The Different Stablecoins on Totle

What makes each of the stablecoins on Totle unique?

Published in

Totle

5 min readOct 28, 2019

Stablecoins are cryptocurrencies that offer price stability by pegging their value to a stable currency or commodity. Their goal is to act as a reliable investment vehicle for users that want the value of their funds to remain constant relative to other cryptocurrencies.

However, each stablecoin is unique. The underlying technology and method for maintaining stability vary for each coin.

This article will explore how the five stablecoins available on Totle Swap differ.

USDT

Tether USD, or USDT, was the first stable cryptocurrency to appear on the market. To this day it has maintained its position as the most widely used stablecoin. Tether’s success is due in large part to its simplicity. It is fiat-collateralized with USD — one USDT is equal to one USD. This makes it easy to understand and offers a familiar valuation for investors coming from the traditional finance system.

Historically, investors have used Tether to reduce their exposure to the volatile nature of cryptocurrencies like Bitcoin when they felt that price fluctuations were not in their favor. Tether has since evolved into a tool for developers to build digital financial applications with and a currency with which digital commerce can be conducted in a stable manner.

The creators of Tether claim that the cryptocurrency is one-to-one backed by a large reserve of USD, but there is still much debate over whether this is true.

DAI

DAI is a stablecoin that has quickly risen to the top of the market as a competitor to Tether. Much of the controversy surrounding Tether, namely that its collateralization method is centralized and subject to potential manipulation, is remedied through DAI’s decentralized collateralization structure.

MakerDAO, a decentralized organization building innovative tools on the Ethereum blockchain, originally created DAI by collateralizing it with a system of contracts that automatically adjust to varying market dynamics. Like Tether, DAI’s price is pegged to the USD, but instead of being directly convertible to USD, DAI’s value is continually readjusted by smart contracts that influence the supply of cryptocurrency it’s collateralized with.

The MakerDAO system is not without its problems. This year alone, thousands of CDPs have been opened on Maker. Consequently, the token holders comprising MakerDAO’s governance structure have been forced to substantially raise the stability fee in order to push Dai towards parity with USD.

However, the loan opportunities available as a result of MakerDao’s censorship-resistant model are noteworthy, making access to credit services available when conventional methods are unavailable.

Recently, MakerDAO announced that DAI would soon be updated to a multi-collateralized asset that, it is anticipated, will improve the stability of the asset.

USDC

USD Coin is similar to Tether in that it’s directly convertible to USD. However, USDC leverages smart contracts to maintain a stable supply of USD, which offers a higher degree of transparency to their reserve of USD. Anyone can contribute USD to a USDC smart contract which tokenizes USD into USDC. At any time USDC holders can exchange their tokens for USD through the USDC smart contract.

USDC is attractive because it maintains a direct relationship with the price of USD while providing evidence of their trustworthiness. This lowers the risk of manipulation or malfeasance occurring. Additionally, USDC was created by Coinbase, a reputable exchange that has been providing reliable services since 2012.

TUSD

Trust USD (TUSD) is the first stablecoin to be regulatory compliant. Issued on the TrustToken platform, TUSD is one-to-one backed with a reserve of 43,523,903 USD, which is openly auditable. Contributors to TUSD must first complete a KYC and AML onboarding process before having access to TrustToken’s smart contracts.

These precautions have positioned TUSD as a compliant stablecoin that could work alongside the current banking system. TUSD could, therefore, play a crucial role in cryptocurrency adoption.

PAX

Paxos Standard (PAX), like TrueUSD, is a regulated token. PAX is equivalent in value to USD, operates through a system of smart contracts on the Ethereum blockchain, and acts as a stable asset in which to store funds.

PAX is unique in that it has achieved its popularity because it is fast. At any time PAX holders can instantly redeem their token for USD. This makes PAX a great fit for commerce because senders or receivers can easily convert PAX to fiat as needed.

Stablecoins

Stablecoins will serve as an incredibly useful digital financial tool for anyone in need of a reliable asset to hold funds, conduct business, or build a decentralized product.

We anticipate the role of stablecoins will continue to grow both in the online financial market and in the Forex. We are excited to see the unique ways cryptocurrency users will benefit from them.

Totle will be adding new stablecoins as demand for them grows. We’re currently keeping a close eye on TruGBP and TruHKD.