Before Diving In To Know Top Stablecoins
A stablecoin is not your regular digital currency. Unlike other crypto tokens, the stablecoin’s value is connected to a reference asset. That asset could be a fiat currency, gold, commodity, or any other financial instrument.
Stablecoin’s purpose is to offer more stability than other crypto tokens. By using a reference asset to determine the currency’s value, a stablecoin avoids volatility often present in the crypto market. You can visit https://godex.io/coins-list/stablecoins to find a detailed list of these tokens. Before setting on any trading moves, keep reading to learn more about the assets!
2 Main Types Of Stablecoins
As digital tokens, stablecoins operate on blockchain technology. They use a collateral structure to back them up, which is how you can recognize them. It’s possible to divide all stablecoins into two classes — we are focusing on them below!
If you check the stablecoin ranking, you’ll notice the top tokens are in this category. Centralized stablecoins are considered a better option by most investors because they include backing from a centralized entity.
The usual approach is to peg a stablecoin to a fiat currency and include a 1:1 backup ratio in a bank. That secures maximum liquidity and attractiveness for stablecoins, explaining why USDT and USDC are among the most popular choices. For each USDT you purchase, there is an actual fiat USD in a bank. Investors believe using a digital token pegged to a fiat currency is a great way to navigate through volatile and turbulent times in the crypto market.
The stability of stablecoins is due not only to the backing of physical assets but also to the complex architecture of smart contracts. Commonly, there is a Decentralized Autonomous Organization (DAO) behind these coins, but there’s no centralized entity. Thanks to that, these tokens remain loyal to the basic crypto concept of anonymity and decentralization.
Occasional burning and minting happen to maintain the value of decentralized stablecoins. The DAI coin is a famous example in this category.
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What is the current situation and forecast for the stablecoin market? These tokens are here to stay, and here are the most popular currencies in 2023!
Tether is a platform that aims to enable using fiat currencies in a digital world. USDT uses the US dollar as the reference asset, with the goal being to enable USD conversion and vice versa at a 1:1 ratio.
The expectation to keep the same value as the US dollar makes Tether a tempting option among investors. During turbulent crypto-times, traders invest in USDT and store it until they are sure the storm has passed and there is no more danger of severe crypto volatility.
USD Coin (USDC)
USD Coin is another stablecoin that uses fiat currency as the reference asset. The token has a centralized consortium under the name of Centre behind it. The famous exchange Coinbase and Bitmain, a company specializing in BTC mining, are a part of the Centre.
USDC is mostly an ERC-20 token, but you’ll find it on TRON, Solana, Avalanche, and several other blockchains. The creators state USDC has “a fully reserved asset backing” held in segregated bank accounts.
Binance USD (BUSD)
Binance is the company behind the BUSD stablecoin. It partnered with Paxos, which has previous experience since they also created PAXG. Unlike that token, which uses gold as backing, BUSD uses the US dollar.
BUSD is available on the BNB Chain and Ethereum. Binance believes that its stablecoin achieved excellent stability after turbulent times. According to the reports from the company, Binance frequently rebalances to ensure 1:1 backing. These reports are promising and show that BUSD could even rise in 2023.
Final Top Stablecoin Tokens Remarks
Crypto is a free and innovative market, and new ideas will continue to appear. Fresh tokens will keep taking the world by storm in the coming years. You might decide to go with Bitcoin and convert XMR to BTC or other popular tokens. Although it can turn out to be a successful investment, you should not neglect the opportunity to profit from stablecoins.