What are stablecoins?
Stablecoins are a type of crypto asset that aims to have a stable value, similar to traditional assets or currency like the US Dollar or gold. They're quite popular because their prices don't change much as it's named. Let's look at the different kinds of stablecoins
Also Read: Difference between Altcoins and Stablecoin
Types of Stablecoins
Algorithmic Stablecoins
These stablecoins use special algorithms and smart contracts on the blockchain to control how many coins are out there. If the value of a stablecoin drops below its target, the system might reduce the number of coins by buying some back or burning them. If the value goes too high, the system creates more coins to bring the price back down.
Crypto-backed Stablecoins
These stablecoins are supported by other digital assets. They use smart contracts to manage how stablecoins are made and destroyed. This method is considered reliable because anyone can check the smart contracts to make sure everything's fine. Some of these stablecoins are managed by groups called Decentralized Autonomous Organizations (DAOs), where members vote on important decisions.
Fiat-backed Stablecoins
These stablecoins are backed by real-world money, like the US dollar. People can swap their stablecoins with real money at a fixed rate. If the value of the stablecoin falls, investors might buy low and sell high in different markets to bring the price back to the right level.
Top 5 Stablecoins
Companies and individuals around the world are taking notice of stablecoins. In 2024, it is necessary to identify stablecoins that will be able to guarantee exceptional results.
Here is the list of the top 5 stablecoins.
- Tether (USDT)
- USD Coin (USDC)
- Dai (DAI)
- TrueUSD (TUSD)
- Paypal USD (PYUSD)
Tether (USDT)
USDT is one of the leading stablecoins in the crypto market, having been introduced in 2014 by the Tether Foundation. Tether is unique in that it extends its offerings beyond the U.S. dollar, providing variants pegged to other fiat currencies such as the euro (EURt), Mexican peso (MXNt), and Chinese yuan (CNHt). Additionally, it has diversified its portfolio by introducing Tether Gold (XAUt), a stablecoin backed by tangible gold.
USD Coin (USDC)
USDC is another stablecoin that is pegged to the U.S. dollar. It was launched in 2018 by a consortium known as Centre, which was established by fintech leaders Circle and Coinbase. USDC is designed for fast and easy transfers, making it a practical option for both individuals and businesses. It can be quickly sent and received via Circle or across various crypto exchanges.
In addition to its ease of transfer, USDC is highly versatile and can be seamlessly integrated into applications and decentralized applications (dApps) as a payment method. This adaptability makes it a popular choice within the cryptocurrency community for real-time transactions and as a stable digital currency option in a typically volatile market. As of 2023, it holds approximately 20% of the stablecoin market share, positioning it as the second most widely used stablecoin, following Tether.
Dai (DAI)
DAI stands out as a leading crypto-backed stablecoin, operating on the Ethereum blockchain. Managed by MakerDAO, a decentralized autonomous organization (DAO), DAI maintains a stable value relative to the U.S. dollar, largely through algorithmic mechanisms rather than traditional currency backing.
Unlike centralized stablecoins which are typically backed by U.S. currency in bank accounts, DAI is supported by a different form of security. It is backed by a surplus of collateral crypto assets that users deposit into what are known as Maker Vaults. This setup not only stabilizes its value but also facilitates a robust platform for crypto lending and borrowing.
TrueUSD (TUSD)
TUSD stands out as one of the most renowned stablecoins in the crypto market, distinguished by its status as reportedly the first regulated stablecoin backed by the U.S. dollar. TUSD also maintains a strict 1:1 backing with the U.S. dollar, verified in real-time through on-chain attestations from independent third-party entities.
TrueUSD can be utilized in various decentralized finance (DeFi) activities such as staking, farming, and mining on platforms like Ethereum, TRON, and BSC. This functionality allows users to maximize their engagement with the crypto economy by using TrueUSD across a wide array of financial applications.
Paypal USD (PYUSD)
For more than twenty years, PayPal has been at the forefront of the digital payment revolution, using technology to improve the accessibility, affordability, and security of financial services and commerce. The PayPal platform has empowered millions of consumers and merchants in over 200 markets worldwide, allowing them to actively engage in and benefit from the global economy.
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Disclaimer: Any financial and crypto market information shared should not be considered investment advice. It is for informational purposes only. Conduct your own research before making investment decisions. Crypto trading is unregulated and highly risky. There may be no regulatory recourse for any loss of such transactions.
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