Which Stablecoins Should you Look Out For?

 

Stablecoins are a huge part of the crypto industry and an instrumental element in crypto lending. If you are using a DeFi (decentralized finance) lending provider, then you will have run into stablecoins before, although CeFi (centralized finance) lenders also engage with them. Here is a quick overview of the most popular stablecoins in the market right now.

 

Tether (USDT)

 

Tether is the first stablecoin to exist in the crypto market. It is hard-pegged to the US dollar, meaning for every dollar that exists, there is meant to be an equal amount of Tether. The idea is that this means it will always stick to the same price as the dollar. Tether has had a questionable history in the courts, and although the creator of Tether (Bitfinex) has been shown to cover up losses in the past, it is still widely used today as a store of value and a safe haven for traders who wish to temporarily avoid volatility, whilst not converting to fiat.

 

Dai (DAI)

 

Dai is a decentralized stablecoin created by MakerDAO. It is soft-pegged to the US dollar, meaning that instead of claiming to have an equal reserve of Dai to match USD, they have an amount of Dai which is backed by a varied portfolio of other cryptocurrencies that add value to the project. Dai is a little more volatile than Tether, but this usually does not deter traders because it has not been engaged in dubious legal activity, plus its price is always very close to that of the actual dollar. Dai is extremely popular among DeFi lending platforms because it is Ethereum-based, and so it is compatible with DeFi projects as they mostly run on the Ethereum network.

 

TrustToken (TUSD / TGBP / TAUD / etc.)

 

TrustToken is a crypto company that has been releasing stablecoins that are pegged to various different fiat coins. The most popular of which is TUSD, which is pegged to the US dollar. It is a centralized project, but its tokens are designed to be functional on DeFi exchanges and lending platforms. Each stablecoin created by TrustToken is backed by a reserve of funds specific to that coin. You could technically call this a CeDeFi project meaning it crosses the barrier between centralized and decentralized projects. It is centralized in that it has developers who work together to regulate the funds for each token, but it is decentralized in that its tokens function seamlessly with fully decentralized projects. It has gained prominence because a lot of developers have been using TrustTokens to bootstrap their DeFi projects by adding liquidity. For this reason, many DeFi lenders rely on it, although it is also available to use with many CeFi lenders, due to its versatility with crossing barriers.