Tether is probably the most popular stable coin known today. It currently has a trading volume of $3,548,100,000, a market cap of $2,520,980,231 and a supply of 2,507,140,814 USDT. But there are many other projects working on stable coins. In definition, a stable coin acts an asset – not a currency and provides price stability characteristics for purposes of avoiding volatility and acting as a better unit of account and even as a store of value. Holders can convert crypto to stablecoins, for instance, when negative volatility hits markets and store the stablecoin instead.
Essentially, it would act as a better link between fiat and other cryptocurrencies, especially in applications such as shopping and a better store and exchange of value. That does not mean it would be a perfect system. Many people would want to assume fiat is stable but its value actually fluctuates. The difference, in comparison to cryptocurrencies, is that the latter are very volatile to large margins.
There are two main types of stablecoins in the market today: fiat-backed and those backed by other assets such as gold. However, some are backed by other cryptocurrencies and still others are not collateralized at all.
Basecoin is now known as Basis. Basis offers a short-term alternative to volatile cryptocurrency with an innovative solution to eliminating volatility for stability of currency. First, it seeks to achieve independence from fiat currency. For now, the crypto is backed by fiat but in future, the system will shift to an index- offering decentralisation, stability and independence from fiat currency.
The coin's protocol is pegged on an index or asset (e.g. Consumer Price Index or Euro, USD, etc.). The supply is adjusted automatically to offer a constant value. This is done by constantly monitoring reliable data sources.
This process is compounded using two additional currencies namely Base Bonds, and Base Shares. These provide an economic incentives for holders of Basecoin to contract supply of the coins. In other words, they can sell their Basecoins for bonds and earn interest on that investment.
Shares are issued when supply expands. These processes maintain an equilibrium of value for Basecoin.
Bitshares are only usable on the Bitshares exchange only. SmartCoin are backed by the BitShares core currency, BTS. They can be converted to the shares at any time on the exchange at an exchange rate set by a trustworthy price feed. They are fungible, divisible, and free from any restrictions. Offered on the blockchain, they implement the concept of a collateralized loan.
BitUSD is another dollar-pegged coin, implemented using “smartcoins” to collateralize the currency held against it, typically Bitshares.
Remember the BitShares platform provides a feature known as "user-issued assets" that helps facilitate profitable business models to issue, hold and trade, with certain restrictions, custom token registered on the platform. These assets are created by users who also sets the requirements. Some of the BitShares assets include OPEN.USD and OPEN.EUR.
BitCNY is a stablecoin backed by Chinese Yuan. With it, holders can trade crypto, redeem value backed by real CNY, and runs on the BitShares blockchain. It is not mineable.
MakerDao/DAI token is also pegged on the US dollar. The projects, nevertheless, recognizes the need to solve some common problems eminent in any fiat-backed crypto or stable coin, such as the fact that in cases of legal actions, user accounts would get into jeopardy. MakerDAO uses smart contract and Ethereum value to deal with this instability. These two makes stablecoin highly attractive for use in both decentralized and centralized economies.
Instead of buying DAI, users will create it in exchange for Ether and thus lock Eth within the Maker system. When a user returns their Dai, the CDP smart contract will return the same quantity of ETH as originally put into collateral. Dai employs an automated process of liquidation in case ETH price moves down. The Dai is auctioned off proactively before dropping below the quantity of Dai it backs.
Thus, it derives its value from the collateralized Ether, with its demand created via smart contracts run on the Ethereum blockchain. The coin is run by MakerDAO community and recently entered into partnership with Dether.io to see the stablecoin being used on Mobile ATMs. This would give the global community he chance to switch between the coin and any supported cryptocurrency. This would also reduce risk for investors in addition to driving adoption of the coin.
MakerDAO currently has a market cap of $36,125,995, volume of $2,770,650 and the circulating supply is 36,282,737 DAI .
In contrast to Dai the stable coin, MKR token is volatile utility token, governance token and recapitalization resource of the Maker system. It is required for paying fees accrued on DPs that have been used to generate Dai in the Maker system. It is the only token that can be used to pay the fees.
However, it is also used in the voting for risk management and business logic of the Maker system -- needed for system success and survival.
DigixDAO was the first company to launch gold backed stable coins. The Singapore-based company uses Ethereum blockchain and issues two cryptocurrencies namely DGX and DGD. DGX tokens equal 1 gram of gold each, backed by real gold while DGD tokens provides the holder with voting power proportionate to their token amount.
The procedure for issuing and auditing DGX tokens is complicated.
They also charge 0.13% of transacted amount. The total demurrage fee is 0.6% with 0.2% going to DigixDAO and 0.4% going to the storage.
Havven is a cryptocurrency project that seeks to eliminate problems where a pegged cryptocurrency is reliant on a third, potentially centralized party as happens in most cases with most cryptocurrency projects.
It employs an autonomous approach to solve volatility. The cryptocurrency serves both as an incentivized rewards system and stable means to transact. This happens through a dual-token economy using Nomin and Havven tokens. Each Nomin token is backed by the system's collateral token, Havven. Holders are compensated for staking each time users transact. 80% of the collateral tokens are held in escrow to eliminate volatility during large-scale sell-offs.
