The lack of a single dominant stablecoin in the landscape for cryptocurrency is perhaps one of its greatest flaws. While many coins claim to offer stability, their prices vary too far from each other and no coin has yet been able to consistently maintain a price point that would match the dollar. With so much uncertainty surrounding currency pricing; there are few options left if you want your assets protected from dips or sharp rises in value without having to worry about what else might happen with traditional investment vehicles. In this article, I will discuss some candidates that could be used as an alternative going forward.,
The “best stablecoin 2022” is a coin that has been made to be a currency that is not affected by inflation. The best stablecoin options are not named TerraUSD, but instead have similar names to other coins.
The failed stablecoin experiment known as TerraUSD is a major contributor to the digital asset sector’s current catastrophe (UST). This algorithmic stablecoin has failed to maintain its 1:1 peg with the US Dollar, causing its value and that of LUNA to fall. Stablecoins, despite their failure, remain a key aspect of the industry and will continue to serve as a transfer medium and a safe haven from market volatility. Here are a few samples of the current crop of top stablecoins on the market.
Asset Backed vs. Algorithmic
Before we look at what makes up the top stablecoins on the market, it’s crucial to understand how they work. While they may have the same name, stablecoins are usually divided into two categories: algorithmic and asset-backed. Each aims to maintain parity with a pegged asset, which is usually the US Dollar.
Algorithmic stablecoins usually try to accomplish this balance by combining two currency systems that incentivise one another’s generation and burning. In principle, if the value of UST rises beyond $1, users may exchange $1 worth of LUNA for 1 UST, thus exploiting arbitrage to promote stability. The assets price is driven back towards parity by increasing the circulating quantity of UST. If the value of UST begins to fall, this scenario also operates in reverse. While we won’t go into detail about what led this popular pair of assets to crash recently, it’s clear that algorithmic stablecoins are problematic and aren’t the way ahead.
The asset backing/collateral technique is another proven and effective way for creating a stablecoin. For each currency in circulation, this requires keeping $1 in unrelated assets in holdings. While the best stablecoins maintain a 1:1 ratio between backing asset and circulating coins, this does not always mean that the underlying asset is FIAT. While these stablecoins may fluctuate from their pegging over brief periods of time, they have shown to be stable and trustworthy for than a decade. Even among asset-backed stablecoins, it’s vital to note that, although the idea and structure of the token have shown to be dependable, the issuer’s policies and accompanying reserves are the deciding factors.
USD Coin (USDC)
USD Coin was created by the ‘Circle Consoritum’ (Circle and Coinbase) and is considered one of the most reliable stablecoins available. It maintains a 1:1 peg to the US dollar by holding FIAT reserves and bonds of equal or higher worth than the coins in circulation.
USD Coin is the most controlled and transparent stablecoin presently available. According to the Circle Consortium, this entails not just conducting regular audits on its reserves, but also registering with FinCEN and being regulated on the same level as ‘…PayPal, Venmo, Apple Pay, and other internationally trusted organizations.’
USD Coin has a market valuation of around $65,000,000,000 at the time of writing, making it the fifth biggest digital asset of any sort.
Tether (USDT), a commodity owned and managed by prominent exchange Bitfinex, is perhaps the most well-known stablecoin.
It should be noted that the real worth of Tether’s reserves has been put into doubt throughout time. This was most evident in October of 2021, when the CFTC fined Tether $41 million for misrepresenting the real value of its assets. Tether failed not maintain a 1:1 backing of its stablecoin over a period of three years, while claiming to do so. This misled investors. Tether, on the other hand, has a track record of successfully maintaining its peg for almost a decade.
Tether has a market valuation of almost $105,000,000,000 at the time of writing, making it the third biggest digital asset of any sort.
Pax Gold (PAXG)
While both the USDC and the USDT favor FIAT assets as a supporting asset, this is not universally seen as a plus. Many FIAT currencies throughout the globe are now undergoing severe inflation, making them unappealing investments. In times like this, people have traditionally turned to things like gold, which are seen as safe haven investments that keep their value. With this in mind, people may be interested in initiatives like PAX Gold.
Pax Gold is a stablecoin that works similarly to both of the preceding instances, with the exception that its value is not fixed to the US dollar. It is instead linked to the price of gold, with each token representing a fraction of a gold bar. While Pax Gold is much more esoteric than USDC or USDST, it does give investors a unique take on the asset-backed stablecoin idea.
Pax Gold has a market valuation of $773,172,158 at the time of writing, making it the 83rd biggest digital asset of any sort.
Stablecoin should be feared.
Around the last several months, authorities from all over the globe have said that stablecoins constitute the biggest danger to the current financial system and, as a consequence, need control. The recent incidents concerning TerraUSD, in which investors discovered that their’stable’ and secure holdings were anything but, and suffered catastrophic losses, justify this distrust about stablecoins. When someone buys a small-cap digital asset, the price is likely to be erratic. When you acquire a stablecoin, you can be certain that your investments will be protected from price fluctuations.
When this is no longer the case, as it was with TerraUSD, expect authorities to make a deliberate effort to rein in stablecoins.
The “stablecoins list” is a list of the top stablecoin options not named TerraUSD. The list includes Tether, Dai, and Paxos Standard Token.
- safest stablecoin 2022
- best stablecoin on coinbase
- list of stablecoins 2022
- best stablecoin staking
- best stablecoin reddit