There is currently a huge amount of stablecoin projects operating in the cryptocurrency space, you can be fairly certain if a country has an active crypto community then their local fiat currency will have some form of a stablecoin in operation. Major fiat currencies such as USD or EURO will have several implementations of stablecoins, with all of them aiming to take Tether (USDT) position as the most used.
Stablecoins are coins or tokens that are pegged to fiat currencies such as the United States dollar, other cryptocurrencies, precious metals or in certain cases a combination of all three. The most popular stable coins are either Fiat-collateralized or Crypto-collateralized. Here we will cover fiat collateralized stablecoin projects, this means that one unit of a stablecoin equals $1 (or alternative fiat currency). If you would like to learn more about crypto collateralized stablecoins we have covered this subject in previous articles:
- Why have Stablecoins become so popular?
- Tether USD (USDT)
- TrueUSD (TUSD)
- Paxos Standard (PAX)
- Coinbase USD Coin (USDC)
- Gemini Dollar (GUSD)
- STASIS Euro (EURS)
- Final Thoughts
Why have Stablecoins become so popular?
The answer is simply market volatility and the unstable nature of cryptocurrency trading. It is also something that is perceived negatively when it comes to talking about crypto being used in retail or payments, if the value is so volatile then it is not the best asset for transferring money, purchasing goods or issuing loans. For example, an online eCommerce owner will be wary of accepting payments in crypto if there is a good chance the asset's value will drop by 10% in a day - because then how will the business pay their suppliers and still turn a profit?
Another problem that has given to the rise in stablecoins is the regulations around depositing and withdrawing fiat currencies on crypto trading platforms. In the traditional finance world, USD has a notorious amount of regulations to follow which can cause many headaches for exchanges.
For the user, it becomes extreme KYC and verification steps that can take weeks to pass. This is one of the reasons Binance became very popular as a non-fiat exchange by sidestepping all that verification - though they are now starting to offer fiat pairs on their platform. Stablecoins such as USDT became the solution for giving investors and traders a stable medium to trade their crypto against. And you can not deny its popularity, with USDT regularly seeing an average 24 hour trading volume of over 20 billion USD.
Supporters believe stablecoins make cryptocurrencies more practical for buying goods or using services. With major cryptos such as Bitcoin or Ethereum being prone to abrupt crashes or sudden gains, a stablecoin helps remove any doubts around conversion rates. For example, imagine you are receiving your salary in crypto and prices took an unexpected crash. Translate this over to the real world, it would be like finding out bread had gone from $2 to $6, meaning your money goes a lot less further.
- Symbol: USDT
- Standard: ERC20
- Total Supply: 4,207,771,504 USDT
- Website: https://tether.to/
- Average 24h volume: ~$18 Billion
Tether is the biggest stablecoin with various tokens deployed for different fiat currencies like the US dollar, the EURO or the Yen. Tether does claim to be 100% backed meaning that every Tether has an equivalent 1-to-1 traditional currency in their reserves. However, they have admitted that there has never been a professional audit of their reserves. This has led to many critics claiming the third party reports that Tether publishes to be transparent contain many holes and should not be trusted. It has also come to light that they may not even be auditable as banks are refusing to let them open new bank accounts due to money laundering concerns. Furthermore, nobody really knows how the company is run with Tether claiming to be a separate entity but seems to have a legal tying to the Bitfinex exchange.
Despite the negative news in media, USDT remains the easiest stablecoin to trade with support across all the major trading platforms - which is why for the moment it is here to stay.
- Symbol: TUSD
- Standard: ERC20
- Total Supply: 160,554,301 TUSD
- Website: https://www.trusttoken.com/
- Average 24h Volume: ~$150M
TrueUSD or TrustToken follows much the same setup as USDT, with one crucial difference: it claims to be a legally backed stablecoin. TrustToken has published reports from independent accounting firms who have professionally audited their reserves, and do so continuously. Their audits show that TUSD is backed 1 to 1 by their United States dollar reserves. Furthermore, their total supply of 160,554,301 TUSD is a more believable number to have in your reserves and the company does not have any questionable legal attachments to a major exchange.
Notably, TrueUSD also has partnerships with accounting firms such as Armanino to improve their transparency and provide traders with realtime monitors of their balances. For this reason, though TrueUSD does use a centralized escrow system (traditional banking) which could be a seen as a single point of failure (what happens if the banks close all their accounts) they appear to be much more trustworthy than Tether given they are committed to being as transparent as possible. It should also be noted that TrueUSD setup uses multiple centralized escrow systems (they are not just using ONE bank) so as long as they are following local regulations as a business their ecosystem should stay operational and your TUSD tokens will always be backed 100%.
In the future, the team is planning to allow the tokenization of real-world assets also, such as real estate, rental properties or timeshares.
