In the world of cryptocurrency, there are few terms as confusing as stablecoins. For many investors and traders, the name itself sounds like a contradiction; if something is stable, it can’t be based on or backed by cryptocurrency. But this isn’t the case at all; in fact, some experts believe that these stablecoins will become an essential part of our economy over the next decade or so. Here are seven stablecoins which have been deemed worthy of investment today, with a look at their strengths and weaknesses to help you decide which one you should use in your portfolio.
1) Tether (USDT)
Tether tokens are widely regarded as stable and so they’re very popular as they are widely adopted and are one of the pioneering types of stablecoin in the digital currency space. They can empower new and upcoming businesses as well as being trailblazers for digital currency as well as making it possible for consumers to store value on an all-digital ledger. A Tether Token is a digital token built on several different blockchains.
It is a digital currency that is pegged to the US dollar, making it one of the most stable coins on the market. Because it’s backed by fiat money, it’s less volatile than other digital currencies. This makes it a good investment for those who want to buy and hold digital currency for the long term.
Unlike a fiat currency, though, you can’t go to your bank and deposit or withdraw Tethers (USDT). It’s a cryptocurrency that exists on the Ethereum blockchain. You store it in an online wallet on websites like MyEtherWallet and access it through any Ethereum token compatible device. But unlike many other cryptocurrencies, you can’t mine
2) Circle USD Coin (USDC)
Fiat money is a government-issued currency that isn’t backed by a commodity like gold. The value of fiat money is based on faith in the issuing government. USD Coin (USDC) is a type of fiat money. It’s a digital dollar, backed by the US government. You can use USDC to buy goods and services, or send money to anyone with a US bank account. USD Coin is stable, meaning its value doesn’t fluctuate much. That’s because it’s pegged to the US dollar. So, if the US dollar goes up in value, so does USDC. If the US dollar goes down in value, so does USDC. You can convert your dollars into USDC, and vice versa, at any time.
USDC’s value doesn’t fluctuate much. That’s because it’s pegged to the US dollar. So, if the US dollar goes up in value, so does USDC. If you don’t want your money to be tied to any particular currency—and you’re also not concerned about your money fluctuating in value—you may prefer a stablecoin like Tether (USDT). The main advantage of Tether is that it doesn’t rely on a single entity or government, meaning its supply can adjust quickly when demand changes.
3) Dai (DAI)
Dai is a decentralized stablecoin that is soft-pegged to the US Dollar. Dai is created by the Maker Protocol and backed by collateralized debt positions (CDPs) in Maker’s smart contracts. When a user opens a CDP, they deposit cryptocurrency as collateral and receive Dai in return. The stability of Dai is ensured by the MKR token, which can be used to buy or sell Dai on the open market, or burned in order to increase or decrease the stability fee.
Stability fees encourage people to maintain sufficient Dai in their CDPs to back their outstanding Dai. If a user can’t meet their debt obligations, they’ll either pay up or risk having their collateral seized and liquidated by MKR holders. As CDPs are secured by Ethereum smart contracts, any liquidation will likely be picked up by automated traders who sense an opportunity for arbitrage. It’s important to note that if you close your CDP before your debt has been repaid, you’ll need to pay a fee (based on how long it took you to repay) in order to unlock your collateral.
4) Binance USD (BUSD)
Binance USD is a stablecoin that is pegged to the US dollar. BUSD is issued by Paxos Trust Company and regulated by the New York State Department of Financial Services. BUSD is one of the most popular stablecoins and is traded on many exchanges. Binance USD has low transaction fees and is a good choice for those looking for a stablecoin with low fees.
To purchase BUSD, you need to first purchase BTC, ETH or XRP from a cryptocurrency exchange and then transfer them to your Binance account. After that, simply select Deposit > BNB on your Binance account and click Convert > USD. On the following page, convert your BTC, ETH or XRP into BUSD by pasting in the amount of either currency you want to transfer in and then clicking Continue. This will initiate a transaction fee based on network conditions but should be around 1%. Click Confirm to finish. It usually takes 20 minutes for deposits to show up as confirmed.
5) Gemini dollar (GUSD)
Gemini dollar (GUSD) is a stablecoin that is pegged to the U.S. dollar. It is backed by the Gemini exchange, which is owned by the Winklevoss twins. Gemini dollar is one of the most popular stablecoins and is used by many exchanges as a way to store and trade value. In terms of stability, Gemini dollar has been very reliable and has not experienced any major price swings.
However, there have been some concerns over Gemini dollar’s price swings. In December 2018, reports stated that a bug in Gemini dollar’s code resulted in a temporary issue where it was trading at 0 cents on some exchanges. Although there were no major losses and everything was corrected, it can be seen as an example of how centralised stablecoins are vulnerable to bugs and therefore trust issues. Also, being fully backed by fiat currency means users can’t receive rewards for holding GUSD — something that decentralised tokens such as Maker DAI allow.
6) TrueUSD (TUSD)
TUSD was one of the first stablecoins on the market and it has remained a popular choice among cryptocurrency investors. TUSD is backed 1-to-1 with the US dollar and it is available on a number of exchanges. The team behind TUSD is also working on introducing new features, such as interest-bearing accounts and a mobile app.
However, TUSD isn’t available on all exchanges. If you hold TUSD with a non-custodial wallet such as Trust Wallet, then you can transfer your TUSD to any exchange or platform that supports it. For example, if you wanted to cash out some or all of your TUSD holdings, you could send them to an exchange like Binance that doesn’t yet support fiat trading and trade them for other cryptocurrencies.
7) Pax Dollar
Pax dollar is a stablecoin that is pegged to the US Dollar. It was created by the Paxos Trust Company, which is a regulated financial institution. Paxos Trust Company also operates it’s own exchange, itBit, making it easy to buy and sell Pax Dollars. Paxos plans to offer other services in the future, such as lending and borrowing against the value of your Pax Dollars.
Paxos uses a dual token model that consists of Pax, a utility token and PAX, a security token. The platform was created to solve issues such as higher transaction costs and lack of liquidity in current stable coins. The advantage over other stable coins such as TrueUSD and Tether is that Paxos only holds two thirds of it’s assets in USD. This allows them to gain interest on assets, which keeps their operating costs down compared to other coins that need additional funding from investors or capital injections.