Direct from the desk of Dane Williams.
As their name suggests, stablecoins aim to maintain a stable value.
Designed to mitigate the volatility associated with free floating cryptocurrencies, this usually means being pegged to a fiat currency.
With the global standard unit of account being the almighty US dollar, even as an Aussie that’s the only price peg I worry about.
This stability makes them appealing for various use cases, such as:
- Facilitating transactions
- General savings
- Offering liquidity to the entire crypto ecosystem
In this week’s fresh top 5 blog post, I take a look at the five most prominent stablecoins.
With the LUNA/UST debacle still fresh on everyone’s mind, navigating the stablecoin space can be a little daunting.
But don’t worry, these are the only ones you need to know
1. Tether (USDT) - Market Cap: $83,384,551,927
Tether (USDT) is the most well-established and widely used stablecoin in existence.
It falls under the category of collateralised stablecoins, where its value is backed by traditional assets held in reserves.
Tether Limited, a company associated with Bitfinex, manages Tether and this is who you are trusting when holding USDT.
The company claims that each USDT token is fully backed by one US dollar’s worth of assets held in reserves…
However, the transparency and auditability of Tether's reserves have been a subject of debate in the cryptocurrency community.
2. USD Coin (USDC) - Market Cap: $27,495,152,338
USD Coin (USDC) is the second most popular collateralised stablecoin, aiming to offer a transparent and better regulated alternative to Tether.
USDC is an initiative of the US-based Centre Consortium, a collaboration between Coinbase and Circle.
The Consortium ensures that every USDC token is fully collateralized by an equivalent amount of US dollars held in audited bank accounts.
This commitment to transparency and regulatory compliance has made USDC increasingly favoured by institutional investors and has thus flowed on into the DeFi space.
3. DAI (DAI) - Market Cap: $4,292,593,678
DAI stands out from the previous two stablecoins due to it being further down the algorithmic stablecoin scale.
It operates on the Ethereum blockchain and is governed by MakerDAO within a relationship I’ve previously looked at in more detail.
To quickly summarise for the sake of this list, DAI's stability is maintained through a system of smart contracts and algorithms.
Instead of relying on direct reserves, DAI achieves its value stability by overcollateralising its issuance with other cryptocurrencies.
It’s cool, but relying so heavily on the collateralised USDC sort of defeats the point of trying to be a decentralised, algorithmic stablecoin.
4. Binance USD (BUSD) - Market Cap: $4,046,192,730
Binance USD (BUSD) is a collateralised stablecoin issued by Binance, one of the largest cryptocurrency exchanges in the world.
Binance maintains full reserves of US dollars to back each BUSD token in circulation.
In 2023 this of course is a double edged sword.
Sure Binance are too big to fail, but the intense global regulatory and legal pressure that they find themselves under is a risk to all holders.
It’s by far the stablecoin that I’ve used the most, but have drifted away more recently because it’s just not worth the risk.
5. Hive Backed Dollars (HBD) - Market Cap: $11,107,434
Hive Backed Dollars (HBD) are the Hive Blockchain’s algorithmic stablecoin.
Supported by the Hive blockchain’s ability to convert 1 HBD into $1 USD worth of HIVE crypto at any time, they provide a novel solution to the (at least soon to be) highly regulated stablecoin space.
As a permissionless, censorship-resistant algorithmic stablecoin that sits completely outside of the regulatory control of governments, HBD has the ability to grant access to financial services to anyone in need.
Its market cap may make HBD a relatively insignificant player right now, but as the need for a permissionless, USD-pegged asset continues to grow, it’s uniquely positioned to capitalise on the demand.
The sleeping giant of the stablecoin world.
Final thoughts on the stablecoin space in general
As I said at the top of this post, these are the only stablecoins you need to know.
My personal advice would be to avoid all others that you come across like the plague.
There are just too many broken models and straight up stablecoin scams (hi Justin) out there.
The five stablecoins I’ve discussed here - Tether (USDT), USD Coin (USDC), DAI (DAI), Binance USD (BUSD) and Hive Backed Dollars (HBD) - are by far the most trustworthy and by extension, the largest by market cap.
Each represents a different model of achieving stability, allowing you to choose the one that’s right for your personal situation and risk tolerance.
Of course my final verdict would be to choose the only truly permissionless stablecoin on the list, my pick for the best algorithmic stablecoin: HBD.
But for sheer convenience, you can’t go past USDC.
Ultimately, you do you!
Best of probabilities to you.
Posted Using LeoFinance Alpha
HBD is definitely the sleeping giant in the stablecoin world. It's decentralized and has great perks like a 20% APR on savings. Apart from HBD, I routinely use Tether. The rest are good too!
Are you ever worried about Tether blowing up if someone discovers that they actually aren't backed by what they say they are?
Posted Using LeoFinance Alpha
I would use it, but not hold it.
I'm worried about it from the viewpoint on how it will impact the crypto space. It'll probably 10x the blow TerraUSD gave to the space. Personally, I only use it for transactions but I don't hold any for mid to long term purposes. HBD is here for that :)
Although HBD is a micro fraction of the stablecoin market I think it is one of the more interesting solutions for the blockchain to have two cryptocurrencies of which one is a unique stablecoin. Keep it that way HBD :)
The idea is great.
But do you ever get worried that not enough is being done to truly scale up?
Even liquidity in Leo's bHBD:BUSD LP on BSC is sliding.
Posted Using LeoFinance Alpha
Yes, this is one of the problems - scale.
And as for other fields like bHBD or pHBD, I've been quite negative lately. The liquidity and bridge between blockchains is a drama (now there are maybe 10 HBD in total on bHBD and pHBD accounts).
Thanks for this, yu nailed it. Be bly. Please boss how do you create your images?
For images, I use Canva.
It has some really good templates and graphics which you can use to make banners like this for free.
Posted Using LeoFinance Alpha
Okay boss, already have Canva installed but don't know how to go about the designs.
You don't need to install anything.
Google Canva and go to their website which lets you do everything from your browser.
Browse the templates and start by just changing the text.
You will quickly get the hang of it.
Posted Using LeoFinance Alpha
Okay boss, thank u
Soon HBD will be on the top 🙂
Well, it is the only truly permissionless stablecoin on the market right now.
There's certainly potential if it can grow its liquidity.
Posted Using LeoFinance Alpha
Yea I feel it also