Interest in stablecoins has surged over the past year, and for good reason. With the trademark volatility in the cryptocurrency markets, enthusiasts want a reliable alternative to store their money without having to convert it back to fiat.
By Andrew Wong on ALTCOIN MAGAZINE
Tether has been the primary stablecoin since its launch in 2014. But after the recent controversy, will new stablecoins overtake its market dominance? Will they prove to be more reliable than Tether, or will they eventually face the same problems that Tether is currently?
The Tether Conundrum
Tether was the first cryptocurrency backed by fiat currency. Its creators assert that for each Tether token in circulation there is a U.S. dollar in the bank that backs it.
But when Tether dropped to 93 cents earlier this month, at the same time that other major cryptocurrencies surged in price and Binance suspended withdrawals, alarm bells rang throughout the cryptosphere.
Despite Tether releasing a “transparency update” in response to the controversy, with details about a third-party confirming the existence of U.S. dollars backing the amount of Tether in circulation, trust in the cryptocurrency dipped to an all-time low.
But was it enough to dethrone the crypto giant and make way for a new stablecoin to rise?
More Stablecoins, Better Promises
Though Tether might have been the first stablecoin, it’s not the only one in town. The following stablecoins comprise a list of Tether competitors who may eventually overtake its standing as the most used stablecoin.
TrueUSD, which bills itself as the only stablecoin that’s exchange-independent and regulated, is Tether’s most prominent rival. With a market cap of over $168 million as of October 23, 2018, TrueUSD funds are held in an escrow account and out of reach of the founding organization. Their holdings and professional attestations are published regularly on their blog.
TrueUSD is part of the TrustToken platform, which allows users to create tokens backed by physical assets. Supported assets range from real estate, gold, and fiat to movies, books and patents.
Dai is part of the Maker platform. Unlike other stablecoins, it’s not backed by fiat currency but by Ether. Maker’s smart contract platform, built on Ethereum, stabilizes the value of the Dai token through the use of collateralized debt positions, autonomous feedback mechanisms, and the incentivization of stakeholders called Keepers.
Both the DAI and MKR tokens rank in the top 100 of all cryptocurrencies as of October 23, 2018, according to data provided by CoinMarketCap.
Paxos Standard is the only stablecoin issued by a financial institution (Paxos). Paxos Standard comes with zero transaction fees and the promise that tokens will be exchangeable for US dollars within one business day. It differentiates itself by being subject to the regulation of the New York State Department of Financial Services.
Similar to TrueUSD, attestation reports are published on their website. Assets backing the Paxos Standard are held at FDIC-insured banks in the U.S.
Havven is a stablecoin and decentralized payment network. Founded by Kain Warwick, this two-token system is comprised of Havven and Nomin tokens. Nomin is the stablecoin with a variable supply, and the Havven token represents collateral for the system and has a fixed supply.
The stablecoin, nUSD, was launched on June 11 of this year. Adoption has been underwhelming to date, with a market cap of just $1.2 million and a 24-hour trading volume of just over $36,000, according to data from CoinMarketCap.
Gemini was a highly anticipated coin thanks to its well-known founders, the Winklevoss twins, also known as the first Bitcoin billionaires. Collateral for the Gemini dollar is held at the State Street Bank and independent audits are posted on their website.
Launched on September 10, 2018, the Gemini dollar is the world’s first regulated stablecoin that lets you send and receive U.S. dollars like email. Gemini dollars are created when a withdrawal is initiated on the platform, and are destroyed when a deposit is made.
New Stablecoins To Watch
Dubbed a third-generation stablecoin, the USDX protocol is not backed by fiat collateral but rather by “adjusting the market exchange rate through an ‘algorithmic central bank’ that automatically expands and contracts the supply of tokens” (source). It’s backed by 200% or more of the LHT Coin, the core currency.
The USDX also promises zero transaction fees, a user-friendly wallet and the ability to restore access to your wallet if you lose the key. Created by Lighthouse Blockchain Technology GmbH, it’s scheduled for release in the first quarter of 2019.
The Basis Protocol, founded by Nader Al-Naji, Lawrence Diao and Josh Chen, maintains the price of their stablecoin by utilizing an algorithmic central bank. It works by generating more Basis when demand rises, and buying back Basis when demand falls.
Basis Protocol raised $133 million in a private sale, according to their blog.
Auditors Need To Evolve
The Tether controversy is just another example of an industry that hasn’t been able to adapt to emerging blockchain technology.
As ShapeShift CEO Erik Voorhees pointed out, what blockchain technology demonstrates as proof of transactions isn’t what traditional auditors recognize as valid.
However, many of the other stablecoins mentioned here have enlisted third-party firms to audit their holdings without issue.
Auditchain proposes to embody an ecosystem that includes a blockchain protocol and an open source library of accounting smart contracts sufficient to capture, process, audit and report enterprise data and performance data on a real time continuous basis under a continuous independent audit exceeding current accounting, audit and control standards. A public facing and/or permission based presentation layer proposes to render in real time, at the close of every block; balance sheet, income statement, cash flow and statement of changes in stockholders’ equity reports that has the capacity to far exceed the reliability of existing reporting standards.
Though plenty of newcomers are on the rise and attempting to dethrone Tether, they have a long, uphill battle to fight ahead of them. Tether’s market dominance proves first-movers advantage, despite the recent controversy.
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The purpose of ALTCOIN MAGAZINE is to educate the world on crypto and to bring it to the hands and the minds of the masses. This article was written and composed by Andrew Wong on ALTCOIN MAGAZINE.