For over a decade now, cryptocurrencies have been disrupting legacy finance. Jump started with Bitcoin, crypto markets exploded with CoinMarketCap currently showing 2136 cryptocurrencies. Growth in the number of coins has been fueled by market segmentation with projects catering to specific target audiences. Stablecoins, counting at around 50, seek to mitigate volatility, a scourge for crypto and roadblock for mass adoption. Traders switch to stablecoins to store value whenever other cryptos move against them.
Tether became the first widely popular stablecoin. It’s pegged to USD, currently enjoying a 50% market share. Arguments arise as to Tether no being, in fact, a stablecoin, but a mere avatar of USD, placed on the blockchain. Another stablecoin, Digix, is a gold peg, using virtually the same mechanics that are employed by Tether. Standing apart, MakerDAO collateralizes only crypto, having nothing to deal with “real-world” assets. Within it, the two-coin ecosystem includes Dai, a USD peg, and MKR, an internal token used to pay fees and incentivize traders to sustain the peg. Using ETH as a collateral, Dai requires over-collateralization in order to prevent vulnerabilities in case of a price crash.
A line of new entrants is set to disrupt the stablecoins, only recently seen as bleeding-edge innovation. Crypto community continues to design solutions, targeting ever smaller use cases. Read on and discover alternative stablecoins with unique offerings that might suit you best.
Launched in summer 2018 by famous Winklevoss Brothers, Gemini Dollar (GUSD) is virtually Tether, but fully regulated. It’s issued by a New York corporation, complying with all applicable laws, specifically developed to help take crypto mainstream. It’s an ERC-20 token. To create GUSD, you park USD at Gemini Exchange. To change back, you import GUSD and withdraw cash. There’s no market cap, and 1 GUSD always equals 1 USD.
In stark to contrast to Tether, which has been embroiled by controversies, GUSD has none of those. All the reserves are stored at a reputable bank, they are regularly audited by a well-recognized auditor, and all data is transparent, ready to be checked on the blockchain.
Being an ERC-20 token, it can circulate on world’s many cryptocurrency exchanges, while Tether, operating off its own blockchain, is restricted in terms of availability.
Being compliant means cooperating with authorities, and GUSD openly states in its Whitepaper that administrators might freeze accounts, should they receive a warrant from authorities. This goes completely against ideas, shared by crypto enthusiasts, but it would actually appeal to institutional investors, who need to assure high security and compliance before they can start using a new tech solution.
Gemini Dollar is after institutional investors and ordinary customers. Having shed pseudonymity, it brings sleek UI, fast processing and ability to trade globally.
USDQ is a stablecoin, developed by the Platinum technical team. Similar to MakerDAO, it engages two tokens. The first one is USDQ, which is a peg to USD, and the second one is Governance Minable Token, acting as an internal management token, used to pay fees, vote on decisions and mine. Users can purchase USDQ via two methods – buying it on secondary markets from other users, just like any other token, or purchasing it directly from the issuer on its website. In the second case, a BTC collateral is used which ratio is determined based on current market conditions.
Price stability is maintained through the two mechanisms. The first incentivizes traders to purchase the stablecoin whenever it goes below the 1USD peg and sell it whenever the opposite occurs. The elegant and fool-proof first line of defense helps enable effective price equalization in case of low and moderate turbulence conditions.
The second line of defense is unique to USDQ. It’s built up by a network of “robots”, which are applications, downloadable on devices and sustained by AI capabilities. They continuously gather and analyze data about cryptocurrencies, potential price trajectories and various other pertinent circumstances. Whenever multiple robots announce the need to change the collateral ratio, the vote is held. Should the unanimous decision be reached in favor of the change, it’s immediately implemented. This approach stitches together AI-driven agents and wisdom of crowd, collaborating to make time-sensitive decisions in high-volatility settings.
In contrast to fiat-collateralized coins, USDQ is backed by BTC, eliminating any need to engage legacy systems, such as banks, auditors, lawyers, accountants and others. Instead, the scanner system, available at the stablecoin’s website, enables to easily track all transactions within the system.
Another unique feature within USDQ ecosystem is an ability to mine cryptocurrency with robots. Users install robots their devices and input a collateral amount. The higher the collateral amount and the number of engaged devices, the faster the internal governance token is being mined.
Many traders who usually hold stablecoin reserves on exchanges would find mining an attractive option, as it will deliver RoI on the funds that are otherwise inactive.
Globcoin (GBX) is a stablecoin, pegged to the basket of fiat currencies and gold. The coin is not effectively backed by any assets, but is an “index fund” with the price automatically changing based on fluctuations in underlying. GBX is an ERC-20 token, which simplifies purchasing and trading.
Those traders who want to find exposure to multiple assets, as opposed to single holdings such as gold, USD, etc., will find this stablecoin of high value. Investing in asset baskets is at the core of policies, employed by Central Banks around the world to stabilize their national currencies.
The GBX issuer plans to roll out basket-based stablecoins, specifically created for certain regions. Traders, active in Asia, Africa, Latin America or other regions, will win from using multi-currency baskets to hedge against undesired moves in national currencies.
Although GBX is not backed by actual assets, convenience and ease will attract investors from both crypto markets and global trading communities, looking for innovative hedge instruments. Setting up such a basket on their own would require exorbitantly high effort and time investments. In this light, automatic adjustments to base assets prices seem like a big advantage.
Stablecoins: future potential
Stablecoins have helped traders to wait out undesired price moves. Reducing volatility in crypto markets, they will be instrumental for future mass adoption. Each individual stablecoin offers a unique value proposition. Some traders might want to take a closer look on USDQ, which enables to mine crypto with stablecoin reserves. Others will be keen to learn more about GBX, finding a new hedging tool. Looking around for new options pays off. After all, diversification and decentralization have always played a key role in crypto markets.