Despite the uncertainty that plagued the global economy this year, 2020 will be the year of stable coins due to the strong growth of the digital sector, with new advances emerging in all areas. While some attribute this growth to cryptocurrency enthusiasts’ growing interest in decentralized funding, others see it as an upward trend confirming fiat currency’s entry into the crypto ecosystem.
As the DeFi sector continues to grow, so does the popularity of stable coins, which are used to generate high returns from various decentralized loan projects.. Stable coins are also useful in bridging the gap between fiat currencies and digital assets. Stablecoins started the year well, with the cumulative transaction volume in a fiscal quarter surpassing the $ 90 billion mark for the first time in history. Although Tether (USDT) still makes up the majority of the stablecoins market, the Dai and USDC also saw growth in 2020.
Since the conception of the first stablecoin in 2012 with the proposal of the Mastercoin project to link cryptocurrencies to traditional assets in order to reduce price volatility, Developers have gotten used to using the US dollar as a stable asset.
Currently, however Developers are experimenting with other stable assets like gold, other fiat currencies, and even cryptocurrencies. Here’s an updated look at the state of the art of stablecoin in the form of a list of the top performing stablecoins out there.
Stable currencies with parity to the US dollar
Like any other stablecoin, Tether was designed to give investors the ability to store the benefits of crypto trading in a dollar-pegged cryptocurrency.. To quote the website: “Every tether is always backed 1 to 1 by the traditional currency in our reserves.” This means that for every USDT coin there is an equivalent of USD 1 in the company’s reserve. Right now, Tether is the most popular stablecoin, with a market cap of more than $ 15 billion and a daily trading volume of more than $ 40 billion, according to Coinmarketcap.
Despite claims by Tether’s issuer that the tokens are 100% backed by liquid reserves, numerous parties have historically expressed doubts about the company’s claims. But leave controversy aside The number of USDT in circulation recently increased from just over $ 4 billion in circulation in early 2020 to $ 15 billion. Most experts believe that DeFi was a major contributor to the massive shaping of USDT.
Furthermore, The rapid growth in the dominance of USDT has caused the currency to outperform huge payment platforms like Bitcoin and PayPal in terms of average daily transfer valuein more than $ 3,500 million. Due to its growing popularity, Tether is now planning to shift most of its offering to faster networks as the Ethereum network continues to have higher gas rates.
USD coin (USDC)
Published by Circle, a blockchain-focused financial services company, USD Coin was launched in 2018 as a stable coin pegged to the US dollar at a 1: 1 ratio.. Regarding stablecoin transparency, Circle states on its website that USDC reserves are audited monthly and presented to the public by major accounting services.
Like tether, USDC grew rapidly. In the last six months, the circulation increased by more than 1.8 billion US dollars. Recently, Center (a consortium formed by Circle and Coinbase to develop USDC management) announced the expansion of Ethereum’s USDC to include additional blockchains. The move is intended to ensure that USDC remains flexible enough for large financial innovations that arise between DeFi projects.
Paxos Standard (PAX)
According to its website, Paxos, the company behind the PAX Standard Stablecoin, is the most stable and most regulated in the world. With its listing on more than 150 stock exchanges, PAX has a daily trading volume of over $ 100 million and a total of $ 2 billion in circulation of minted PAX coins.
Like her colleagues PAX is offered as a digital dollar that you can use to quickly move money around the world at any time. The stable coin is based on Ethereum’s ERC-20 protocolClient funds are held in segregated accounts insured by the Federal Deposit Insurance Corporation.
Founded through a partnership between one of the largest cryptocurrency exchanges and Paxos, Binance USD (BUSD) is a stable coin pegged to the US dollar. The stable coin has previously received approval from the New York State Department of Financial Services. This allows other financial institutions in the New York area to hold BUSD without the need for prior NYDFS custody licenses.
In a race to establish itself as a stablecoin for DeFi applications Binance USD was just launched on Dapper Labs’ flow blockchain. By working with Dapper Labs – the pioneering team for crypto games like Crypto Kitties – Binance USD is expected to open the doors for developers looking to build stable DeFi apps with Bitcoin support. BUSD is also very popular on Binance’s Smart Chain, a contractable smart blockchain designed to accelerate the development of DeFi protocols.
Thanks to Binance’s dominance of the market BUSD has seen one of the most explosive growth rates, with market cap increasing from around $ 20 million at the beginning of the year to more than $ 500 million today..
