Stablecoin Comparative Analysis

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Stablecoin Comparative Analysis

  1. @ren_heinrich Nov 8 2021 on Medium

stablecoin comparison

What Are Stablecoins?

Stablecoins are cryptocurrencies that are pegged to other assets with established market value, such as gold, Bitcoin, FIAT currencies, real estate, etc.

What Are Stablecoins Used For?

Stablecoins are used for the following reasons:

  • to provide price stability when prices of cryptocurrencies are volatile
  • as fast processing medium between other cryptocurrencies and FIAT currencies
  • as payment medium

What Are Stablecoins Backed by?

Stablecoins are backed by different assets. Here are the 4 major types:

  1. Backed by off-chain reserves of FIAT currencies, such as US Dollar or Euro. Examples of this category are Tether, Binance Coin, and USD Coin.
  2. Collateralized by on-chain cryptocurrencies such as Bitcoin or Ethereum. An example of such a stablecoin is Dai.
  3. Backed by physical commodities such as real estate, oil.
  4. Modified by smart contract algorithms. These stablecoins do not have collateral behind them. When their price is below 1 USD, the algorithm will decrease the supply of the coin. When the price is more than 1 USD, the algorithm will increase the supply to bring the price down. Examples include TerraUSD, Basis Cash (BAC), and Empty Set Dollar (ESD).

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