The importance of stablecoins to the entire crypto-sphere can not be over-emphasized. Stablecoin brings to life much-needed stability to the ever-volatile cryptocurrency ecosystem.
Most stablecoins are usually pegged 1-1 with the USD, but some of them are having some problems with their USD-peg feature. Therefore, this article covers some of the top and most resistant stablecoins available today.
Also, we will do a quick review of the issue facing the TerraUSD (UST) algorithmic stablecoin. But before we move on, let’s find out more about stablecoins
What are Stablecoins?
Stablecoins are unique cryptos that are usually pegged to an external value source. These external variables may include top fiat currencies like the USD, commodities like gold, or even other cryptos.
Moreover, stablecoins provide much-needed price stability and other benefits like privacy, security, and fast cross-border transactions without the underlying volatility issue.
— Coin98 Analytics (@Coin98Analytics) May 10, 2022
Therefore, there are several types of stablecoins, which are classified depending on underlying assets.
- Fiat-collateralized stablecoins – They are usually pegged to a fiat currency reserve like the USD, GBP, EUR, Yuan, etc. Examples of fiat-collateralized stablecoin include USDC, USDT, etc.
- Commodity-collateralized stablecoins – They are usually pegged to precious commodities like Gold, Oil, Silver, etc. Examples include Paxos Gold, GSX, etc.
- Non-collateralized (Algorithmic) Stablecoins – A perfect example of an algorithmic stablecoin is the Terra USD (UST) stablecoin.
- Lastly, Crypto-Collateralised stablecoins – These stablecoins are usually pegged to other cryptocurrencies.
Top Current Stablecoins
Now, you will see a brief overview of some of the top stablecoin options available today.
1. Tether (USDT)
Tether (USDT) is the most popular stablecoin available today, which is backed by the US dollar. The stablecoin is usually pegged 1-1 with the dollar and is known for its stability and security. Interestingly, USDT is the largest stablecoin in circulation and by market cap. Tether is also currently available on top networks like Ethereum, Tron, EOS, Algorand, Bitcoin Cash, and Liquid.
According to Coingecko, USDT currently has a market cap of $82.8 billion and a 24-hour trading volume of $167.1 billion.
#Tether hit over $125 billion in trading volume over the last 24h 🚀
— Tether (@Tether_to) May 10, 2022
2. USD Coin (USDC)
USD Coin (USDC) is also a fiat-collateralized stablecoin. It is backed 1 – 1 with US dollars and is a reliable bridge between the fiat ecosystem and crypto exchanges. Notably, USDC is based on the Ethereum network and so is an ERC-20 token. Being an ERC-20 token, it is compatible with most wallet and crypto custody platforms available today.
Also, USDC is the second-largest stablecoin available today. The stablecoin is currently issued by the CENTRE consortium. Coinbase is also a major supporter of the USD Coin.
According to Coingecko, USDC currently has a market cap of $49,2 billion and a 24-hour trading volume of $29.3 billion.
3. Binance USD (BUSD)
Binance USD (BUSD) is a stablecoin issued by Paxos and a partnership with the popular crypto exchange, Binance. It is also backed 1 – 1 with US dollars and is approved by the New York State Department of Financial Services (NYDFS). BUSD is backed by reserves held in US-insured banks and Treasury bills.
At the time of writing, BUSD has a market cap of $16.9 billion and a 24-hour trading volume of $23.4 billion.
The most important part of BUSD’s trustworthy reputation as a stablecoin is its regulatory compliance.
BUSD offers a 100% transparent service that verifies, protects, and ensures the reserves that effectively maintain its US dollar peg.https://t.co/xb4egOzM9b
— Binance (@binance) May 10, 2022
4. DAI (DAI)
DAI stablecoin is the native stablecoin of the Maker protocol. It is a crypto-collateralized stablecoin and has a 1- 1 co-relation with the US dollar. However, instead of using fiat to back it, DAI does it using cryptocurrencies. Furthermore, this stablecoin uses smart contracts to control it and not in reserves or financial institutions.
Interested persons can obtain DAI by simply purchasing it from a crypto exchange like Coinbase. They can also do this by creating a Maker Vault.
According to Coingecko, DAI has a market cap of $5.9 billion and a 24-hours trading volume of $3,9 billion. Also, its circulation supply currently stands at 5,9 billion tokens.
5. TerraUSD (UST)
TerraUSD (UST) is a decentralized and algorithmic stablecoin pegged by Terra (LUNA) to US dollars. As compared to other stablecoins, UST is, however, not backed by any assets. Instead, to mint 1 UST, it needs to burn $1 of LUNA.
Update on Luna Tokenomics
How to predict when depeg will end.
Bringing back my “death spiraling Luna” model. Turns out it was accurate. All of those “Didn’t age well” jabs at it Didn’t Age Well.
— Pedro Ojeda (@pedroexplore1) May 11, 2022
Before this week, UST was one of the fastest-growing stablecoin options available. Its Co-founder, Do Kwon even revealed plans to unseat DAI stablecoin in a bid to further strengthen the UST. However, this is no longer the case as the stablecoin continues to struggle to remain pegged to the dollar. Yesterday, UST dropped by over one-third of its value and is currently trading at $0.41.
In response to UST tanking, Do Kwon has released plans on the next course of action to redeem the stablecoin.
Also, according to Kwon, the best course of action is to absorb the exiting stablecoin supply. Therefore, giving UST a chance to peg back to the US dollars.
Find out more about Do Kwon’s recovery plan.
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