Cryptocurrencies have had quite the rave in the financial sector, and its accompanying Blockchain technology is slowly but surely making its way into every other sector through DeFi (Decentralized Finance). Crypto is a good way to invest your money, but there is only one problem: the highly volatile nature; this is where Stablecoins come in as really useful assets. And where US Federal Reserve proposed USDC.
Let us say you're running a business, and you're thinking of adding a crypto gateway to give your client more options. But you're also aware of the volatile nature of crypto in general. So what do you do? The best option would be stablecoins . Stablecoins don't have the instability that other cryptos have. And this is because they are backed by a currency (usually USD).
As the name implies, stablecoins are usually as stable as the currency it is pegged to. This is a perfect shield against bitcoin volatility that could dump over 20% in a single day. Something no trader likes to hear about. Since every fiat currency is not always available for trade-in every geopolitical location. Stablecoins are doing the job of bridging that gap.
The same goes for long-term holding investors. Suppose they feel the crypto market prices will be tanking at any time. In that case, they can easily swap between their crypto holding and any available stablecoin on the exchange instead of selling for cash. Which would've been the safest option in such a case. Exchanges like Remitano simplify the process of swapping between crypto to stablecoins and even crypto to crypto at very good fees. To minimize the loss of trading coins between exchanges.
Not only exchanges but also governments of different countries like China, Senegal, Russia, Tunisia, Sweden, etc. Are already exploring the possibility of having a government-issued stablecoin. This practice is bound to see more participation as time goes on. Because stablecoins don't inherit the high volatility of crypto in general, it has become very good for cross-border payments. Because it means lower transaction fees, compared to what is currently charged for wire transfers by banks on average. It is slowly turning into a preferred alternative to established currencies.
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(Total Stablecoin Supply on the crypto market as of Jan. 18, 2021)\
Although stablecoins have been around for a while. They had a combined Market Cap All-Time High, From April 2020 to January 2021.When the total market cap for stablecoins soared from $5 billion to an amazing $33 billion. Around the same period, other crypto-assets were unpredictable, and stablecoins were looking attractive. So individual investors and traders and Institutions were more inclined to trade stablecoins, the readily available alternative to fiat.
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The two most popular stable coins currently, judging by market cap, are Tether (USDT) and USDC. Although Tether has been around for longer, and has a larger share in the total market cap than any other stablecoin. It is a lot more popular on trading platforms and exchanges. Stablecoins like USDC and DAI have gained more acceptance with banks and financial institutions instead.\
As we go on in the article, we will be looking into the USDC in particular. Why it is gaining so much attention, and its performance levels in comparison with other stablecoins.
USD Coin was made available to the public in 2018. It's a corporate project between Circle Internet and Coinbase. Being the only stablecoin on that exchange, USDC has emphasized it's play on transparency and as a result. It has since amassed an impressive catalogue of users. As well as renowned bankers who have a good will towards the crypto industry and would like to participate. The coin even has a mobile wallet application specially for selling or holding USDC to earn interest among other features.
This token, built as an ERC-20 token on the Ethereum blockchain , constituted over 14% of total stablecoin market shares and is projected to increase. Despite not giving any profit higher than the real currency would, USDC will keep getting a steady increase in interest because of the transparency and stability.
The reason is simple; the USD is currently the world's most popular currency in trading platforms and exchanges.
In an interview, the co-founder of Circle gave thanks to their early readiness in partnering with the Defi community as the major reason behind the coin's success.
Besides its parent company, the USD Coin is also available to buy and sell on different trusted exchanges like; Remitano, Binance, KuCoin, etc.
To continue further, we will be looking at some other leading stablecoins and their differences in light of the USDC.
USD-Tether, aka Tether , is the very first stablecoin project. Although the product wasn't launched till 2014, this project first came to light in January 2012. And was originally known as MasterCoin upon launching. Tether is fiat-collateralized. Meaning that although its stability is also pairing with the US Dollar, it remains decentralized without regular audits as the USDC. Probably the reason why they don't have the sort of relationship USDC has with bankers.
Although still the reigning king of stablecoins, with its supply constituting over 75% of the total stable coins in circulation, this percentage keeps falling as the community of stablecoins keeps increasing (as it should).
Tether is a solution for crypto investors. not to pay too much in transfer fees when they want to move funds from one exchange to another. It is also quick adoption coin to maintain the value of one's crypto assets against the dollar.
Judging from Tether's continued reign, despite the wider array of stablecoins , especially USDC trying to catch up fast. One can say that their early initiative and involvement in finding this solution still has a positive bearing. There have been a couple of lawsuits and negative news that left dents in an otherwise reputable project over the past few years.
Regardless of all this, the token still remains the number 1 stablecoin and even launched XAUT on Bitfinex earlier in the year, a token tied to the market value of Gold.
