What are the Most Promising Decentralized Stablecoins?
A large volume of traders refrains from investing their money in cryptocurrencies because of their volatile nature. While the high potential for profits makes cryptocurrencies very desirable, their price fluctuations on the other hand pose an equivalent threat. Stablecoins which are gaining wide popularity across the world for their price stability characteristics, have solved this problem. They were first discussed by J. R. Willet in 2012. Currently, stablecoins occupy a market cap of over $150 Billion. Let’s first understand what stablecoins are and then look at some of the most promising decentralized stablecoins.
What are Stablecoins?
Stablecoins are those cryptocurrencies that offer price stability and contain the best features of two different worlds of currencies, that is fiat and crypto. These stablecoins enable instant processing security manifested by cryptocurrencies. At the same time, they are stable and free from the effects of volatility as that in the case of fiat currencies. Stablecoins have reserve assets (collateralization) backing them which are responsible for the price stability factor of these cryptocurrencies.
What is a Decentralized Stablecoin?
Decentralized stablecoins are those stablecoins that are fully transparent, non-custodial, and have almost no or very little involvement from third parties. The collateral assets backing the decentralized stablecoins are fully visible to people as they are located on public-verified blockchain networks. This enables the decentralized stablecoin to be more secure as all the payments and transactions as a single entity controls them.
Why Is There a Need for Decentralized Stablecoin?
Currently, the stablecoins which are issued by centralized exchanges, pose a threat of freezing assets and censoring the holders. This is exactly the opposite of what the crypto market aims to achieve. Therefore, decentralized stablecoins become the need of the hour in the ecosystem of cryptocurrencies. Also, when stablecoins are backed by centralized assets, there is a possibility of the backing authority regulating the assets and targeting the entity.
Most Promising Decentralized Stablecoins
If you are thinking of investing in stablecoins this year, here are some of the most decentralized stablecoins that you must invest in.
Backed by fiat currency, Tether was established as a stablecoin in 2014. Its value is equivalent to One US Dollar held by its parent company, Tether Operations Limited. So, you can exchange one Tether for exactly one US Dollar. It is one of the most used stablecoins in the crypto world and has a market cap of $78 Billion. It offers a provision for low-risk trading in the crypto market, which means that there is absolutely no likelihood of market manipulation.
Dai: Most Promising Decentralized Stablecoins
Dai is a stablecoin that is backed and utilized by Ethereum-based currency. The user needs to deposit Ethereum-based currency in MakerDAO vaults and then use these currencies to withdraw the Dai stablecoin. When compared to Tether, the Dai market is still volatile but very effective.
As the name suggests, Binance USD stablecoins have the company, Binance as its founder. The whole idea of Binance USD stablecoins is based on Binance cryptocurrency pegged against US Dollars, that is, fiat cash. It has a market cap of around $14 Billion and is hence, the third-largest stablecoin in the world.
Digital Gold Token: Most Promising Decentralized Stablecoins
Digital Gold Token or DGX is a medium-risk based stablecoin. This means that the prices of this coin may be volatile, however, no one can manipulate them ever. It is pegged to gold which means that each DGX stablecoin can be exchanged for one gram of gold. This accounts for the volatility of DGX stablecoin because whenever the price of gold fluctuates, the price of the stablecoin will also change. Currently, the market cap of this stablecoin is around $4.1 Million.
Like other stablecoins in this list, Pax Dollar is also pegged against the US Dollar. The coin is based on the Ethereum blockchain. It is one of the best fiat-collateralized stablecoin when it comes to facilitating cross-border transactions without incurring any extra fees. It is considered a reliable crypto asset and is highly beneficial in improving the traditional finance industry.
Terra USD: Most Promising Decentralized Stablecoins
Terra USD was established with an aim to provide a price-stable but a growth-driver option for crypto investors. It is stabilized by the Terra cryptocurrency. Its protocol works by incentivizing the users to get low-risk profits when the price of TerraUSD deviates from $1. This happens by linking TerraUSD with the native Terra coin and then allowing it to be exchanged with US Dollars.
USD Coin was born in conjunction between Coinbase Global Inc., a cryptocurrency exchange, and Bitmain Technologies, which is a bitcoin mining company. At present, the market cap of USDC is around $42 Billion and is sure to go beyond. It was released in September 2018 and is tied to the US Dollar as well.
TrueUSD: Most Promising Decentralized Stablecoins
TrueUSD was the first stablecoin to be regulated by the US Dollar because the issuing exchange wanted to obtain the faith of the crypto industry by keeping the fraudulent and manipulative schemes away from their circle. With a market cap of about $1.3 Billion, TrueUSD is a transparent coin.
Stablecoins are largely taking the crypto world by storm. As digital payment options are becoming more and more popular every day, people are coming closer to the world of digital transactions, investments, and hence, the crypto world. But since a lot of people feel reluctant to invest in cryptocurrencies because of their volatile nature, stablecoins become a perfect haven for such investors. The stablecoins mentioned above are the top coins in the crypto market and occupy a major portion of the overall market cap. If you plan to invest in any of the stablecoins given above, make sure to read through their whitepapers and understand their projects better.
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