- Symbol: PAX
- Standard: ERC20
- Total Supply: 237,822,906 PAX
- Website: https://paxos.com/standard
- Average 24h Volume: ~$200M
Paxos is a New York based blockchain company, which created their USD collateralized stablecoin PAX in 2018. Paxos Trust Company is regulated, and its reserves are audited on a yearly bases by professional accounting firms such as Deloitte or Grant Thornton. They also work with a third party smart contract auditing company Withum, who verifies their total supply of PAX is consistently backed by their USD reserves amounts. Paxos tokens are only in circulation when they have been backed by fiat currency, as soon as PAX tokens are redeemed for USD then the tokens are immediately burned.
PAX had been fairly successful in catching up with Tether in terms of trading volume, as Paxos also runs the iBit exchange it was easy for them to market their stablecoin to their existing userbase in the US and Singapore. However, a controversial backdoor was found in their smart contract that if requested would let governments freeze your balance - when asked about it, Paxos simply announced they were following regulations. Since this news, PAX adoption has slowed.
Coinbase USD Coin
- Symbol: USDC
- Standard: ERC20
- Total Supply: 461,632,527 USDC
- Website: https://www.centre.io/usdc
- Average 24h Volume: ~$300M
USDC is a joint venture between one of the biggest crypto brokers Coinbase and Circle (a Goldman Sachs backed crypto finance startup). They like to market their stablecoin as the Power of the dollar at the speed of crypto - and with Circle being one of the most well-funded cryptocurrency companies ($3 billion) it appears their statement is true? Much like the other projects mentioned, USDC issued is backed 1 to 1 by US dollars in their reserve bank accounts - which has already passed several independent audits. USDC has been steadily rising in adoption amongst traders, with its trading volume going up, furthermore, it is supported by most if not all of the major cryptocurrency exchanges with many pairs on Coinbase Pro, Binance and KuCoin.
USDC is a popular stablecoin not only for trading but is also seen being implemented into various DeFi projects (Fulcrum, Compound, Nuo) for lending purposes. This allows USDC holders to lend liquidity to the Dapp's pools and earn interest on it. These Dapps operate in a fairly stable and risk free environment which interests investors who do not like the extreme volatile nature of standard crypto investments. If you have passed Coinbase's verification you can also earn interest rewards by storing your USDC in their saving account.
- Symbol: GUSD
- Standard: ERC20
- Total Supply: 4,120,149 GUSD
- Website: https://gemini.com/dollar/
- Average 24h Volume: ~$3M
GUSD is a stablecoin created by Gemini Exchange when announced it had a lot of media attention around it due to the involvement of the Winklevoss twins and because it dubbed itself the world's first regulated stablecoin. This is because GUSD is highly audited, with their US Dollar deposit balanced verified each month by a publicly registered accounting firm BPM. The regular auditing ensures that users of GUSD can be sure that Gemini does indeed have the equivalent amount of fiat currency in their reserves to keep the 1:1 stablecoin peg.
Despite being one of the only stablecoins that has gained complete regulatory clearance by the New York Department of Financial Services, thus making it possible the safest stablecoin for a user to use (less risk of their reserve bank accounts being closed or banned), GUSD adoption has been very low. The asset is listed on various exchanges, however, traders appear to generally prefer using alternative stablecoins for their daily trading needs. This is confirmed by the asset's total supply being much lower than the alternative fiat pegged projects.
More recently there has been positive news for GUSD, such as BlockFi supporting the token for zero-fee trading with Bitcoin or other cryptocurrencies, so we could potentially see much more adoption of GUSD in the future.
- Symbol: EURS
- Standard: EIP20
- Total Supply: 31,979,207 EURS
- Website: https://stasis.net/
- Average 24h Volume: ~$590k
EURS is a stablecoin that, as you may have guessed, is pegged to the Euro €, it is backed 1 to 1 by their reserve accounts. However, EURS can also be issued to their liquidity providers in exchange for securities. To ensure transparency Stasis publishes weekly verifications and quarterly audits, which are both carried out by BDO Malta (a blockchain auditing company).
As we can see this token has a much lower average trading volume, which appears to indicate that for traders using a US Dollar backed stablecoin may be more important. In fact, its most popular markets are usually against USDT or a different fiat pegged currency. STASIS Euro is not as widely listed as the other stablecoins we have covered, so this could also be one of the reasons why it sees less volume.
One feature that is interesting for EURS is that it follows an EIP-20 standard that allows delegated payments on the Ethereum network, meaning you can send EURS with their STASIS wallet without needing to pay any GAS fees to make transactions. This opens up some interesting use cases for EURS which could potentially make it a widely used stablecoin in the future.
Stablecoins are here to stay, no matter how hard you grumble about them not truly being cryptocurrency. For traders, they offer a haven when you are unsure where the market trends are going. For vendors, it will just make much more sense to accept payments in an asset that is not highly volatile. For services such as lending, it also helps reduce risks and calculate interest rates precisely. And there are now many popular open finance Dapps that implement stable tokens into their ecosystems.
What we may see happen is weaker projects in terms of the coins and tokens that are not used could die out, and we will be left with a handful that dominate this niche in crypto. Because in terms of different iterations of a fiat $1 peg, as long as you have the equivalent amount of reserves in the bank - what more is there to innovate? For this space I believe there is more excitement and innovation to be made in stablecoins or stablechains backed by a combined basket of various crypto and real world assets.
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