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Highlights
- Tether is tied to the value of the US dollar, which means that whatever the US Dollar is worth, USDT will be worth the same.
- USDC aims to stand apart from other stablecoins due to its transparency, which assures users that they will be able to withdraw 1 USDC and receive US$1 in return without any problem.
- The advantage of BUSD lies in its use cases, including its low transactions fees and fast transaction speeds
Cryptocurrency has fast become one of the leading digital financial assets in the world over the past two years. With major corporations and even countries saying yes to cryptocurrency, its march to mainstream has revved up.
Of course, crypto is not without its share of problems, one of which is – its volatility. Cryptos, such as Bitcoin, can lose and gain thousands of dollars overnight, which makes it a dangerous gamble, not just from an investment perspective, but just from a basic use perspective. If today, I buy a thousand dollars in Bitcoin, with a plan to purchase something with it tomorrow, and the price of Bitcoin falls by ten percent overnight, suddenly I’m left with just nine hundred dollars.
One of the combatants of this problem are stablecoins. As the name might suggest, these coins are designed to hold their value, which is achieved by tying the token to a real-world currency or commodity, like the US dollar for example.
There are multiple stablecoins currently in circulation. Let’s take a look at four prominent ones
- Tether (USDT)
Tether is the largest stablecoin in the crypto space with a market cap of US$78.43 billion.
Tether is tied to the value of the US dollar, which means that whatever the US Dollar is worth, USDT will be worth the same value.
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- TerraUSD (UST)
Another stablecoin which is linked to the US dollar, UST is an algorithm-based token whose primary value is equal to the the token’s minting cost. TerraUSD’s platform also hosts Decentralised Finance (DeFi) applications.
- USD Coin (USDC)
This is the second largest stablecoin by market cap and, like Tether, is tied to the US dollar on a one-to-one ratio.
USDC aims to stand apart from other stablecoins due to its transparency, which assures users that they will be able to withdraw 1 USDC and receive US$1 in return without any problems. To help it achieve this, an accounting firm is there to help users verify cash levels to ensure the proper one-to-one ratio.
- Binance USD (BUSD)
This stablecoin is also tied to the value of the US dollar on a one-to-one basis.
The advantage of this particular token lies in its use cases, including its low transactions fees and fast transaction speed.
Its DeFi use cases also make it an attractive option for those in the market for a stablecoin, including the users’ ability to earn interest if they deposit BUSD.
The Bottom Line
As crypto becomes more popular, so will the appetite for a less volatile crypto. This is where stablecoins come into picture. With their value tied to a physical asset/real-world currency, stablecoins offer the much-needed semblance of stability to crypto fans and they are likely to be in high demand.
