. Before the appearance of new coins in 2018, it occupied a leading position among the best stablecoins. The cost of a coin is equal to $1, but sometimes it can vary from 91 cents to above a dollar.
The guarantor is the Bank of Hong Kong, whose accounts hold user funds. The blockchain system is used in its operation.
The management of output, liquidation, and demand tracking is implemented through the Omni Layer protocol. The company regularly provides reports on the status of accounts. The data is compared with blockchain registries.
USD Coin (USDC)
Recently, the USD Coin currency has appeared on the market due to the joint work of two exchanges.
It is based on the CENTRE technology, which is built on the Ethereum blockchain.
The creators cooperate with financial organizations that regularly provide reports on the state of the monetary fund.
The creators themselves provide all control over the functioning of the system. Users can register on the official website. The identification procedure is simple and quick. However, the ability to return funds is available only for customers of U.S. banks.
True USD (TUSD)
True USD coins appeared on the market in 2018. The stablecoin is provided by the dollar in a ratio of 1:1.
The creators characterize the cryptocurrency as the most manageable and independent. Collateral funds are stored in third-party storage.
All the money goes to the trust 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 once. The release 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 to preserve the identity of the gold bullion linked to it. The 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 out their DGX in real physical gold bars according to the specified value. Almost 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 value which is tied to valuable material. Paper money, oil, silver, gold, and other things can act as an asset.
Due to this attachment, the cryptocurrency is less susceptible to exchange rate fluctuations. Unlike conventional, decentralized virtual currencies, stablecoins guarantee more accurate price values and expand business opportunities.
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Usually, they are "tied" to the price of an asset, for example, to a 1:1 fiat currency. In most cases, this is the U.S. dollar, where 1 unit of the coin is equal to $1. However, there are stablecoins tied to other currencies, such as the euro, yuan, or even to precious metals or other goods.
The advantage of a coin tied to a fiat currency is that it will retain 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, fiduciary (fiat) money functions based on laws that
oblige people to accept them according to face value. The state is the
guarantor and sets the price of paper money, regardless of how much money was spent on their production.
oblige people to accept them according to face value. The state is the
guarantor and sets the price of paper money, regardless of how much money was spent on their production.
Benefits of Stablecoins
Stablecoins differ from cryptocurrencies in that they have a low volatility
index.
index.
Another difference is that the issuing organization can issue an unlimited amount of the asset, while cryptocurrency has a limited issue.
Advantages of Stablecoins:
- They have a low level of volatility.
- Such assets are provided with real value.
- They can be used to preserve value for a long period of time.
- They have a low level of dependence on state institutions.
- They contribute to increasing the popularity of cryptocurrencies in
general.
Stablecoins differ from cryptocurrencies because they are not so much
exposed to the schemes of a “pump” (artificial speculative appreciation of a
digital asset’s price) and “dump” (the selling off of the inflated asset,
lowering the price). As a result, stablecoins are resistant to financial
collapses.
exposed to the schemes of a “pump” (artificial speculative appreciation of a
digital asset’s price) and “dump” (the selling off of the inflated asset,
lowering the price). As a result, stablecoins are resistant to financial
collapses.
Types of Stablecoins
The classification of stable cryptocurrencies is based on the method of
their provision. The stability of the virtual currency price can be guaranteed
in these ways:
their provision. The stability of the virtual currency price can be guaranteed
in these ways:
- Pegged to other cryptocurrencies.
- Pegged to ordinary money or other valuable assets.
- The cost can be set when creating the coins.
Below is the stablecoin list with a description of the features of each
type:
type:
Unsecured Stablecoins
This type is decentralized, but its rate is more stable. This is achieved
thanks to the “seigniorage” method (seigniorage is an old word meaning the right to make a profit from minting metal coins for the state).
The issue of new coins directly depends on the demand for stablecoins.
thanks to the “seigniorage” method (seigniorage is an old word meaning the right to make a profit from minting metal coins for the state).
The issue of new coins directly depends on the demand for stablecoins.
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The main difficulty lies in the process of adjusting the stability of the
exchange rate. The issuer uses the method of smart contracts, which affects the volume of issuance of stablecoins.
exchange rate. The issuer uses the method of smart contracts, which affects the volume of issuance of stablecoins.
To do this, the demand and supply in the market are taken into account. Such a system is challenging to analyze, and if a crash occurs, the currency cannot be exchanged. On the other hand, the advantage lies in the absence of collateral.
Backed by Another Digital Currency
This type of stablecoin retains its decentralization. Stability is ensured
by the fact that it is necessary to spend much more than other cryptocurrencies on the issue of each coin.
by the fact that it is necessary to spend much more than other cryptocurrencies on the issue of each coin.
Therefore, stablecoins can be easily exchanged and purchases can be paid for. Even if the value changes dramatically, the currency is easily liquidated. There is no need to involve outside companies in the audit.
Anyone can view data on the status of accounts in the network. Compared to other types, the exchange rate is less stable.
Secured by Fiduciary Money
The principle of working with such a cryptocurrency is that the user
replenishes the electronic account with ordinary money. Then, they are
converted into digital currency at the same price.
replenishes the electronic account with ordinary money. Then, they are
converted into digital currency at the same price.
After credit, the funds are transferred to a third party for storage, and the stablecoins are credited to the user's wallet account. For this type of coin, the probability of price spikes and attacks from cybercriminals is the smallest.
The difficulty lies in the fact that a third party is responsible for the
safety of the system. To prove its ability to act as a guarantor, audits of
accounts are constantly carried out.
safety of the system. To prove its ability to act as a guarantor, audits of
accounts are constantly carried out.
The reliability of a cryptocurrency depends on the rules and the reputation of its creator, which is responsible for the safety of fiat funds. The disadvantages are the search for a repository for collateral and the involvement of other financial institutions in auditing the monetary fund.