Talk about an exciting crypto type is what got me to writing this article.
The USP of this type of crypto is that unlike others, it is stable in its price. Strange, right?
Stable in the sense that its value in USD or EUR doesn’t fluctuate like Bitcoin and Ethereum.
But there is more to it.
Stablecoins are a new genre of cryptocurrencies which weren’t thought of or were not possible before. And now, after 10 years of the launch of first successful cryptocurrency Bitcoin, you have a plethora of options to choose amongst stablecoins.
Stablecoins, as we discussed earlier, are of three types. I am not going to get into detail again, but I will leave you with the link to my previous article: What are StableCoins
The year 2020 saw increased adoption of stable coins as it has immune to high volatility of Bitcoin, Ethereum and now there are services that let you earn interest on these stable coins.
- Crypto.com – Offers interest up to 8% Per annum on all popular stablecoins.
- Compound finance: Offers interest on DAI, USDT and few other decentralized stable coins.
Unlike earlier days, now users are not liquidating their crypto in fiat, rather using the stable coin to keep them and often use it directly to spend for their purchases.
Today, we are going to look at some stablecoins in each category to understand them better.
At the last time of updating this guide, here are the best Stablecoins:
- USDT (Tether)
- USDC (Launched by CoinBase)
- BUSD (Launched by Binance)
- SAI (DAI) (Decentralized Stable coin which is Colletralized)
7 Best Stablecoins In The Cryptosphere
1. Tether (USDT)
Tether is the first well-known stablecoin which started in early 2015.
It is a fiat-collateralized stable cryptocurrency, meaning, it is backed by fiat currency in a 1:1 ratio. And USDT token, which is also an ERC-20 token, is backed by US dollars in 1:1 ratio and is believed to be maintained by this team.
But controversies have surrounded Tether over the last year where it has been found that Bitfinex, a popular Bitcoin exchange, is behind stablecoin. And they have been using it o manipulate the markets as fiat-collateralized stablecoins are the easiest to manipulate.
Plus, they have been issuing millions of USDT without proper audit process in place which seems contrary to their initial promise.
Also see: Best Tether USDT Wallets
Nevertheless, it the most widely used and adopted stablecoin right now in the crypto market with a humongous market cap that puts it in top #10 of CoinMarketCap.
2. USD Coin (USDC)
USDC is a stable coin which is pegged with USD 1:1. This stable coin is brainchild of CENTRE which is managed by Coinbase and Circle. USDC is available on all exchanges including:
USDC is based on Ethereum and is distributed as Ethereum token. The US dollar reserves for USDC is audited every month by Grant Thornton LLP, an acocunting firm and you can see the latest audited report here.
3. TerraUSD (UST)
TerraUSD (UST) is an algorithmic interchain stablecoin developed on the Terra network, a project established by Terraform Labs.
TerraUSD is a decentralized stablecoin that is scalable, interchain, and yield earning. And thus, because of its scalability, it helps the blockchains to scale themselves.
There are many stablecoins that, with an increase in demand, are unable to scale themselves. This leads to an increase in the price of the stablecoin compared with a US Dollar, thus failing the main purpose of their existence. Moreover, on the Ethereum network the cost of minting a new stablecoin is greater than the value of the coin itself. Therefore, UST ensures that it remains scalable irrespective of its market demand.
As UST is an algorithmic stablecoin, the cost of minting is equal to the face value of the stablecoins minted, i.e., USD 1 in this case. To mint 1 UST, the reserve asset (i.e. LUNA, native token of Terra Network) must be burned. Therefore, the Terra network is a double-edged sword.
First, as soon as network adoption grows, the demand for TerraUSD (UST) would increase. UST is infinitely scalable as it needs an equivalent value of LUNA to burn each time new stablecoins (UST) are issued. Second, every time LUNA burns, the value of remaining LUNA tokens in the market increases, thus ensuring that the amount of LUNA required to be burnt for issuing stablecoins would never be in shortage.
Further, the Terra network is not restricted to pegging USD to its stablecoin. They have a Korean Won pegged stablecoin TerraKRW, and MNT pegged stablecoin TerraMNT. In the coming future, Terra wants to launch stablecoins for all the major currencies to increase DeFi adoption around the globe.
You can also earn 20% fixed APY on UST stablecoin. Watch this video to learn how to do that:
4. Paxos Standard:
Onthe 10th of September 2018, a New York-based Regulated company with Blockchain expertise Paxos Trust, LLC introduced a new stablecoin to the Crypto Market called Paxos Standard, simply as PAX.
