Best Stablecoins to Use in 2024

Stablecoins play an important role in the world of cryptocurrencies as they act as a connection between conventional money and digital assets. Their main purpose is to tackle the volatility often linked with cryptocurrencies by tying their value to more stable fiat currencies. These coins serve multiple functions and are integral to crypto trading. Regardless of your specific interest in cryptocurrencies, understanding stablecoins and their fundamentals is quite important. In this article, we will explain what stablecoins are and identify the leading stablecoins worth considering in 2024. Let’s take a look:

What Are Stablecoins?

Stablecoins belong to a unique category of cryptocurrencies designed to maintain a consistent value by pegging their price to external assets like fiat currencies or other commodities. In contrast to the fluctuating prices associated with cryptocurrencies such as Bitcoin, stablecoins offer a reliable and consistent value.

The stability within stablecoins is typically achieved through methods like collateralization or algorithmic mechanisms. Many users opt for stablecoins to protect the worth of their assets during volatile market periods. This still allows investors to enjoy the benefits of cryptocurrencies, such as rapid transactions and worldwide accessibility, just without the volatility. If you find yourself uncertain about market conditions and want to protect your assets against market corrections, stablecoins can provide that much-needed stability.

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Fiat-backed Stablecoins

To put it simply, fiat-backed stablecoins are virtual representations of fiat currencies created on a blockchain. The process involves locking actual fiat currencies, and an equivalent amount is then created through smart contracts. The locked fiat backs the stablecoin and determines its value through a peg. For instance, in the case of dollar-backed stablecoins like USDT, the peg is set at 1:1 to the US dollar. This means that for each stablecoin created, $1 worth of USD is held in reserve, whether in the form of US dollars or equivalent assets. Fiat-backed stablecoins allow you to enjoy the stability of fiat and the flexibility of crypto at the same time.

Top Stablecoins in 2024

Here are some stablecoins that are both safe and reliable, giving you an idea of what to look for when choosing the right one.

Tether (USDT)

Tether (USDT) is the leading stable cryptocurrency based on market capitalization and is backed by the US dollar. Originating in 2014 with its issuance by Tether Limited, it pioneered the concept of a blockchain-based, universally accessible US dollar. This was revolutionary at the time because it combined the technical advantages of fiat with the liquidity of cryptocurrencies and gave people a way to battle the volatility of crypto markets.

Renowned for its stability, Tether (USDT) mirrors the value of the good-old US dollar, allowing users to catch a break from the volatility associated with other types of cryptocurrencies. Its widespread acceptance and liquidity make it a top choice among traders. With its value tied to fiat currency, Tether allows seamless transactions and serves as a dependable store of value.

It is important to mention that Tether has also encountered scrutiny regarding its transparency and the adequacy of its fiat reserves, creating doubts about its ability to maintain its peg during more challenging market conditions. The absence of regular, independent audits has been the main concern for some time. This has also left some investors questioning the coin’s foundational stability and looking for alternatives. Despite these challenges, USDT remains the predominant choice in the stablecoin realm, favored by many investors seeking stability in the tumultuous crypto markets. However, despite all that, USDT is still the most popular cryptocurrency in the stablecoin category and is still considered the best option by many investors. Its popularity and trust are also reflected in its market capitalization.

USD Coin (USDC)

USD Coin (USDC) holds the position of the second largest stablecoin in the crypto market in terms of market capitalization. Introduced in 2018 by Circle (a peer-to-peer payments technology company), USDC is a dollar-backed stablecoin with a fixed value of $1. Founded by Circle and managed by the Center consortium, USDC’s financial and technical standards are overseen by this collaborative body. It is the Center’s responsibility to maintain the coin’s 1:1 peg to protect its stability.

USD Coin stands out by prioritizing transparency and undergoes regular audits. This provides assurance to investors that each circulating USDC is fully backed by actual US dollars. The commitment to audits is commendable and is one of the reasons why USDC is one of the top stablecoin choices.

However, a potential drawback of USD Coin is its centralized nature. Relying on traditional banking systems for USD backing raises serious questions about decentralization. Remember, decentralization is the foundation of cryptocurrencies, and bringing in centralization just negates the main purpose. Critics have argued over this before, and it remains a controversial topic.

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Dai (DAI)

Ranked as the third-largest stablecoin by market capitalization, DAI stands out from the bunch by being the sole decentralized option among the leading stablecoins. While others, like USDT and USDC, are subject to control by intermediaries, DAI is issued through a decentralized application built on Ethereum called the Maker Protocol. DAI was first introduced in 2019 by MakerDAO and claimed complete decentralization relying solely on crypto collateral. The token is designed to maintain a soft peg to the US dollar at a 1:1 ratio.

The MakerDAO system, governing DAI, operates under the control of a decentralized community, which minimizes the risk of manipulation and promotes stability through democratic decision-making. This decentralized governance structure adds to the attraction of this coin and is the main reason why it is preferred by many.

However, DAI isn’t all glitter and gold, either. Its stability relies on the collateralization of assets, and in the event of a significant market drop, there’s a risk that the value of these assets could drop below the amount of DAI in circulation. This can cause destabilization and can affect the 1:1 dollar peg.

True USD (TUSD)

TrueUSD (TUSD) entered the stablecoin scene in 2018, and it was introduced by TrustToken and PrimeTrust. Compared to other stablecoins, this one is fairly new to the crypto space. TUSD came out with the aim of tackling crucial issues associated with stablecoins, specifically trust and transparency. In pursuit of this, all user funds in USD are managed through third-party escrow accounts inaccessible to the issuing entities. This model prevents any direct access, reducing the risk of fund misuse and improving security for TUSD holders.

However, a potential drawback could be seen in TrueUSD’s centralized approach to asset collateralization. While this promises reliability, it also introduces a dependency on centralized authorities. Critics argue that such a structure may compromise the decentralized principles.

Binance USD (BUSD)

Binance USD (BUSD) is the native stablecoin issued by Binance in collaboration with the blockchain company Paxos Trust. Just like its counterparts, BUSD maintains a 1:1 peg with the US dollar. The supply of BUSD is not capped, with its quantity determined by the demand from individuals seeking to purchase BUSD. Paxos Trust is responsible for issuing the token and both burning and minting new tokens.

The main advantage of Binance USD is seen in its integration with the Binance ecosystem, which also provides a smooth connection with the exchange’s trading platform. This integration not only adds to the liquidity but also improves the process for users to transition between fiat and crypto assets within the Binance ecosystem. This can be quite convenient for the traders.

However, it’s important to mention a potential concern regarding the centralized nature of Binance USD. Its stability relies on Binance’s control and reserves, and considering Binance’s involvement in controversies over the past year, users may want to consider this before choosing BUSD as their stable cryptocurrency.

Conclusion:

In conclusion, stablecoins are important for the future of crypto. They act as a min link between traditional currencies like FIAT and other cryptocurrencies. Their popularity is growing, and new use cases, like decentralized tokens, are emerging. As crypto is getting mainstream acceptance, stablecoins will play a major role in this development. Buying and holding stablecoins is now easier than ever before, but like any crypto investment, it’s advised that you conduct your research before making financial decisions. Always do your due diligence and trade smartly. Happy trading!

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