Some of the safest stablecoins to look out for are: Tether (USDT) USD Coin (USDC) Binance USD (BUSD) TrueUSD (TUSD) TerraUSD (UST) Dai (DAI) Pax Dollar (USDP)
Dips today, mooning tomorrow. Volatility has scared away many investors from the crypto market. Some others have resorted to revenge trade to make back what they have lost - this is also not guaranteed.
The cryptocurrency industry is no doubt a high-risk asset. With constant volatility; gains, and losses here and there. Many hm investors have been forced to rethink their approaches.
If you want to have more control of your crypto assets, you should invest more in stablecoins. Unlike their names, they are built to withstand market volatility and are pegged to the fiat currencies backing them. For example, 1 USDT is equal to 1 USD.
That said, you may be asking, "what are the safest stablecoins?" Or, "what are the best stablecoins?". This article will answer your questions, including the types of stablecoins and the differences between altcoins and stablecoins.
Let's get to it.
Table of contents [Show]
- What Are Stablecoins?
- Altcoins vs. Stablecoins
- Top 7 Safest Stablecoins to Look Out For
- Advantages of Stablecoins Over Other Cryptocurrencies
- Where Can You Buy Stablecoins?
What Are Stablecoins?
Stablecoins are cryptocurrencies with a fixed price pegged to stable assets like gold or fiat currencies such as the US dollar. Unlike other cryptocurrencies, stablecoins help minimize the crazy effects of market volatility. Thereby enabling users to trade without worrying about bullish or bearish markets.
According to Business Insider, stablecoins answers the calls from early crypto investors looking for crypto equivalent to fiat currencies. These coins have made it easy for investors to hold their crypto portfolios without fear of volatility and dips.
In general, stablecoins are designed to fill three crucial roles in the cryptocurrency space. They include:
- Serve as a unit of account for cryptocurrency transactions.
- Act as an alternative currency for traders and investors to use for transactions.
- Finally, it has become a store of value for crypto investors looking to avoid price volatility in the crypto market.
How Do Stablecoins Differ from Regular Cryptocurrencies?
Stablecoins are a relatively new phenomenon, but they're growing in popularity. In this section, we'll take a look at the points of comparison between stablecoins and other cryptocurrencies:
- Price stability
Stablecoins are based on fiat currency or backed by an asset. Unlike traditional cryptocurrencies, a stablecoin's value is pegged to an asset, making them less volatile. While cryptocurrencies like Bitcoin, Ethereum, Dogecoin, etc., aren't backed by any assets. Their values are determined solely by market forces, resulting in wild price fluctuations.
- Backed by a central authority
Stablecoins are controlled by a central authority - typically a company or a government body.
That authority controls the supply of stablecoins and guarantees that there will be enough of the underlying currency on hand to redeem for their face value.
On the other hand, traditional cryptocurrencies like Bitcoin and Ethereum are decentralized, with no central authority controlling them.
Altcoins vs. Stablecoins
Altcoins or "alternative coins" are cryptocurrencies that aren't Bitcoin. Some Altcoins such as Litecoins are variations of Bitcoin with modifications to improve functionality or efficiency. Others, like Ethereum and Dogecoin, were created to serve a specific niche function.
Stablecoins, on the other hand, are different. They're not just solving the problems of volatility; they also target specific areas of their functions in society. These functions include enabling faster payments, cheaper remittances, providing a decentralized exchange medium, etc.
Top 7 Safest Stablecoins to Look Out For
Some of the safest stablecoins to look out for are:
- Tether (USDT)
- USD Coin (USDC)
- Binance USD (BUSD)
- TrueUSD (TUSD)
- TerraUSD (UST)
- Dai (DAI)
- Pax Dollar (USDP)
Tether USD is a stablecoin hosted on Ethereum technology and is regulated by the owners of Bitfinex. USDT is considered the most prominent and safest stablecoin. It is pegged to the US dollar at US $1 to 1 USDT. Thereby making it less volatile and a widely accepted medium of exchange for goods and services.
