Stablecoins are one of the most dynamically developing segments in the world of cryptocurrencies. In this article, we will take a deeper dive into the variety of stablecoin types. Enjoy reading!
So, let’s remind ourselves once again that a stablecoin is a digital asset that is linked in one way or another to the exchange rate of a physical asset. However, such assets are not always backed by real money, securities, or precious metals; they can also maintain a stable exchange rate using an algorithm.
What are stablecoins for?
Stablecoins are necessary for the convenience of calculating and conducting transactions in the cryptocurrency industry. It is more convenient and understandable to know how many dollars Bitcoin is worth than to see the price expressed in Ether, for example ($19.24 ETH = $1.0 BTC).
Since fiat dollars cannot be used for trading and exchanging cryptocurrencies, so-called digital dollars were invented.
However, as the cryptocurrency industry has progressed and developed, some companies have begun to add stablecoins to the market that are pegged not only to the dollar but also to other assets.
Let’s take a look at the different types of stablecoins.
Stablecoins to the Dollar
Let’s start, of course, with the most popular stablecoins, which are pegged 1:1 to the dollar. It is worth noting that there are dozens, if not hundreds, of such stablecoins. Here we will mention only the most popular ones:
- USDT — The most widely used stablecoin, which is almost three times ahead of its closest competitor in terms of capitalization. USDT was issued and backed by Hong Kong-based Tether Limited in 2015. According to the company’s management, the token is more than 85% backed by real dollars. Its capitalization at the time of writing is $84.8 billion.
- USDC — The second most popular stablecoin, issued by the American company Circle. As of October 26, 2023, the USDC token is more than 100% backed by the US dollar. Current capitalization — $24.6 billion.
- DAI — Another well-known stablecoin issued by the Danish company Maker Protocol and managed by the decentralized autonomous organization DAO Maker. Interestingly, this token is backed by cryptocurrency contributed by DAO participants, whose value is 25% higher than the issued DAI token. Current capitalization is $5.3 billion.
- TUSD — The next stablecoin was issued by TrueUSD after several scandals involving USDT in 2018-2019. This token is positioned as the first transparent stablecoin. Interestingly, to purchase this asset directly from the company, users must transfer US dollars to a specified account, after which they receive digital assets in their wallet. If a user wants to sell their assets to the company, they are irrevocably “burned,” and the user receives their dollars. Current capitalization: $3.3 billion.
Interesting fact: our list does not include the BUSD token issued by the American company Paxos. The reason is that, according to a ruling by US regulators, Paxos will stop issuing BUSD from February 2024. This is because a few months earlier, Binance introduced mandatory conversion of certain stablecoins entering the exchange into BUSD. After that, Circle filed a complaint, which was successfully upheld.
Stablecoins to Precious Metals
Such stablecoins are issued and backed by precious metals: gold, silver, platinum, etc. Let’s take a look at them.
- XAUT — stablecoin pegged to the value of gold, issued by Tether Limited. Interestingly, this token can be exchanged for real physical gold, as it serves as proof that the user owns that gold. Current market capitalization: $489 million.
- PAXG — Another stablecoin pegged to gold, issued by Paxos. Current market capitalization: $478 million.
- SLVT — A stablecoin pegged to silver, issued by SilverToken. This asset is not traded on any crypto exchanges and can only be purchased directly from the company. Incidentally, there is currently no data confirming the company’s integrity.
Stablecoins to the Euro
Next, let’s look at stablecoins pegged 1:1 to the euro. At the moment, they are much less popular than dollars.
- EURC — Another token from Circle. The reserves for this asset are also 100% backed by real euros. Current market capitalization: $53 million.
- EURT — digital euro from the well-known company Tether Limited. Current market capitalization — $38 million.
- EURS — A token issued by European fintech company Stasis. Current market capitalization: $131 million.
Stablecoins to other fiat currencies
In addition to the most well-known dollar-based stablecoins, there are others pegged to less popular currencies. Here are a few examples:
- CNHT — stablecoin pegged to the Chinese yuan. This token is issued by Tether Limited only on the Tron blockchain and is traded on the Bitfinex exchange, which is affiliated with Tether. Current market capitalization — $2.8 million.
- TRYB — stablecoin pegged to the Turkish lira. This token was issued and secured by the Turkish company BiLira and is traded on the MEXC exchange. Its current market capitalization is $8.3 million.
- DCHF — stablecoin pegged to the Swiss franc. This asset is issued by an on-chain project called Moneta DAO. Its current market capitalization is $8.4 million.
- GBPT — stablecoin pegged to the British pound sterling. This asset is issued and regulated by the government of the Isle of Man, part of the British Isles. It is traded on the Gate.io exchange. Current capitalization is $1.7 million.
- MXNT — Stablecoin pegged to the Mexican peso, also issued by Tether Limited. This token is also traded only on Bitfinex. According to Coinmarketcap, this token has no capitalization or it is unconfirmed, which is a bad sign.
Stablecoins to Commodities
Such stablecoins are pegged to various units, for example, to one ton of harvested wheat or to carats, which are used to measure the weight of precious stones. There are few such projects, but here are some of them:
- Diamond Standard — An asset issued by the company of the same name, which is equivalent to one carat of diamonds. According to the company, ownership of such an asset confirms ownership of real diamonds, which can be exchanged directly with the company. In other words, users purchase digital assets and, if they wish, can exchange them for real precious stones.
- Agrotoken — An asset issued by an Argentine startup of the same name, backed by agricultural crops: soybeans, wheat, and corn. One ton of harvested grain provides one digital asset.
Interesting fact: in 2018, Russian company Norilsk Nickel announced plans to issue its own stablecoin, which would be pegged to raw materials. However, the project never progressed beyond the planning stage and was safely shelved.
Conclusion
Despite the large number of stablecoin types, those pegged to the US dollar remain the most popular at the moment. This is because the dollar is an international currency used in more than 80% of all transactions worldwide. Consequently, it is much more convenient to evaluate the value of a particular cryptocurrency in dollars.
Remember that it is important to ensure that stablecoins have verified collateral that has been audited by reliable auditors. Be cautious and always do your own research (DYOR) before purchasing any assets.
