Understanding the Differences Between Today’s Leading Stablecoins: Tether, USDC, DAI, PAX
Stablecoins are one of the key drivers of blockchain adoption today.
The stablecoin industry is dominated by several big players — including Tether, USDC, and DAI — which can be confusing to the average investor. What are the differences between these stablecoins and their use cases in the real world?
The Rising Popularity of Stablecoins
A stablecoin combats the volatility of cryptoassets by pegging its value to a currency, usually the U.S. dollar. Stablecoins are often used as a way to easily hold money on cryptocurrency exchanges in key moments to reduce losses when trading.
For example, an investor who expects the price of BTC to fall can convert his holdings into stablecoins to retain his dollar value. He can then rebuy BTC at a lower price if it does fall or cash it out to his bank account to gain profit.
Stablecoins are growing in popularity as they are the fastest way to transfer stable value funds between crypto exchanges. Not only are transactions quick, but most exchanges also offer attractive trading fees for using stablecoins, which minimizes losses when moving cryptoassets from one exchange to another.
Stablecoins are also being actively explored by governments and financial institutions for their viability as a currency. Since they are theoretically unaffected by crypto’s infamous volatility, stablecoins are ideal for real-world use cases as they enable borderless, low-cost payments. With wire transfer fees reaching up to $30 per transfer, it’s no surprise stablecoins are catching up to established currencies in usage, particularly in emerging markets.
A Comparison of Today’s Leading Stablecoins
1. Tether (USDT)
Tether (USDT) was one of the first companies to introduce stablecoins to the market, with the coin being in operation since 2015. It was first devised as a solution for investors to transfer assets from one exchange to another for minimal fees. Tether’s billion-dollar daily volume and popularity in the market prove the company’s success at achieving its main objective even with an increasing number of rival stablecoins.
Despite being the market leader, Tether has endured multiple negative events in the past that have tarnished its reputation severely. One notable case was in 2018 when the company produced new USDT coins without guaranteeing a true 1-to-1 peg with the U.S. dollar.
Nevertheless, Tether remains strong on top of the stablecoins list and remains the #1 coin in terms of volume and market cap at the time of writing. The company also launched a gold-backed option (XAUT) earlier this year to strengthen its foothold in the industry.
2. USD Coin (USDC)
USD Coin (USDC) is another popular stablecoin with an impressive list of backers including Goldman Sachs, Silvergate, and US Bancorp. The coin was created through a joint-deal between Coinbase and Circle in 2018. Like Tether, USDC is also pegged to the U.S. dollar.
USDC emphasizes transparency for its users and partners, which explains why the stablecoin is being explored by some banks eager to get involved in the blockchain industry. It even has a dedicated app that allows users to convert their holdings to fiat, send money to other wallets, and earn interest, among a plethora of other fintech-related features.
3. Dai
Dai is a stablecoin operating on the Ethereum blockchain. Unlike USDC and USDT, Dai is backed by the value of ETH through smart contracts. This makes Dai a fully decentralized digital currency, earning the coin high praise among experts and users alike.
Dai is the standard currency for Ethereum’s decentralized finance (DeFi) ecosystem, a series of fintech solutions created and sustained by Ethereum’s tech stack. This results in virtually infinite demand for Dai as long as DeFi is in demand, which seems to be the case as the industry recently crossed the $1 billion mark — a 300% increase in less than a year.
Expect to see Dai flourish and cement itself as a leading stablecoin as DeFi matures in adoption and market growth.
4. Paxos Standard (PAX)
Paxos (PAX) was built as an alternative to USDT in early 2018. PAX works on the Ethereum blockchain, allowing the coin to be exchanged with other ERC-20 tokens instead of operating solely as a stablecoin. The company controls inflation by burning PAX every time it is redeemed, which prevents its value from tanking due to oversupply.
PAX is also regulated and certified by numerous financial institutions, including the New York State Department of Financial Services. It’s gold-backed token, PAX Gold, is the only gold token in the cryptosphere that can be converted into physical bullion bars. These benefits, combined with very low transaction fees, make PAX one of the more popular stablecoin options among traders.
How Blue Swan Helps Investors Keep Track of the Latest Stablecoin Updates
Keeping up with the latest stablecoin updates is important for investors to make informed decisions in the market. However, we understand that doing so can be tedious and time-consuming.
This is where our crypto market intelligence system comes in handy.
Blue Swan, our professional-grade, multi-channel big data platform gives investors everything they need to know about the latest updates and news about crypto futures.
Blue Swan Grading benefits investors immensely by offering a comprehensive crypto analytical framework that aggregates and analyzes essential data from a diversity of sources, offering a comprehensive market overview.
Blue Swan does everything from analyzing news and media coverage to assessing project development status. The platform also takes into account the skills and reputations of the teams behind crypto projects while keeping up with their regulatory compliance (or lack thereof). In short, the platform offers unbiased market analysis and project ratings and classifications that investors need, allowing them to make faster and smarter trading decisions.
Blue Swan Grading also offers API tools and customizable features for developers to make full use of the platform.
Be one of the first to benefit from Blue Swan Grading by signing up for our free 7-day trial.
