Stablecoins are a less volatile alternative to typical cryptocurrencies.
Stablecoins play an important role in the crypto economy. They are cryptocurrencies that are designed to maintain a steady value pegged to an underlying asset that is more stable, like a national currency. Some of the most popular stablecoins on the market are pegged to the U.S. dollar or a commodity like gold. Given their price stability, stablecoins help relieve some of the volatility that comes with investing in cryptocurrency. Their existence also allows more digital asset trading on crypto exchanges, bringing more liquidity into the crypto market. The market capitalization for stablecoins is about $190 billion and growing, as more investors use them to balance their crypto investment portfolios. Here are seven of the best stablecoins to choose from.
Tether (USDT)
Tether is the world’s first stablecoin and is the most transacted and liquid stablecoin in the crypto market. Tether is the largest stablecoin by market cap, at nearly $83 billion, making it the No. 3 cryptocurrency overall, behind Bitcoin (BTC) and Ethereum‘s Ether (ETH). Tether was founded in 2014 by Brock Pierce, Craig Sellars and Reeve Collins and was originally called Realcoin. The goal of this stablecoin is to keep its value pegged, 1-to-1, to the U.S. dollar. This means you can purchase and redeem one USDT for $1. Many crypto exchanges offer USDT as an alternative to using fiat currencies so investors can make quick trades. Tether has previously been the subject of controversy when it wasn’t able to provide proof that it had enough reserves to back USDT. But according to Tether, the token is 100% backed by reserves that include traditional currency and cash equivalents, which may include other assets and receivables from loans made by Tether or third parties.
Dai (DAI)
Dai, created in 2017, is a stablecoin powered by the Ethereum-based protocol MakerDAO. Like many stablecoins, Dai is correlated to the U.S. dollar, but unlike many stablecoins, Dai can also be pegged to different cryptocurrencies, such as Ether, USD Coin (USDC) and others that can be used as collateral. The multi-collateral option that Dai offers arguably increases Dai’s price stability as a stablecoin. Users can vote for more collateral options in the MakerDao community. Dai’s market cap is more than $9 billion, making it one of the top stablecoins available for users.
Binance USD (BUSD)
BUSD is another U.S. dollar-backed stablecoin, and it is approved by the New York State Department of Financial Services. Users can purchase BUSD 1-to-1 with the U.S. dollar. BUSD was developed via a partnership between Binance, one of the most popular cryptocurrency exchanges, and Paxos, a regulated blockchain infrastructure platform. The goal of Binance USD is to increase the speed at which digital assets flow through the global financial network. BUSD is the native stablecoin of the Binance exchange, where users can easily move in and out of crypto transactions rather than having to wire fiat currency from their online wallet to make crypto trades.
USD Coin (USDC)
Founded in conjunction with cryptocurrency exchange Coinbase Global Inc. (ticker: COIN) and Bitcoin mining company Bitmain Technologies Inc., USDC — like many of the coins included on this stablecoins list — is tied to the U.S. dollar. Released in September 2018, USDC now has a market cap of nearly $50 billion, making it the second-largest stablecoin by that measure. Since its launch, USDC has been used by applications and businesses and runs on many blockchain networks. Many crypto exchanges, online wallets, protocols and other services are integrating USDC into their platforms to facilitate easy payments globally.
TrueUSD (TUSD)
TUSD was the first regulated stablecoin fully backed by U.S. dollars. TUSD operates under a system of regulations because TrustToken Inc. — the exchange that issues TrueUSD — wanted to secure the trust of the cryptocurrency industry by rooting out fraudulent and manipulative schemes. Therefore, TUSD is a relatively transparent coin. It has a market cap of more than $1.3 billion. TrueUSD’s reserves are fully audited by Cohen & Co., a cryptocurrency audit and tax firm. TrustToken doesn’t charge any trading fees on its TUSD coins, which is enticing to many investors, but TrustToken isn’t fully decentralized and users are bound to the standards of the platform. In other words, regulatory actions on the TrustToken platform will affect holders of TUSD.
TerraUSD (UST)
According to the TerraUSD white paper, the goal of this coin is to remain “both price-stable and growth-driven.” TerraUSD’s protocol is stabilized by its own native cryptocurrency, Terra. Terra platform protocols incentivize users to earn extremely low-risk profits when TerraUSD’s price is anything other than $1. By linking TerraUSD to the regular Terra (LUNA) coin and allowing LUNA to be exchanged for either UST or dollars (and vice versa), more UST is created when its price rises above a dollar. The UST pool starts to contract when its price is below a dollar. This give-and-take keeps the price of TerraUSD stable with respect to the dollar. Although it is rated a bit riskier than the likes of Tether and Binance USD, TerraUSD is classified by analysis site InvestorsObserver as a low-risk coin.
Digix Gold Token (DGX)
DGX works differently than the other stablecoins on this list because it is backed by physical assets. More specifically, it’s backed by gold bars. This Digix token is tied to the value of one gram of gold. As gold’s price fluctuates, so does the value of DGX, which makes the cryptocurrency more volatile but also attractive to investors who believe in the power of hard assets. There are roughly 54,600 DGX coins circulating in the market, and the coin’s market cap is just over $2 million.
7 stablecoins to temper volatility in your crypto portfolio:
— Tether (USDT)
— Dai (DAI)
— Binance USD (BUSD)
— USD Coin (USDC)
— TrueUSD (TUSD)
— TerraUSD (UST)
— Digix Gold Token (DGX)
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What Is the Best Stablecoin? 7 to Pick From originally appeared on usnews.com
Update 04/18/22: This story was published at an earlier date and has been updated with new information.
