Cryptocurrencies are extremely volatile, there’s no question about that.
Price swings of 10% or more in a day are not uncommon and this extreme volatility can provide traders with lucrative opportunities.
However, cashing out crypto to fiat only to jump back into crypto isn’t the most efficient method of trading. It’s usually much cheaper to trade crypto-to-crypto rather than fiat-to-crypto and vise versa.
Also, apart from trading in and out of crypto, stablecoins provide traders with a safe place to hide during those brutal crypto storms (ie. when the price plummets 40% or more).
Moreover, as DeFi emerges:
Stablecoins have gained much more use and are contributing to the progress of DeFi by combining the best of both crypto and fiat.
That said, Stablecoins are decreasing transaction risks as well as democratizing and disintermediating the world’s financial system.
Now, in the following piece, I present to you some of the most popular and forward-thinking stablecoins.
Organization behind it: Tether Operations Limited
Market Cap: ~$9,211,395,923 USD
Tether (USDT), launched in 2014 by iFinex - the parent company of BitFinex, is a stablecoin pegged on a 1:1 basis to the United States Dollar (USD).
Tether is by far the largest stablecoin in crypto and is even ranked as the 3rd most valuable “cryptocurrency” in terms of its market cap. Tether’s USDT stablecoin resides on the Omni, Ethereum, and Tron blockchains but is predominantly issued on Ethereum’s blockchain.
Tether claims that its USDT stablecoin is 100% backed by traditional currency, cash equivalents, and “from time to time may include other assets and receivables from loans made by Tether to third parties.”
However, it is widely speculated that Tether is not 100% backed and the stablecoin project is undergoing an on-going investigation and lawsuit by the New York Attorney General’s Office regarding this matter.
That said, many crypto investors seek stablecoin alternatives such as the ones presented below.
Organization behind it: MakerDAO
Market Cap: ~$126,161,269 USD
DAI is a decentralized stablecoin launched by MakerDAO in 2016. The DAI stablecoin lives on the Ethereum blockchain, its stability to $1.00 USD does not rely on any central third party, and its solvency does not rely on any trusted counterparties.
All circulating DAI are generated from Maker Vaults and are backed through Collateralized Debt Positions (CDPs), which are smart contracts that issue DAI tokens backed by Ether (ETH) and a surplus of collateral assets such as other ERC-20 tokens (BAT/WBTC).
DAI is used in the same manner as other cryptocurrency assets in that it can be freely sent to others and be used to pay for goods and services. But what’s more, DAI can be used as a hedge against market volatility and is a popular stablecoin used in decentralized applications and the DeFi space.
All in all, DAI is one of the most interesting stablecoins out there because it is decentralized and fully collateralized by digital assets rather than fiat currencies and other real-world assets.
Organization behind it: MakerDAO
Market Cap: ~$6M
SAI is a decentralized stablecoin created by MakerDAO when the Maker system upgraded to Multi-Collateral DAI in November 2019. SAI is simply Single-Collateral DAI backed solely by Ether (ETH).
In other words, SAI is what DAI used to be before the Maker system was upgraded to Multi-Collateral DAI and the name change is simply to differentiate the old single-collateral DAI tokens from the new multi-collateral DAI tokens.
The SAI stablecoin can be migrated to the newer DAI stablecoin by visiting migrate.makerdao.com, logging into your SAI wallet, and submitting a transaction to upgrade your SAI.
Various DeFi dapps such as Compound Finance, dydX, Fulcrum, and others support the SAI stablecoin for lending, sourcing liquidity, and other DeFi use cases.
Organization behind it: Circle and Coinbase
Market Cap: ~$734,228,372 USD
USDC is a fully collateralized US Dollar (USD) stablecoin launched by Circle and Coinbase. USDC resides on top of the Ethereum blockchain as an ERC-20 token and each USDC is backed 1:1 with the US Dollar.
USDC is a highly reliable and trusted stablecoin as it’s issued by regulated and licensed financial institutions that maintain full reserves of its equivalent USD fiat currency. Issuers of USDC are required to report their USD holdings on a monthly basis and Grant Thornton LLP issues report on those holdings every month.