Like USDC, Tether is a good tool for business owners that accept payment via crypto to maintain currency value and those traders looking to pay very little, or nothing in trading taxes, long as they keep their trading between decentralized digital assets.
Since USDT is a decentralized stablecoin, the negative speculations can only take a bad toll on it when a larger percentage of its users decide to leave. So far, over 50% of the stablecoin holders still want in on it.
So which of these two stablecoins is the best? Judging strictly on their features, we will say it all depends on your preference and client needs. If you deal with most financial and similar institutions in the US and any other Coinbase supported country. Then perhaps USDC should be your better option as institutions are drawn to this coin because of its centralized transparency.
USDT would be a more suitable option for a client base having crypto traders and investors, as they are allowed to keep their profit while swapping between coins at a small fee. The platform is heavily decentralized and still retains a stable value range. Unlike USDC, the user is in complete control, as they would with every other decentralized crypto.
If you're already thinking of incorporating either, or both coins in your payment and gateway, then Remitano would be the perfect platform to start with. Contact us today and get it done!
Just like the USDT, Dai is another decentralized, fiat-collateralized stablecoin. It is also considered a DeFi , built on the ethereum blockchain mainnet just like USDC without the centralization.
Launched in December of 2017 by MakerDAO, this DeFi stablecoin is supported by Ethereum (ETH), being held in the native smart contracts of MakerDAO. One of the safest smart contracts in existence. Although USDC has its backing to an entity with more history and clear risk factors. The centralized nature has more individual investors and traders running to the decentralized counterparts like Dai and Tether.
With decentralization being the main theme of crypto. It can be quite troubling to know that your USDC funds could be withheld at any time without prior warning. Owing to the privacy terms the user automatically agrees to when they trade USDC. In history, the financial sector as well haven't always had good cause to freeze client assets.
A stablecoin only needs to be backed by enough funds to support it, and it can stand. But only for a while. A stablecoin that will stand the test of time should have many loyal community members trading and adding to its market cap. Dai has enough of this at the disposal of the parent company, MakerDAO. With a thriving community and that of Ethereum, Dai has a very bright future. USDC, on the other hand, has mainly a good financial backing to boast of.
Eventually, you have to pick a stablecoin that works best for you and your needs. Between DAI and USDC, there are clear-cut differences in the mode of operation and protocols to follow. Suppose you will thrive under centralized communities and using strictly regulated assets. In that case, USDC is still the top choice, but if you're a privacy-loving investor looking for a decentralized stablecoin, then DAI will be a better option.
Owing to this centralized nature in USDC, access can be restricted under certain conditions. This can be a red flag for most privacy lovers.
Ethereum's DeFi ecosystem sustains dai, so this literally means that Dai will stay in circulation as long as DeFi is being used. Also, as a result of it's ethereum based backing, is the fact that Dai can be affected by sudden long dips in ETH price value. This isn't so much to fret about, as Dai recently proved resilience at the $1 mark last time ETH dropped below 40%. This event also solidified the trust of prior loyalists.
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Launched in 2018, PAX came as an early alternative to USDT. It also functions on the Ether decentralized platform and can be exchanged with other tokens besides stablecoins. Regardless, the parent company; Paxos Trust Company, states clearly on their website that PAX, along with other stablecoins under their belt (BUSD and HUSD) are backed by USD in reserve, to the ratio 1:1. The company still combats inflation actively by burning every PAX token that makes a full trip back to their distribution outlet. As soon as it is exchanged for its equivalent in cash or another token. This prevents an excess in supply of PAX.
PAX is supported by over 15 exchanges, 5 of which are considered major, and none of which support fiat withdrawal in USD. However, the native PAX wallet supports the option of USD withdrawal.\
PAX is regulated by New York's Department of Finance, and therefore subject to audits. Inasmuch as this fosters stability, it also leaves PAX open to the cons of a centralized network; Assets can be freezed at any time, and restrictions can be forced on users. Just like it is with USDC.
Judging by its key features, the PAX token is pretty much as good as the USDC in many ways.
Every stablecoins has a common factor in the fact that it is pegged to some fiat currency. However, they are usually different in every other way. And it is important to understand their differences to know what works for you.
One thing is for sure, whenever there is a strong bearish trend in the crypto market. Stablecoins will still stay attractive, and more so because they are very likely to have a positive fluctuation in such a scenario. They still obey the crypto laws of high demand, to an extent. Some traders ignore the long-term and take advantage of such little fluctuations, doing arbitrage trading. They can buy and sell on different for-profit exchanges and accumulate a good holding doing that.
USDC, our main focus in this article as one of the stablecoins making waves, is also built on the Ethereum Blockchain. But investors backing it are not as solid as that of USDT, mainly because of high centralization. It still has a good degree of acceptance, better than most on the list.