Havven platform works as a decentralized payment network in addition to being a stable coin. With it, users can do global remittances and payments, fund token sales, and trade on exchanges in addition to securing a store of value and the crypto acting as a unit of account for prediction markets.
The platform held an ICO this last February, and is planning launch of platform and release of ETH-backed nomins this March. Havven-backed nomins will launch in the second quarter for the foundation phase and public phase in the third quarter. Multi-currency support launches in the forth quarter.
Nomins, the stablecoin has a value of US$1. Remember, ownership of the Havven tokens also grants the right to issue Nomins in escrow.
The market cap for the cryptocurrency is currently $33,609,823, Volume is $1,020,270 and current circulating supply is 60,945,766 HAV.
TrueUSD uses own crypto TrueCoin, which is fully backed by USD but, compared to Tether and the likes, the project brings in more transparency, regular auditing, full collateral, and legal commitments to exchange the token for USD. Holders who pass KYC/AML verification and comply with company terms will be able to redeem TUSD for USD in the TrueUSD escrow accounts.
The company also plans to support Euro, Yen as well as precious commodities (gold, silver) and assets (stocks, real estate, etc.) to back the coin. The company works with a number of listed trusts and banks to maintain a transparent pool of USD backing its tokens. TrueCoin does not have access to these holdings itself but smart contracts ensure decentralization.
However, ties to fiat means it is reliant on centralized third parties.
The cryptocurrency can also be paired against BTC, ETH, and Tether and tradeable on Bittrex exchange.
The coin is made possible by tokenizing USD through TrustToken’s legal and technical platform. With it, it is possible to also tokenize assets (such as real estate, art, and IP) in addition to real-world currencies (such as USD and Yen).
TrueUSD or TUSD value recently went up after listing on Binance exchange, gaining as much as 50% in a matter of hours in early March. Launching on the exchange means users can trade the BTC/TUSD.
It currently has a market capitalization of $33,264,571, volume of $20,274,600 and a circulating supply of 33,255,260.
Tether, currently in Beta, is the most popular and fiat-backed (USD) crypto at a 1:1 ratio, but also very controversial project there. It allows users to tether their crypto and digital assets to the USD, Euro, and the Yen with 1:1 equivalence ration. That means you can redeem one Tether for dollar at any time, eliminating the fear that Tether's depreciation could spell worst for your business or personal finances while holding or sending or receiving it as payment.
The platform is also integrating with a host of other platforms, allowing users to buy, sell and use tethers at Bitfinex, Shapeshift, GoCoin, and other exchanges. Individuals can move their digital currencies seamlessly between exchanges and wallets, whether globally or locally, while exchanges can use tether as an alternative to traditional currency deposit and withdrawal method. Exchanges can also use Tether to secure and manage customer assets through multi-sig and other crypto processes. They can also use Tether to settle fiat balances between exchanges much easier and in real time.
It also makes usability of fiat on blockchain very easy due to easy conversion.
Tether is also used by blockchain and non-blockchain companies to price goods and services and avoid much volatility while reducing operating costs and times by bypassing financial institutions.
With an account, users can add and send cryptocurrency to and from their wallets. They can then store, send and receive tethers using this wallet. It is free to send between Tether.to wallets while other transactions have a zero conversion fee. This fee is attracted when you send cryptocurrencies from your Tether.to wallet to an external tether-enabled wallet such as on exchange or on another platform.
Currently, users are required to go through KYC to issue and redeem USD₮, EUR₮, and soon JPY₮.
Tether works through the Omni Protocol, an open-source software that interfaces with blockchain to allow issuance and redemption of crypto tokens.
Some of the problems with the platform include the stealing of $30,950,010.00 worth of tokens, through a security breach on November 2017, through malicious action by an external attacker. The company has also been through many leadership wrangles.
Other issues include lack of transparency or proof of financial standing. Additionally, their terms of service states no legal obligation to convert USDT into USD. Many also point out a weakness in the centralized, permissioned nature of USDT and its link to fiat currency.
USDX is a Singapore-based project, which is a crypto backed by an equivalent amount of USD and this is ensured through an innovative algorithmic protocol considered better than that of USDT and other fiat-backed coins. Its algorithmic central bank will expand or contract the supply of the tokens to match the US Dollar’s real-time value. Hence, it is one of the coins employing an ‘elastic supply’ mechanism. It also eliminates need for collateral and has a robust mechanism.
The system delivers market rates through Oracle Feed. This is their decentralized, third party service that uses derives data from different exchanges. The exchange rates on the platform are accepted or dismissed by randomly chosen token holders on the platform, and this ensures reliability and transparency.
Seignorage Shares is one of the non-collaterized stablecoin. Its intention is to model a smart contracts as a central bank, to always issue a currency that will trade at $1 in regard to controlling the supply. The smart contract mints new coins and auctions them in the open market when the price is too high -- until the price returns to $1. The smart contracts gets some profits.
At the same time, buying up of coins in the market is done to reduce supply and thus increase the price. It issues shares that entitle shareholders to future seignorage and these shareholders are entitled to a share of the future profits when new coins are issued by the contract. The supply will decrease is the price is too low, by way of issuing shares instead of paying cash right now.