Tron leads in USDT dominance among blockchains with 50.72%, followed by Ethereum at 40.28%. Binance Smart Chain (BSC), Arbitrum, and Solana have smaller shares. Tron’s significant lead in USDT dominance reflets its popularity as a platform for USDT transactions, while Ethereum maintains a notable presence in the stablecoin market.
Dai stands at $5.35 billion, with First Digital USD and True USD following suit. Tether’s significant lead underscores its prominence in the stablecoin space. Alternatively, top up your Binance cash wallet with other currencies to exchange the stablecoin of your choice. Mainstream users consider traditional cryptocurrencies, which lack both long-term and short-term stability, to be extremely risky. The future regulatory environment for crypto is currently uncertain, and crypto is not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC).
Bitcoin Cash
Rising gas fees on the Ethereum network pushed the need to launch the token on other networks with a relatively smaller fee. Therefore, the coin was issued on several networks, including Algorand, Solana, and Stellar. While some large projects have a good track record, there have also been many projects that have failed. When a stablecoin has constant issues maintaining its peg, it can lose its value dramatically. To mint 100 DAI pegged to USD, you will need to provide $150 of crypto as 1.5x collateral.
Cryptocurrencies circulate on decentralized networks that use cryptography to guard against counterfeiting and fraud. Typical examples include selling governance tokens that allow buyers to gain voting control over the stablecoin’s future or locking up funds into smart contracts on the blockchain to earn interest. Their primary distinction is the strategy of keeping the stablecoin’s value https://www.tokenexus.com/what-is-a-stablecoin-and-how-does-it-work/ stable by controlling its supply through an algorithm, essentially a computer program running a preset formula. To serve as a medium of exchange, a currency that’s not legal tender must remain relatively stable, assuring those who accept it that it will retain purchasing power in the short term. Among traditional fiat currencies, daily moves of even 1% in forex trading are relatively rare.
1. Top Stablecoins by Market Capitalisation
Arbitrum follows with 6.14%, while Harmony and Binance Smart Chain have smaller shares. Ethereum’s dominance underscores its robust infrastructure supporting Frax transactions and liquidity within the ecosystem. Ethereum overwhelmingly dominates First Digital USD usage among blockchains with 95.07%, highlighting its central role as the primary platform for transactions involving this stablecoin.
- In addition, to prevent sudden crashes, a user who takes out a loan may be liquidated by the smart contract should their collateral decrease too close to the value of their withdrawal.
- Stablecoins are typically pegged to a currency or a commodity like gold, and they use different mechanisms to maintain their price peg.
- To be on the safe side, it’s best to stick with stable cryptocurrencies that are more well-known and have a high market cap.
- The graph below shows USDC’s collateral reserves as of August 2022—at $54 billion, the coin’s reserves are slightly greater than its liabilities of $53.8 billion.
- Tron’s dominance reflects its robust infrastructure supporting USDD transactions, while Ethereum’s smaller indicates lesser utilisation for USDD transactions within its ecosystem.
- Ethereum’s significant lead highlights its role as a primary platform for stablecoin issuance and transactions within the crypto ecosystem.
As stablecoins continue to “stabilize” and gain public trust, the way the financial sector uses digital assets will keep evolving. The protocol behind stablecoin Dai is an open-source platform that anyone can use to create Dai tokens against crypto collateral assets. Dai is generated by users of Maker Vault who can deposit crypto collateral using the Oasis.app. Initially, DAI was launched with the support of only Pooled Ether (PETH), obtained by depositing ETH into a smart contract. USDC is traded on Coinbase, Poloniex, Binance, and other major exchanges like Huobi and Serum Dex.
Where can I buy stablecoins?
Because their goal is to track an asset, stablecoins are often backed by the specific assets they’re pegged to. For example, the organization issuing a stablecoin typically sets up a reserve at a financial institution that holds the underlying asset. So, a stablecoin could hold $100 million in reserve and issue 100 million coins with a fixed value of $1 per coin. If a stablecoin’s owner wants to cash out the coin, the real money can ultimately be taken from the reserve.
- Stablecoins have become an important part of the cryptocurrency ecosystem because they provide a cryptocurrency option wherein stability is a key requirement of the financial transaction.
- The future regulatory environment for crypto is currently uncertain, and crypto is not insured by the Federal Deposit Insurance Corporation (FDIC) or the Securities Investor Protection Corporation (SIPC).
- You need a cryptocurrency to facilitate transactions, but one that has the price stability of cash.
- It has cemented its status as one of the country’s most innovative investment platforms, offering a full range of banking services to support clients in their day-to-day life and in building their own stories.
- There is currently no universally agreed standard for stablecoins, let alone a regulatory framework governing them.
- For example, merchants may take $5 in BTC for a coffee one day but find that their BTC is worth 50% less the next.
Stablecoins aim to maintain their pegged rates using different means. Stablecoins can be backed by cash, cash equivalents, commodity values, or the value of other financial instruments to maintain their peg. Some even use complex algorithmic programs to maintain the peg by controlling supply, although this doesn’t always work. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories, except where prohibited by law for our mortgage, home equity and other home lending products.
