With the increasing introduction of stablecoins in the mainstream cryptocurrency culture these days, we thought it’d be a good time to give a full rundown of not only the market leaders in terms of daily trading volume, but also highlight a few projects that are taking an interesting approach to break the mold of a traditional stablecoin. Most people by now are familiar with the USDTs and USDCs of the world, as they are perceived as the most stable both in terms of their valuation pegged to the USD but also in terms of what the market expects from them for now. True to their nature, stablecoins are not supposed to fluctuate much — making speculation on them rather futile and frankly, a little boring. But that doesn’t mean there aren’t any interesting alternative projects in the stablecoin space as more and more organizations are pushing the boundaries of what we think stablecoins can and cannot do. Take Libra for example, the proposed stablecoin issued by Facebook and associates. While currently still under renovation, Libra could potentially offer drastically different usability than anything we’ve seen since Facebook has over a billion daily active users, and a robust advertising system in addition to an emerging marketplace. If correctly implemented and approved, Libra would have accomplished that which most stablecoins could only dream of.
What Libra demonstrates is the newfound simplicity of creating stablecoins, we now live in a day and age where the technology has caught up. This was true for much of the earlier market entrants as technology was still growing. Many of the earlier challenges faced by Tether and companies like NuBits have now been solved with time and innovation, making it even possible for non-blockchain companies like Facebook to enter the market.
In order to understand stablecoins from a hyperopic point of view, it is important to note that much of the current jazz the industry is experiencing is due to demand. Industries, and to an extent individual businesses, are often created by the power of demand. The stablecoin industry is no different. Take the industry leader Tether as an example. The United States Dollar has arguably been the global standard in terms of fiat currency, and is demanded by both governments and individual citizens around the world for both its stability and usability. In countries like Cambodia or Zimbabwe, USD is still accepted as a primary currency up until very recently due to its liquidity and demand. This makes it the natural first step in terms of collateral and pegging for any stablecoin entering the market, as evidenced by the overwhelming majority of tokens being backed by the United States dollar. But as things are stabilizing and saturating, opportunity is increasingly lying elsewhere with a more diverse set of collaterals being used not just in terms of fiat currency, but also in terms of goods such as gold, oil or debt.
If 2020 is the year where the world is introduced to stablecoins, then 2021 and onwards will be the years when it’ll finally make its mark and redefine itself as possibly the leader in the cryptocurrency space. This is especially true when you factor in other growing sectors like Decentralized Finance and the possible symbiotic relationship it can have with stablecoins. Both sectors are still relatively immature in their developmental stages, but their ceiling is potentially infinite.
Having said that, we wanted to give a short, but in-depth look at some stablecoins you should keep an eye out for not just this year — but moving forward as well.
1. Pax Gold (PAXG)
Gold, unlike fiat, will always have a place in our cultural demand no matter how a government is regulating its policies based on GDP. It is arguably the longest standing, most valued type of precious metal with an unquenchable global thirst. Unlike many of the other gold and precious metal backed projects, the Paxos Standard Token has been a staple in the cryptocurrency space since 2018 — eons in this part of the world. This gives PAXG a solid foundation to build on, a reputable name, and therefore a sense of stability and assurance in the mind of investors and holders of PAXG despite offering a type of collateral most are not too familiar with, gold. The way their stablecoin works is that 1 PAXG is pegged to 1 ounce of gold, currently valued at just under $2,000 and making it one of the most expensive stablecoins on the market. But as we stated above, gold will probably always be in demand due to its cultural significance amongst multiple religions, ethnicities and the widely developed network and ways you can use it. If you want a golden standard of stability for your stablecoin, maybe gold is the way!
Unlike the other projects we’ve listed here, Libra is not currently launched yet — and may not ever be pending regulators approving it in the United States. But the proposed concept alone by a behemoth like Facebook deserves some attention. At the very basic level, Libra will be just like any other stablecoin, which operates on the blockchain, but if you peel back a layer, you’ll realize that it will be backed by a collection of low risk financial assets put into a basket of goods. This in theory will lower the risk profile of the coin against any singular fiat currency and positions Libra as possibly the first true global stablecoin backed by a collection of global assets. This all sounds very promising, but Libra has faced multiple hiccups along the development process, most notably with regulators and Facebook users themselves. As stated above in our introduction, the sheer idea that Facebook will launch a stable coin is beyond massive as the primary problem is not just the stablecoin sector, but the cryptocurrency sector as whole is usability. For demand to continue to increase, there needs to be more and more practical and interesting ways of using a certain coin. Facebook could easily implement usability immediately by forcing all advertisers to use Libra instead of USD — and by giving free Libra tokens away when you convert them from any other currency. For example, if I want to run a $100 ad campaign, Facebook will give me the equivalent ads reach for only 80 Libra instead if I convert my USD into their stablecoin. This monopolistic power is both frightening and exciting at the same time as real implantations of Libra could upend the entire industry! Alas, for now this is merely a pipedream, but Facebook has previously announced the release of their digital wallet Nivi for the end of 2020 — fingers crossed.