USD Coin (USDC)
The USD Coin is a digital currency that is backed by the United States Dollar. USDC is managed by a consortium that goes by the name Centre- which was founded by Circle, a union of members of Coinbase and Bitmain, a Bitcoin Mining Company. USD Coin operates on a transparent and regularly audited blockchain network and is considered one of the safest stablecoins.
Binance USD (BUSD)
The Binance USD is considered to be one of the best stablecoins. BUSD is backed by the United States dollar and is used to exchange for transactions. In addition, it is a regulated stable coining- by the New York State Department of Financial Services. Thus, enhancing its consumer protection.
TrueUSD is a stablecoin pegged to the USD and regularly audited by third-party firms. Since the TUSD is collateralized by USD in escrow accounts, it's easy for users to verify its balances and holdings. These holdings are subject to quarterly attestations by third parties.
TrueUSD gives you complete control over escrowed funds and allows you to redeem TrueUSD for USD whenever you want.
TerraUSD is a recently launched and rapidly growing algorithmic stablecoin. It was launched on the LUNA blockchain in September 2020 and is currently the fourth largest stablecoin by market capitalization, valued at US$9.2 billion. The supply of UST doesn't use a custodial model like Tether, but algorithm changes based on information received from Terra's local LUNA blockchain.
Dai is a stable currency hosted on Ethereum technology. Its price is pegged to the U.S. dollar and is secured by other cryptocurrencies. Its issuance and development are managed by the maker protocol and MakerDAO decentralized autonomous organization.
Pax Dollar (USDP)
The Pax Dollar is considered one of the best stablecoin because it is collateralized, and there are no cross-border exchange fees. It is valued at 1 Pax Dollar token to 1 USD. It is also a widely accepted medium of exchange.
Advantages of Stablecoins Over Other Cryptocurrencies
Using a stablecoin comes with certain advantages over other cryptocurrencies. For example, it has a low transaction cost, high security, and no limits on scaling.
Here are some other advantages of using stablecoins:
- Stablecoins have lower transaction fees than other cryptocurrencies since no miners verify transactions on the network. This means stablecoins can be used for microtransactions, unlike other cryptocurrencies with high transaction fees.
- They also provide greater transactional privacy since they don't require users to reveal their identities when transacting on the blockchain.
- Another advantage is that they can be used as a temporary store of value during sudden price fluctuations in other cryptocurrencies or during times of economic uncertainty.
- Stablecoins can be integrated into smart contracts to provide liquidity and facilitate trustless exchanges between multiple cryptocurrencies.
Where Can You Buy Stablecoins?
There are different ways you can get your hands on stablecoins. These include:
You can purchase stablecoins directly with Bitcoin or Ethereum on a cryptocurrency exchange. However, it’s essential to do your research on the exchange you’re considering. Ensure they support the cryptocurrency and fiat currency you’re looking to use.
Another way to get stablecoins is to store your coins in a cryptocurrency wallet. These multi-currency wallets allow you to buy cryptocurrencies through their platforms and some of them even allow you to convert between different cryptocurrencies using their in-wallet exchanges. Topit is a cryptocurrency exchange platform that provides a cryptocurrency wallet that allows you to safely and securely store your coins.
Directly from the issuer
Some cryptocurrency exchanges offer direct fiat-to-stablecoin trading pairs. For example, you can convert USD into Binance USD by buying them with USD on the Binance website. It's much easier than having to go through multiple steps or exchanges.
If you're a beginner in the crypto space, or you're probably looking for a safer way to invest in Crypto, Stablecoins are a good way to start. You don't have to deal with price fluctuations and the risks of volatility. In addition, you have more control over your crypto assets and holdings.
However, just like when trading other cryptocurrencies, you would also need a safe and secure crypto exchange platform to trade and store your stablecoins.
Topit provides one of the best crypto exchange solutions in Africa. The platform allows you to instantly and seamlessly buy and sell bitcoin, altcoins and several stablecoins with your local African Currency. With Topit, you can now buy and sell cryptocurrencies in KES, UGX, GHC, NGN, ZAR, etc without hassles.