If you’re new to cryptocurrency, you might have heard of “stablecoins” and wondered what they are.
They’re a relatively new concept in the cryptosphere that aims to provide investors with a way to hedge against volatility and store their assets for long periods without having them fluctuate wildly in value.
And even if it doesn’t sound like much fun, this is an important development in the crypto world because it provides an alternative to Bitcoin.
The concept of stablecoin
If you’re new to the concept of stablecoins, here are some basics:
Stablecoins are cryptocurrencies that are pegged to the value of fiat currencies. They are a way for financial institutions and users to hedge against volatility in other coins. This makes them appealing to those who want cryptocurrency but don’t want their funds fluctuating as much as they would with Bitcoin or other popular digital currencies.
Stablecoins can also help make crypto more accessible for mainstream users by enabling people without sophisticated crypto knowledge (or even computers!) to buy into cryptocurrencies without worrying about losing money on an investment gone wrong.
1. Tether (USDT)
Tether is a crypto asset that is pegged to the U.S. dollar. The company Tether Limited created it and has been around for years. The idea behind it is that you can hold your money in USDT, and it will always be worth $1, no matter what happens with the crypto market.
The value of Tether has always been backed by USD in the bank account of Tether Limited. However, in late 2018, some questions were raised about whether this was true. This led to the value of USDT dropping from above $1 to less than $0.90 at one point.
The good news is that this appears resolved, and now USDT is back above $1 again. The bad news is that if you held USDT when it dropped, it might have caused you to lose money on your investment.
2. USD Coin (USDC)
USDC is a stablecoin and dollars backs it. It was launched in 2018 by Circle, a crypto exchange company. The U.S. dollar reserves are in accounts at banks worldwide, with regular audits and third-party verification to ensure that the tokens are always backed 100%.
You can use USDC on crypto exchanges like Coinbase, as well as other exchanges that support it.
3. Gemini dollar (GUSD)
The Gemini dollar (GUSD) is the first Stablecoin issued by a regulated exchange. It’s backed by cash held in a U.S.-domiciled bank account and fully collateralized by holdings of U.S. dollars. The coin is subject to ongoing regulatory reporting requirements and monthly attestations from an independent registered public accounting firm.
GUSD has legal protection in the event of bankruptcy or fraud. They are fully collateralized. GUSD do not use any derivatives or other unregulated deposits that could potentially be used to pay out more than 100% of their value as claims against them (i.e., it’s not an IOU).
4. Paxos Standard (PAX)
In the world of stablecoins, Paxos Standard (PAX) is one of the most well-known. It is a dollar-pegged cryptocurrency that has been in circulation since mid-2019.
Why should you consider investing in this token? Well, for one thing, a financial institution by the New York State Department of Financial Services (NYSDFS) backs it. This means Paxos Standard is safe from market fluctuations and protected from theft or fraud due to its state-backed status.
5. Origin Dollar (OUSD)
Origin is a peer-to-peer marketplace protocol that enables buyers and sellers to transact on a distributed, open-source platform. Origin’s mission is to remove unnecessary intermediaries from the economy, lowering costs and increasing efficiency while promoting fairness and trust.
Origin Dollar (OUSD) is the token of choice for users to buy and sell products on the Origin Marketplace. This new Stablecoin is pegged 1:1 with U.S. dollars. It provides fast, reliable, and secure payments for everyone in the ecosystem – buyers, sellers, and developers alike.
6. TrueUSD (TUSD)
TrueUSD (TUSD) is a stablecoin backed by the U.S. dollar. It’s also one of the market’s most popular and liquid stablecoins. If you hold TUSD in your wallet, you can redeem it for $1 from TrustToken’s escrow account at any time. The company behind TrueUSD is TrustToken and has offices in San Francisco and Singapore.
Real assets backs TrueUSD to ensure its value remains consistent over time, it’s not just an IOU like many other stablecoins. It is redeemable for real money.
In addition, TrueUSD uses smart contracts on Ethereum blockchain technology to provide users with proof-of-reserve audits, so they know exactly how much cash backs their token balance at all times.
Are stablecoins easier and safer?
Hopefully, this article has given you a good overview of the stablecoins that are out there and their potential as a store of value.
Of course, there is a lot more research and development to do in this space before we see any real adoption, but with the promise of cryptocurrencies being able to provide stability for investors around the world, it’s only a matter of time before we see them become mainstream.
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