If you were to ask what the future of money looks like, a good number would answer cryptocurrency
. The world is growing more and more digital these days anyway. Online and mobile banking has become the norm and online money-sharing platforms are now as integral as ever. Of course, digital currency will have its own place too and cryptocurrency is doing just that. But there's also no denying that there are a lot of people that are still hesitant about cryptocurrencies, mostly because of their volatility. Hence, stablecoins were invented to answer those concerns.
What Are Stablecoins?
Just as its name says, stablecoins are a type of cryptocurrency that has more stability than regular cryptocurrency. Also referred to as 'altcoins
,' they're backed by real-world assets, particularly by the US Dollar, and are more regulated compared to Bitcoin
and other altcoins. Because of this, beginners are less adamant about getting into the crypto market thanks to the stablecoins. Though they work on similar technology, the fact that stablecoins are less volatile helps invite more investments compared to other cryptocurrencies. And as a result, some of the most popular kinds of stablecoins have reached the billion mark in terms of market capitalization.
How Stablecoins Work
Just like regular cryptocurrencies, you can use stablecoins in all sorts of online transactions. Whether it'd be to pay for goods and services—such as renting through All Luxury Apartments—or to use as collateral for loans and the like, stablecoins are as legitimate as a digital currency as standard cryptocurrencies. In fact, as already mentioned, stablecoin uses the same technology as other cryptocurrencies. You'll need a digital wallet (which you can get on platforms like Coinbase
, etc.) to purchase and store your stablecoins and a blockchain to list down all your transactions. Once you have these, you're good to go!
The Benefits of Getting Stablecoins
With so many cryptocurrencies around, what makes stablecoin such a worthy investment? There's the stability that it promises, of course, which ensures less risk for the long haul. The quicker transactions, on the other hand, benefit those who transfer money from one country to the next and, at the same time, helps avoid paying extra financial fees. And in relation to that, trading with stablecoins using cryptocurrencies helps you undergo all sorts of financial services without the use of other applications. In this regard, you get to deal with the cryptocurrency directly with little to no third-party interference.
The Most Noteworthy Stablecoins
Now, to further this discussion on stablecoins, it's worth noting a few of the most popular and highest-valued stablecoins in the market today. Beyond their market capitalizations, this handful of stablecoins have impacted the crypto market in more ways than one.
Developed by the cryptocurrency platform BitFinex
, Tether (USDT) enjoys the highest market capitalization to date. Currently, it's valued at $68.6 billion USD and since stablecoins rarely fluctuate, it's highly likely that Tether will enjoy this high value for a long time. As a fiat-collateralized stablecoin, Tether is backed by a number of standard currencies, specifically by the US Dollar, the Euro, and the Japanese Yen, among many others. Though it also works on a blockchain just like any other cryptocurrency, its stability has garnered a lot of attention from investors. As a result, it's now the fifth-largest cryptocurrency in the world.
Pax Dollar (USDP)
Formerly known as the Paxos Standard stablecoin (PAX), this Paxos
-developed cryptocurrency now goes by the name of 'Pax Dollar' and uses the symbol, USDP. Since it is indexed to the US Dollar, the Pax Dollar will remain valued at $1.00 at any given time. In a way, this is the closest connection any cryptocurrency has with standard currency. Although other stablecoins are also less volatile, the USDP cryptocurrency is only of the few that are affixed with a standard currency. So if you have, for example, 100 Pax Dollars in your digital wallet, it's no different from having a $100.00 bill in your pocket.
USD Coin (USDC)
In many ways, the USD Coin is similar to the Pax Dollar as it is also indexed with the US Dollar, albeit originally. Invented by the American cryptocurrency company Circle
, the USD Coin serves as a stablecoin that provides stability within the crypto market. The difference between this and other stablecoins, however, is that users can work on the USD Coin on a variety of systems, be it in Ethereum
, Algorand, Tron, and more. And while it started as having the value of the US Dollar, Circle's website has since updated that the USD Coin is now 'backed by fully reserved assets
.' What that means exactly remains to be seen.
Binance Dollar (BUSD)
, with the help of Paxos, developed the Binance Dollar, or 'BUSD' as another formidable stablecoin in the crypto market. Regulated by the New York State Department of Financial Services
, each Binance Dollar is valued at $1.00, not far from Pax Dollar. And while Binance developed the stablecoin, it's Paxos who serves as the USD custodian. Thanks to this, anyone can convert their US Dollars to Binance Dollars with little to no problem at all. The only downside, however, is that because of government regulation, it's not s decentralized as other cryptocurrencies.
Gemini Dollar (GUSD)
Since Gemini, founded by Cameron and Tyler Winklevoss, is one of the most popular and most notable platforms in the crypto market, it's only natural that they will develop their own cryptocurrency. And so, in 2018, the company launched the Gemini Dollar, a stablecoin backed by the US Dollar. Approved by the New York Department of Financial Services (NYDFS) and held in reserve at State Street Bank and Trust Company
, it's become one of the most trustworthy cryptocurrencies in the market today. Through the Gemini platform, anyone can purchase Gemini Dollars and use them for all sorts of transactions. What sets it apart, however, is the high-level security that comes with the transaction process.
created the Dai stablecoin to combine the transparency of decentralized finance with the stability of real-world currency backing. The Ethereum-based decentralized autonomous organization (DAO) plans to let this stablecoin stand as proof that it's possible to maximize the freedom of the crypto market all while ensuring the stability that comes with stablecoins. Similar to the other stablecoins on this list, Dai is indexed on the US Dollar, making its value equal to $1.00 each. Worked on the Ethereum system, allowing for flexibility in terms of cryptocurrency transactions and the like.
Although cryptocurrency remains an ever-growing market, its volatile nature remains a hindrance at large. And this is what stablecoin aims to eradicate. By providing ample stability, stablecoins help attract more investors to advance cryptocurrencies forward.