Cryptocurrencies are valuable, but many investors dislike their price volatility. In the last three years, Bitcoin has increased by more than 1,000%. During this time, the value of the coin also fell significantly. Price fluctuations like these are just too much for some investors.
A stablecoin is a cryptocurrency whose value is pegged to another asset such as the US dollar, commodities, or other cryptocurrencies. This makes the price of the currency more stable. The idea of stablecoins was first proposed in a 2012 white paper published online by J.R. They’ve been in a rage since their inception. The total global market cap of stablecoins exceeds $150 billion.
In this article, we will be exploring the top seven stablecoins of 2022.
What Is A Stablecoin?
A stablecoin is a cryptocurrency backed by a physical asset. Maintaining market volatility has always been a big question mark with cryptocurrencies, and the stablecoin system answers that question perfectly. This combination of physical and crypto-assets allows stablecoins to maintain their market volatility. Market volatility is a key issue for various crypto assets. With the effectiveness of stablecoins, the negative misconception will be corrected by tying cryptocurrencies to real assets.
The development of stablecoins allows users to take advantage of the market value of the tied physical asset and other features. The most important factor for a real asset is not subject to daily market volatility. There will be volatility, but it will be small and not on the scale of cryptocurrencies. Gold, elements, fiat cash, metals, real estate, etc., are common physical assets associated with cryptocurrencies. These physical assets are used for stablecoin development for businesses.
Top Seven (7) Stablecoins in 2022
1. Tether (USDT)
The coin gets its name from the value of being tied to the dollar. Tether is the most popular stablecoin in the crypto space. Additionally, it was the first major coin to be adopted by investors and cryptocurrency exchanges.
Tether is backed by traditional currencies, commodities like gold and silver, and cash equivalents. Smooth integration with cryptocurrency and fiat currency platforms has made this stablecoin a favourite of many investors.
With a market cap of around $82.64 billion, stablecoin is the fifth-largest cryptocurrency with a market price of $1. However, it can sometimes vary from 91 cents to just over a dollar. The guarantor of the token is a Hong Kong bank with a large amount of user funds. In addition, the Omni-layer protocol manages coin issuance, demand tracking and clearing.
2. USD Coin (USDC)
USD Coin’s value is pegged to the US Dollar and runs on a variety of blockchains, including Algorand, Ethereum, Solana, and Stellar. It worked with CENTER technology and was initially developed by Coinbase and Circle. The coin is known for its transparent verification technology and fast and secure transactions.
In addition, it is a crypto-backed stablecoin. Its cash reserves remain with FDIC-insured US banks. Additionally, it is regulated by the New York State Department of Financial Services to protect customers and other investors.
USDC has a market capitalisation of $50.57 billion and a market price of $1.00, a 1:1 ratio to the US dollar. Also, users are not charged any fees when exchanging or creating these tokens. In turn, they offer an excellent way to trade assets. This is possible due to the underlying USD reserves and monthly market token supply.
3. Binance USD (BUSD)
Binance has partnered with Paxos to launch Binance USD (BUSD) in 2019. This stablecoin is backed by a virtual dollar with a 1:1 ratio to the US dollar. It is regulated by the New York State Department of Financial Services, and FDIC-insured banks store their reserves.
It is audited monthly by a reputable auditing firm to verify the authenticity and compliance of the reserves. Many users prefer it due to its stable and reliable value. Investors can hold BUSD as a hedge against crypto market volatility and the risk of fiat currency devaluation. Finally, they can also use and trade it in the DeFi lending market.
Binance USD has a real-time price of $0.999986, a market cap of $17.67 billion and a 24-hour daily trading volume of $4.27 billion. Currently, the coin is the 18th largest cryptocurrency on the market.
4. TerraUSD (UST)
According to TerraUSD’s whitepaper, the token will remain “price-stable and growth-oriented”. TerraUSD’s protocol is stabilised by Terra’s own native cryptocurrency, Terra. How it works is pretty simple.
The Terra platform protocol incentivises users to earn profits with extremely low risk when TerraUSD price is not $1 by linking TerraUSD to regular Terra (LUNA) tokens and trading LUNA against UST or USD ( and vice versa). More UST is created when its price rises above $1, and when its price rises, the UST pool begins to shrink below $1, establishing equilibrium. This keeps the price of TerraUSD stable against the US Dollar, and it seems to work. Despite having a higher risk rating than Tether and Binance USD, InvestorsObserver still considers TerraUSD a low-risk token.
5. Dai (DAI)
According to MakerDAO’s whitepaper on the company’s Dai stablecoin, “Dai is generated, secured, and stabilised using an Ethereum-based currency deposited into MakerDAO’s vault.” This escrowed cryptocurrency can then be used as collateral whenever a user wants to withdraw Dai currency. And since the deposited cryptocurrency is worth more than the US dollar, MakerDAO can easily link its stablecoin 1:1 to the US dollar.
The theory excited some investors so much that venture capital firm Andreesen Horowitz invested $15 million in MakerDAO in September 2018, less than a year after the currency’s launch. This means that 6% of all tokens in the company at the time were purchased. This institutional investment also helps keep the value of the coin stable. Although InvestorsObserver considers Dai slightly more volatile than Tether, the site still lists DAI as a low-risk currency.
6. True USD (TUSD)
Launched in 2018, True USD is the first 100% USD-backed stablecoin in the crypto industry. It is transparent, reliable and considered by many to be the best way to hedge against volatility in the crypto market. Because of this, many experts believe the asset to be the most independent and manageable cryptocurrency on the market.
The coin has a 1:1 ratio to the US dollar. In turn, its collateral funds are in third-party storage. Also, the money goes to the trust institution.
Also, its creator is not involved in the transfer and does not have access to it. In fact, the release of these funds is done at the client’s request using smart contracts.
True USD runs on the TrustToken platform. At the time of writing, it has a market cap of around $1.36 billion and a market price of $1. In addition, the token is characterised by low transaction costs, high interest on capital deposits and high data transparency.
7. Neutrino USD (USDN)
Neutrino USD is an algorithm-based crypto-collateralized stablecoin. This stablecoin is backed by the US dollar. This stablecoin includes applications such as issuance, staking, collateralisation, and reward payments. These applications are transparent, and their governance is secured by smart contracts.
Live trading at $0.9808 with a market cap of $995,755,472, making Neutrino USD the 7th largest stablecoin.
The development of stablecoins is considered the next big thing in the crypto market. Stablecoins are expected to be the driving force behind the digital economy of the future as commercial platforms enter this space for a wide range of returns and gains.