Stablecoins (stable coins) have many advantages over traditional cryptocurrencies such as Bitcoin or Ethereum, because they are low in volatility and represent greater stability.
They are ideal for those looking to invest with little risk and want to keep their assets in a certain space of the crypto world.
The appearance of the first stablecoin is recorded in 2014, but it is now that they gain maximum popularity.
For those who are just starting out in the crypto market, stablecoins provide a firm asset with an advantageous transactional speed, among other benefits that we will describe below.
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What are stablecoins?
A stablecoin is a digital currency backed by a reserve asset, which can be fiat money (currency in circulation), precious metals (gold, silver or oil), or simply protected by an algorithm, with the intention of keeping its price stable.
They have been created with the intention of sheltering investors in times of volatility and function as a kind of token, the value of which is directly defined by the established asset.
In other words, it is an instrument for any operator looking to avoid these strong price variations.
Rise of stablecoins
The first stablecoin, known as Tether, was created in 2014 and is based on the US dollar.
Over time, other stable crypto assets backed by various assets emerged. For example, the DAI, which is protected on the Ethereum blockchain network.
On the other hand, there are stablecoins anchored in precious metals, such as PAX Gold (PAXG), valued against gold.
Today, they set trends in the investment market, since they are an alternative that seduces against the demand for dollars.
They are easily acquired through different places and are an option to make transactions quickly and safely, in the face of an increasingly inflationary economy.
Advantages of stablecoins
These currencies have stability and their benefits are similar to that of cryptocurrencies, but with less risk. Some of its most outstanding advantages are:
- Your transactions are low, fast and secure.
- No fees are paid to third parties.
- Transactions go to a ledger.
- Thanks to them, other cryptocurrencies can be adapted.
- They adapt to various investors.
- They are powerful and they have no physical boundaries.
Types of stablecoins
Since 2019, the stablecoin ecosystem has been dominated by FIAT money-backed coins, with Tether being the most capitalized. Differentiated by the asset that supports them, they are categorized into:
Backed by raw materials
They are those that are stabilized with assets such as gold, silver, oil or real estate, although they also allow the use of diversified baskets of precious metals.
The most widely supported of this type are Digix Gold Tokens (DGX) and Tiberius Coin.
Backed by fiat money
These are currencies that maintain a reserve of fiat money as collateral, although they also include precious metals and raw materials and can be exchanged for their cash equivalent. Some examples include Tether and TrueUSD.
Backed by cryptos
Crypto- based and overcollateralized currencies fall into this category, thanks to the lower supply than fiat-backed currencies. An example is the Dai from MakerDAO.
Backed by algorithms
In this group there is no asset, but rather they have an algorithm to record or add cryptography and thereby give stability to the value.
They are programmable, flexible and scalable assets. Among the main ones are Fragments, Kowala, Carbon.
No warranty
They function as reserve banks and are in charge of monitoring supply and demand.
Also, they buy circulating coins when prices are very low and when they rise, they issue new coins. A prominent example is BASIS.
Best Stable Coins
Not all stablecoins are the same, therefore, here we offer you a list with the best, useful and anchored options, that is, the stablecoins of the moment, according to the CoinMarketCap portal.
Tether (USDT)
It is the best-known stablecoin, tied to the value of the USD and backed by gold, which aims to keep cryptocurrency valuations stable.
It is used by investors who want to avoid the extreme volatility of other cryptocurrencies while maintaining value within the market.
They are backed by an equivalent amount of traditional fiat currencies, such as the dollar, the euro, or the Japanese yen.
USDCoin (USDC)
It is a stablecoin with a fiat collateral pegged to the dollar, available on various exchange platforms. It is governed by the Ethereum blockchain and is distributed as an ETH token.
** Its goal is to make transactions faster and cheaper ** while providing the much-needed stability of cryptocurrencies.
Binance USD (BUSD)
Binance also launched a stablecoin: it is Binance USD, pegged to the US dollar.
It was created to facilitate transaction in decentralized finance (DeFi). It’s easy to buy and trade on various platforms in the US.
You can also trade BUSD with more than 48 currency pairs instantly exchange it for other popular stablecoins, and passively and actively earn money from it.
Dai (DAI)
It is a decentralized and collateral-backed stablecoin, trying to maintain a stable 1: 1 value to the US dollar.
It maintains its value by using debt collateralized in ether (ETH), the cryptocurrency of Ethereum.
If users want to acquire it, they can also spend ETH to buy the equivalent amount in dollars.
TerraUSD (UST)
It is a digital asset, famous for its predominantly scalable monetary policy.
It uses some simple protocols and policies including scalability, performance, and interchain.
Additionally, TerraUSD leverages technology to provide users with the best experience . Through it, stable performance can be obtained using the “Anchor” service.
TrueUSD (TUSD)
Backed 100% by the dollar, it is one of the most liquid currencies on the market . Their transaction fees are very low and interest rates high on stored balances.
It is an asset that is mainly focused on providing its holders with legal protections and audits in real time and under strict transparency protocols.
TrueUSD trades at the same rate as USD and can be exchanged between parties anywhere in the world.
Pax Dollar (USDP)
Founded in September 2018, Paxos is a fully regulated, fiat-secured stablecoin .
USDP can be exchanged one for one for US dollars, under strict transparency controls.
Among its advantages, it promotes greater efficiency and instant transactions for institutions and consumers.
Liquity USD (LUSD)
With a 24-hour trading volume, Liquity is the USD parity stablecoin.
It is used to pay loans on the Liquity protocol and can be exchanged for the underlying collateral at face value.
It allows users to get more liquidity for their ETH. In addition, it borrows LUSD, a stable and backed currency, pegged to the US dollar that is maintained by algorithmic monetary policy.
Neutrino USD (USDN)
Neutrino USD (USDN) is a collateralized algorithmic stablecoin pegged to the US dollar.
In addition, it facilitates exchanges of priced assets linked to national currencies, indices or raw materials.
HUSD (HUSD)
HUSD is a safe, trustworthy and fiat guaranteed stablecoin that combines the stability of the US dollar and the efficiency of blockchain technology.
All operations involving USDN, such as issuance, wagering, and reward payments, are transparent and governed by a smart contract.
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