The clue is in the name: We call them stablecoins because they’re stable, OK? So can investors assume that one stablecoin is pretty much the same as another? Well that would be a big misconception. We analyzed a range of 18 stablecoins, factoring in ROCKZ as well, and the results reveal wide differences.
Firstly there’s the with/without utility token categories. The majority of stablecoins do have utility tokens, and from our sample, only Tether, Reserve and Stably are without. But of the ‘with’ group, the token security/utility varies greatly:
Examining BitShares with a market cap of EUR 230 million / USD 270 million — at time of writing — the token economy mechanism provides a dividend composed of a share of the mining reward and transaction fees, which is paid to the BitShares holder.
The Israeli/Swiss player, Saga — funded at USD 30 million — sees Saga Genesis holders being rewarded in Saga Tokens, with the conversion ratio depending on the strength of Saga’s economy.
Basis, with funding at USD 133 million, has a highly complex token utility structure featuring both bonds, and share tokens. If Basis increases in value, shareholders receive newly-created Basis tokens, while bond tokens are auctioned off when the Basis supply needs to be contracted.
These are just three snapshots showing the wide spread of offerings, and proving that ‘not all stablecoins are created equal.’ Now let’s turn to the question of collateralization, and see what differences apply here. Essentially we can divide the offerings into three:
The first segment, containing 8 players, only one of which — Reserve — is without a utility token, are the Uncollateralized group, which have no underlying asset from which their value can be derived. The whole system is based on trust, and if that trust is lost, then the system collapses. Clearly, this is not the place for any serious investor.
The second segment — including BitShares, and the Australian player, Haven — does boast collateralization, but we’re talking the roller-coaster volatility of crypto. Crypto collateralized offerings may appear solid one minute, and extremely dubious the next. This volatility can only be dampened by considerable over-capitalization. This might help absorb the worst shocks of the crypto market, but is deeply inefficient in terms of capital utilization: a too high percentage of the capital is simply sitting around, waiting for that ‘just in case’ moment when the crypto market lurches up or down.
The third and most effective segment is the fiat collateralized group, including Stably, Saga, TrueUSD …and ROCKZ. In this segment a national currency strength is greater than most of the collateral. This provides efficient utilization of capital (compare and contrast with crypto collateralization!), and the collateral is exactly equal to the value of the stablecoin. This provides an intrinsic value to the stablecoin, and most importantly, the whole system is backed by a tangible asset, and is not just on trust or ‘gentlemen’s agreements’. Some of this group also uses other real assets as collateral, typically precious metals.
Taking a peek under the hood of Tether, for example, trust soon comes into question. There is a lack of transparency in its professed one-to-one USD backing, and it is well-documented that Tethers have been minted without fiat backing. The clincher comes with the fact that there are no legal rights on the reserves by token holders. It’s the very definition of the unstable stablecoin, and yet hey, it’s the major player with roughly 95% share of the market cap! TrueUSD also fails to provide legal rights to token holders.
So are all stablecoins the same? No. Are all stablecoins even stable? No. Or to put it another way: Why ROCKZ, and why now? — The answer is that because by any analysis of the stablecoin market, ROCKZ effectively answers all the needs of users and investors.
This is why we call it the bulletproof cryptocurrency!
Sébastien Hess, Head Business Development
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