Paxos Standard Token is backed by USD in 1:1 proportion which means, If the Paxos Trust Company removes a dollar from their account, the PAX, backed by it, disappears. The tokens are also issued only at the time of their purchase by the customer. It means, that no matter what situation the company is in, anyone could exchange its tokens for USD. The dollar deposits of the Paxos Trust are held in collateralized by U.S. government treasuries or FDIC-insured U.S. banks.
It is a fiat-collateralized stablecoin on the Ethereum blockchain as an ERC-20 token. It is approved and regulated by the New York State Department of Financial Services.
Paxos has become the most widely adopted cryptocurrency in the fastest time frame, with support from over 20 exchanges and OTC desks in the first five weeks of its existence. Within three months of being issued PAX achieved $5 billion in transactions, and just over a year later in November 2019, it is the 33rd largest cryptocurrency by market capitalization, with a market cap of $226 million.
PAX is now listed on over 150 exchanges and OTC desks. It has a market cap of 246.58M USD with a 190.19M USD 24hr Trading Volume which shows its high liquidity. It has a total supply of 249.95 PAX and a market cap rank of 35. [At the time of writing]
PAX allows user to convert digital assets to fiat currencies with no fees; Assets can be rapidly converted from physical to digital and vice versa very rapidly; Even though PAX is a stablecoin intended primarily for use on the Paxos platform, there is a chance that it will replace Tether as the most popular stablecoin, and that would see PAX supply growing massively.
5. BUSD: One of the best stable coin
BUSD or BinanceUSD was launched on September 5th of 2019. It is a fiat-collateralized stablecoin on the Ethereum blockchain as an ERC-20 token. It was created in partnership between the largest and most trusted companies in the crypto space, Binance Exchange, and Paxos Trust Company.
New York State Department of Financial Services is the one to regulate and approve it, thus ensuring the utmost consumer protections. BUSD is 100% backed by U.S. dollars held in FDIC-insured U.S. banks. It has a simple pegging mechanism and a strong payment system, allowing BUSD to be better used in day-to-day payments. Its smart contracts are audited with the cooperation of global auditing firms specializing in smart contracts, providing a security guarantee.
6. TrueUSD (TUSD)
TrueUSD, as its name suggest, is another USD-backed ERC20 stablecoin.
On the first look, it seems just like USDT but unlike it, TrueUSD is fully fiat-collateralized, legally protected, and transparently verified by third-party attestations.
Their attestations are made public regularly and anyone can receive the reports on Twitter:
The token is managed by real people who have worked previously with Google, PwC, and UC Berkeley. (See here)
The company plans to tokenize other real-world assets such as TrueEuro, TrueBond, TrueYen, etc. so that stability can be brought to the volatile world of cryptocurrencies.
TureUSD’s market cap currently is quite humble as compared to USDT and sits in top 150 cryptocurrencies at the moment, but its acceptance is increasing rather swiftly as the crypto market is expanding.
7. MakerDAO (SAI & DAI)
MakerDAO is a decentralized autonomous organization which has proposed a new approach for making stablecoins.
MakerDAO started in early 2017 and proposed to peg its stablecoin, known as DAI to US dollar. However, it is not backed by USD like USDT or TUSD. Instead, it is backed by Ethereum.
So that’s why it is a classic example of stablecoins that are backed by other cryptocurrencies and are known as crypto-collateralized stablecoins. More over, it brings the true decentralized nature of crypto.
But MakerDAO and DAI have been criticized for being highly complex to be understood by other market players. Their model is becoming popular in 2019 and becoming a basis for DeFi.
You can actually use a DeFi system like Compound.finance to earn interest in DAI Lending. You should read my earlier guide on how to earn an interest in Bitcoin and Cryptocurrencies to learn more about this.
Conclusion: Top Stable Coins
I believe stablecoins have a long way to go in proving their worth and usability in the long term and that will happen on in events of the crisis.
What kind of crisis?
Well, I don’t know that, but the financial world calls it the black swan event.
So far TrueUSD, USDT, USDC, DAI are doing an excellent job though there are some controversies and arguments about their long-term sustainability.
Lastly, there is, of course, a need for a stablecoin in the market that works irrespective of the conditions in the cryptosphere and is easy to liquidate.
Now you tell me: What do you think of stablecoins? Have you used any of these stablecoins before? Which of these will survive the hard times? Do you know anymore stablecoins that I have missed here? Let us discuss in the comments below 🙂
Here are a few other hand-picked articles that you should read next:
- Best Ways To Convert Bitcoins To Cash [Fiat]
- Top Crypto Portfolio Rebalancing Tools (Automated & Manual)
- Understanding Protocol Coins And Tokens – The Beginners Guide
- The 5 Best Automated Cryptocurrency Index Funds (Updated)
Harsh Agrawal is the Crypto exchanges contributor for CoinSutra.
He has a background in both finance and technology and holds professional qualifications in Information technology.
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