A stable coin is something used by cryptocurrency traders to temporarily cash out of a position. They’re usually pegged to the price of 1 USD, so one will always be worth 1 USD. When anticipating the crypto markets to swing wildly, traders can buy a stable coin in order to keep the value of their holdings stable.
They’re often used to take profits on cryptocurrency investments and some traders hold funds in stable coins while waiting for price dips to then reinvest and buy more back than they sold.
USDT – Tether
The most commonly used stable coin is USDT or Tether which was one of the first stable coins in existence! Tether is backed by real assets in their regularly audited reserve account. You can track the amount of USD in the bank account of Tether Limited to ensure they have more USD than there is Tether in circulation here https://wallet.tether.to/transparency!
There are many people who believe the cryptocurrency is doomed to fail and refuse to use it. The team have ‘printed’ almost $1.4 Billion worth of Tether in 2018 alone already after the latest 250,000 was ‘printed’ on 18th May 2018.
Considering the market cap to date is $2.5 Billion, that means more than half has been created in the past 5 months, a significant amount considering it’s been trading since 2014!
Because there’s no longer an official third party auditing firm responsible for ensuring Tether Limited actually hold the correct amount of USD to back the cryptocurrency, many question how safe it actually is. There is concern that without ensuring every Tether is actually backed by $1, then the market is being artificially propped up with false funds.
This is a real cause for concern as at the moment, Tether trades account for around 15% of the total cryptocurrency trading volume!
There are alternatives which you can use instead though thankfully. Tether seems to be treating on some pretty uneven ground and the longevity certainly comes into question.
Of course it may not always boil down to which stable coin is the best, because if it’s not listed on the cryptocurrency exchange you use, then it will be of no use to you. USDT holds the top spot still simply because it was the first and oldest and most exchanges already accept it. But there are now better and potentially more trustworthy alternatives to bear in mind.
“TrueUSD, part of the TrustToken asset tokenization platform, is a blockchain-based stablecoin pegged to the value of USD. In the TrueUSD system, U.S Dollars are held in the bank accounts of multiple trust companies that have signed escrow agreements, rather than in a bank account controlled by a single company. The contents of said escrow account is verified by an independent third-party accountant that publishes monthly attestation reports.
If someone wants to obtain TrueUSD through the online application, they will need to pass a KYC/AML check. Once that’s complete, they can send USD to one of TrueUSD’s trust company partners. Once the funds are verified by the trust company, their API will instruct the TrueUSD smart contract to issue tokens on a 1 to 1 ratio and to send them to the Ethereum address associated with the account at hand.
Once in the wallet, the tokens can be transferred to a friend or used as payment, combining the advantages of fiat (stability and trust) with those of cryptocurrencies (reduced fees and transfer times). The user can also redeem real US Dollars by sending the TUSD tokens back to the smart contract address, which will notify the trust company, and initiate a bank transfer to the user’s account.”
True USD has recently just been added to Binance exchange, the world’s largest cryptocurrency exchange. They started trading it on 18th May 2018.
Being listed on Binance gives TUSD a great advantage simply because Binance is now the biggest exchange and is growing rapidly with their plans to create Binance chain and build their own DEX.
Binance do still have USDT as the main stable coin trading pair, but listing TUSD earlier in the month may suggest they intend on replacing USDT in the near future.
The Chinese cryptocurrency market took a big hit late 2017 after the governement banned Bitcoin exchanges and put a ban on all ICO’s. But they too have their own stable coins backed by the Chinese Yuan Currency.
The value of which is of course pegged to 1 CNY, which at the time of writing is equal to around $0.16 USD.
At the time of writing, BitCNY has a market cap of around $35 Billion. At the moment, the USD is the global reserve currency, and most exchanges and countries recognise the United States Dollar. China however hope to soon replace the USD as the global reserve currency with the CNY.
Asian investors will most likely prefer to store their value in a currency more close to home rather than USDT.
There isn’t much online about bitCNY and when trying to research we couldn’t really find out much (see below): Apparently this is everything you need to know about bitCNY.
Dai is a decentralized stable coin created by Makerdao! The value of Dai is pegged to the United States Dollar.
With Dai, anyone, anywhere has the freedom to choose a money they can place their confidence in. A money that maintains its purchasing power. Maker is a decentralized autonomous organization on the Ethereum blockchain seeking to minimize the price volatility of its own stable token — the Dai — against the U.S. Dollar.
MKR holders govern the DAI meaning those controlling the cryptocurrency have an incentive to make the project do well and succeed.
If you know of any other stable coins you think should be included in our list, please let us know in the comments!