USDC is a popular stablecoin among institutional investors and hedge funds due to its regulated, transparent, and trustworthy nature. USDC can be used for payments, lending, investing, and trading.
Organization behind it: Binance
Market Cap: ~$163,803,389 USD
Binance USD (BUSD) is a 1:1 USD backed stablecoin issued by Paxos in partnership with Binance.
BUSD is approved by the New York State Department of Financial Services (NYDFS) and is backed 1:1 with US Dollars held by Paxos Trust Company as the USD custodian and issuer of BUSD.
BUSD is supported on both the Ethereum (ERC-20) and Binance Chain (BEP-2) blockchains and is supported by a wide number of cryptocurrency exchanges.
BUSD is primarily used by cryptocurrency traders to save on fees for multiple trading pairs and it can also be used to earn interest on Binance’s lending market.
Organization behind it: Paxos Trust Company
Market Cap: ~$245,588,494 USD
Paxos Standard (PAX) describes itself as a digital currency that combines US Dollar stability with the efficiency of blockchain technology. It claims to be the most liquid regulated stablecoin in the world and offers instant 24/7 redemptions for US dollars.
The PAX stablecoin is stable, audited, regulated, backed 1:1 with the US dollar (USD), and is supported on over 150 exchanges, OTC desks, and wallets.
PAX can be used to send US dollars peer-to-peer instantly around the world, it can be used to pay for goods and services, trading, and act as a stable store of value.
Moreover, PAX is an ERC-20 token atop the Ethereum blockchain and can be securely stored in any ERC-20 token supported wallet.
Organization behind it: Synthetix
Market Cap: ~$10,855,913 USD
sUSD is a synthetic stablecoin asset that tracks the price of a single US Dollar (USD).
sUSD, which stands for “Synthetic USD” was launched by Synthetix, a crypto-backed synthetic asset platform that provides on-chain exposure to real-world assets such currencies, commodities, stocks, and indices, as well as digital currencies.
Unlike most stablecoins that are backed 1:1 by USD, sUSD is backed by SNX tokens with a collateralization ratio of 650%. The price of sUSD is assigned an exchange rate pegged to the US dollar through high-quality price feeds supplied by trusted and secure Chainlink oracles.
sUSD is more closely related to MakerDAO’s DAI stablecoin as it is also a permissionless stablecoin committed to the values of decentralization. That said, sUSD is widely used by DeFi users and is traded on the Synthetix.Exchange platform as well as KuCoin and Kyber Network.
Organization behind it: Ampleforth
Market Cap: ~$5,439,178 USD
Ample (AMPL), created by Ampleforth in 2019, describes itself as synthetic commodity money, like Bitcoin or gold, but with near-perfect supply elasticity, like fiat.
What does that mean?
It means the total circulating supply of AMPL can fluctuate up or down. Ample has an automatic supply policy that makes the AMPL asset immune to both runaway inflation and runaway deflation.
Here’s the catch. Ampleforth is not exactly a stablecoin as it does not fluctuate tightly around $1.00 as other coins listed here.
Instead, Ampleforth’s Ample token has a daily “rebase”; a re-calculation of the supply.
For example, I bought around 190 AMPLs for 1 ETH like 2 weeks ago and every day I see a different amount of AMPLs in my ERC-20 wallet. You won't see that happening with any other coins so it might be surprising to you at first.
The left screenshot is from June 8th and the right one’s from June 9th, so during this 1 day period, AMPL's total supply decreased. This decrease can also be seen this 30 Day chart below:
So, to answer Batman's question of if it’s a real stablecoin? The short answer is no it’s not. It’s a completely new thing crypto has never seen before.
When the price of AMPL is over ~$1.04, the supply increases, and when the price is below $0.96, the supply decreases. But the important thing to remember here is that you as an AMPL token holder hold the same % of the total supply despite Ample’s daily rebases.
So, since the AMPL token fluctuates around $1, you can earn a lot when the demand for AMPL rises or get rekt harder when it shrinks. So as a supply-based trader, you have to watch closely how AMPL adoption and all sorts of partnerships affect the demand for AMPL in order to profit from these.
What do you guys think of the stablecoins listed here? Which stablecoin project are you most interested in? Let me know in the comment section below.