TrueUSD, while criticizing Tether for its centralized management and lack of transparency, claims it does the opposite. TrueUSD is a stable US dollar parity coin based on the TrustToken platform and claims that it operates with a transparent code of ethics that provides the public with real-time evidence of funds held in an escrow account.
Not even the TrueUSD team has access to the escrow account Instead of a management team, intelligent contracts are concluded to keep the peg between the US dollar and the TUSD currency at 1: 1.
In March of last year, TrustToken worked with an accounting firm to develop a dashboard that allows third parties to view the outstanding TUSD amount with guaranteed fiat funds.
In addition to TrueUSD The TrustToken platform also offers stable coins backed by other national currencies such as the British pound, Australian dollar, Canadian dollar, and Hong Kong dollar.. All of them were launched in 2019 and most of them are actively traded on Uniswap, a decentralized exchange that hosts a variety of DeFi protocols.
Second part: projects in connection with other national currencies
5th October, Xfers, a Singapore-based payment company, has launched a Singapore dollar-pegged XSGD stablecoin. As the first token denominated in Singapore dollars, the makers of XSDG hope the coin will provide an opportunity for both businesses and individuals to engage with the crypto industry.
In order to ensure easy access, the token can also be freely withdrawn and processed with unguarded wallets. Since the stablecoin claims to meet the Financial Action Task Force’s travel standard, Financial institutions can also use it for cross-border money transfers. Like most stablecoins, the team behind XSGD is pushing for the token to be introduced within the DeFi ecosystem Currently available on Ziliswap as an ERC-20 token.
Speaking to Cointelegraph, Aymeric Salley, who leads the project, said: “Now is the time for stable coins pegged to other national currencies such as the Singapore dollar to emerge.”
Saga, a UK-based blockchain company, launched an alternative stablecoin to the Facebook Libra in late 2019. Much like the Libra, SGA keeps its value stable by pegging it to a basket of national currencies.. What sets Saga apart from the Libra proposal is that the SGA token’s value is tied to bank deposits in the International Monetary Fund’s Special Drawing Rights. The IMF’s Special Drawing Rights are a basket of assets heavily weighted in the US dollar, as well as the euro, Chinese yuan, British pound sterling and Japanese yen.
Unlike the Libra, Saga won’t benefit from the stablecoin either, although it acts as the main issuer of the token.. In an interview with CNBC, Saga founder Ido Sadeh Man said that the goal of the stablecoin is to act as a complementary currency for cross-border payments as it would allow consumers to make payments on ecommerce platforms like Amazon. . Due to the lack of clarity of regulations, Saga is currently not available in the US or Israel..
With the support of the euro, the stablecoin EURS is issued by Stasis, a blockchain company that aims to tokenize traditional assets.. The company claims to bring together several licensed financial intermediaries, including accounting firms and law firms, to ensure compliance and stability of its token assets.
The EURS stable coin was issued in June 2018. It is based on the optimized EIP-20 standard from Ethereum. EURS pioneered the first stable coin to be backed by the euro and also provides continuous transparency through daily bank statements from its liquidity providers.. To date, EURS has issued around 32 million coins with a daily trading volume of just over $ 1 million.
Monerium is a fintech company founded in 2015 that hopes to simplify access to digital currencies. The company launched its first stablecoin in January 2019 after a $ 2 million startup round led by Crowberry Capital with the participation of ConsenSys and Hof Holdings.
The Monerium digital currency is designed to issue the digital equivalent of the major fiat currencies to customers who can customize their currency basket. Monerium claims it is decentralizing funding by allowing open technical and regulatory standards in support of its stable coin. Monerium services are currently available in six countries: the UK, Germany, Denmark, France, Lithuania and Sweden.
Can stablecoins outperform other currencies?
The increase in overall stablecoin supply has puzzled many market watchers. If we are guided by the analysis of the coin metrics, April 20 marked the first time the number of stablecoins in circulation exceeded $ 9 billion. Some analysts argue that the increased stablecoin supply is a bullish sign as people hedge their positions. Others believe it is a bearish signal from people leaving the crypto room.
However, this growth in stablecoins comes at a time when Some jurisdictions also appreciate the idea of creating their own stablecoins.. As calls continue to mark traditional assets, newcomers to the stable coin market like the stablecoin XSDG will be the order of the day.
As the volatility increases, more developers will be watching developments in stablecoins to create financial innovations that reduce volatility. The question now is whether stable coins like Tether will overshadow the usefulness of Bitcoin, Ethereum and other cryptocurrencies as cross-border payment protocols, as well as the fiat currencies they are tied to.
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