3. Reserve (RSV)
While most people are focusing their USD attention on Tether or USDC, maybe more people should focus on a company like Reserve instead. Since they launched in late August, RSV has seen daily trading volumes peak at about $35,000. Is this a lot? No, it is miniscule in the stablecoin trading space — but this isn’t what we want to focus on. Instead, a good place to start looking is their domain name which ends in .org — a suffix usually reserved for nonprofit organizations, or government sponsored partners who are supposed to give back more than they take to put it simply. One look on Reserve’s website backs up this claim as they consistently focus on delivering a marketing message around simplicity, access, and providing the developing world with a stable digital currency to lift nations out of poverty. Much of their focus is in Africa, specifically with the mobile payment provider M-Pesa. Does this matter to traders and investors in the stablecoin sector? Maybe, maybe not — but this absolutely matters in the grander scheme of things as Reserve looks to implement their service to people who actually need it rather than traders who are trying to make a margin. If there are real use cases for their stablecoin, regardless of the cases are in Nairobi or Bangladesh, it will drive demand of RSV across the board, which further increases their visibility. This upward trend can be seen in their gas token, Reserve Rights (RSR) which is NOT a stablecoin and can fluctuate based on market demands.
4. pTokens (pBTC, pETH)
pTokens may not be the stablecoins you want, but they are the stablecoins you need. For the majority of people, pTokens may seem too technical or complicated — even though all you have to do is add a lowercase p to the digital currencies they support. The value for pTokens is that they provide cross-chain interoperability, which means they are portable to any blockchain technology and a 2-way peg. Once again, this might not mean much to the average stablecoin investor but most stablecoins (including the ones we’ve listed above) are only available on one blockchain, mostly Ethereum. This severely limits their usability as the industry scales, which in turn limits their usability and demand. Is this a huge problem at the moment? No, Ethereum is able to solve most of the real life problems that demand stablecoins through their smart contracts. But new public chains are emerging every year, and companies like NEO and Omni are creating a different set of blockchains that not only provide different features to Ethereum but also different transaction speeds and costs. To make this simpler, imagine tokens as individual cars and blockchains as the highways. To begin with, you need a reason to get into the car and drive somewhere — this is the usability problem we’ve highlighted constantly. Once you have a reason, you demand a car — or in our case, a token. But the tokens need roads and highways to travel on. Most cars these days are only allowed on one type of road — Ethereum, which serves as the main highway. But maybe you want to instead take a road less travelled, a more scenic route. Unfortunately, you would need a car that is able to do that which most are not able to today — except for something like pTokens. This flexibility, known as cross-chain interoperability, is what puts pTokens as one of the leaders in the stablecoin industry in terms of usability. While most people are obsessing over the security of collaterals backed by USD in stablecoins like Tether or USDT, there remains a massive opportunity for more functional stablecoins like pTokens to serve a completely different purpose. So moving forward, keep an eye out for not just pTokens, but any stablecoin, which offers this type of cross-chain interoperability.
5. Stably (USDS)
Like many of the other stablecoins listed above, Stably is also a little bit different than your traditional stablecoin. To begin with, Stably offers an enterprise service in which they will help organizations create their own stablecoin — as well as offer to manage it and make sure it fits all the regulatory compliances. This is similar to how software went from everyone making their own software to what we see now in the SaaS space. In many ways, this is truly innovative as Stably essentially provides the same service (albeit a different kind of SaaS). While they have their own stablecoin in USDS, the bigger focus is on transforming the stablecoin industry into a service that you can scale across a range of clients. As we stated above, much of the technology in this sector is changing daily, making it difficult for many legacy service providers to just jump into the stablecoin space despite knowing that digital currencies are the future. With Stably’s solution though, any financial service provider is able to transition smoothly into the stablecoin space.
Stablecoins are still emerging and in self-discovery mode. Not only is the public not 100% clear of their usability or security all the time, but neither are the projects themselves which back and create stablecoins. This is not necessarily a bad thing, as innovation requires trying new things and testing things out. Are there some projects, including ones we’ve listed, going to fail? Probably. But in the grander scheme of things stablecoins are without doubt trending in an upwards direction. This is only going to be further compounded by the emergence of DeFi and the complicated market dynamics it brings to the table such as crediting, insuring or microlending. Without a strong backbone to keep its tokens stable, DeFi won’t be able to attract enough eyeballs and wallets to propel the sector to new heights. Maybe one day we’ll look back and realize that stablecoins were actually just along for the ride, but that is another story for another day.
If we missed any stablecoins you’d like to have personally reviewed, please let us know — we’d love to hear from you!
Stably is a venture-backed FinTech from Seattle, Washington. We provide regulatory-compliant stablecoin and onramp infrastructure for emerging blockchains, Web3 applications, and financial institutions, enabling their users in 170+ countries/regions to easily buy, sell, or swap digital assets at competitive rates across multiple blockchain networks with stablecoins and fiat payments. Our mission is to power the next billion Web3 users with a superior fiat & stablecoin onramp.
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