I won’t go into the pro’s and con’s of each stablecoin and how it works but instead list a variety of different options currently and coming onto the market. Stablecoins are certainly a very interesting concept and will no doubt be paramount to the success of cryptocurrency in the long term as most cryptocurrencies are extremely volatile and not stable enough to use as an every day currency (Well unless they only increased in value of course)
Last I heard, there were over 30 stablecoins currently on the market and a lot more to come. I won’t talk about all of them but one in each category.
USDT is a token named Tether USD (simplified as USDT) that Tether issues based on stable value currency US dollar (USD). 1 USDT equals 1 USD.
The issue and transaction of USDT are based on Omni (former Mastercoin) protocol. It is a 2.0 currency on the basis of bitcoin. The parameters such as transaction conformation is consistent with those of bitcoin. Users can get USDT in exchanges, or by remitting dollars to the bank account provided by Tether through SWIFT, and vice versa. Furthermore, users can also exchange bitcoin for USDT in exchange.
Tether strictly follow the fund guarantee of 1:1, which means users’ bank accounts will get a dollar fund each time a USDT token is issued. Users can also inquire the fund on the platform of Tether to ensure the transparency.
2. Commodity Backed
DGX is am ERC-20 token backed by physical gold that has been fully audited and is stored in a vault in Singapore, known as The Safe House. DGX is fully redeemable at any point of time. The value of each token is fully dependent on the market value of gold. DGX is based on the Proof-of-Provenance algorithm where each gold bar is secured and it’s ownership/custodianship status is tracked accurately on the Ethereum blockchain. DGX is scheduled to be audited each quarter (every 3 months), which is a positive indicator.
3. Cryptocurrency backed
MakerDAO is an ERC-20 project that has 2 separate coins: MKR & DAI. We will focus on DAI since it is a stable coin backed by other cryptocurrencies. Unlike other stable coins, Dai does not rely on a centralized entity or third party since it lives completely on the blockchain. DAI is a decentralized, cryptocurrency-backed coin with a face value that is pegged to the US dollars. DAI achieves price stability through an autonomous system of smart contracts – called Collateralized Debt Position (CDP) – that responds to varying market dynamics.
Reserve Protocol’s RSV and RSR will be a hyper-inflation-proof stablecoin designed to retain price parity with the U.S. dollar, enabling people to use it as a replacement for fiat currency. The stable coin offers all of the benefits of blockchain technology, namely cheap, instant and frictionless money transfers to anywhere in the world, with fewer intermediaries and no volatility.
RSV will be fully backed by collateral and kept in Reserve’s vault – a smart contract containing a pool of other blockchain assets used to collateralize the token.
My question here is what type of stable coin will be the most efficient at keeping a stable price as we go through different stages of financial high’s and lows with traditional fiat currencies? I have been a large fan of MakerDAO and am looking forward to seeing it continue forward although I do know there are concerns about making it hard to scale but I do think a truly decentralized stable coin is the most intriguing solution. What are your thoughts?