Stablecoins are newer types of digital coins that aim to solve the volatility problem of cryptocurrency. The price of any cryptocurrency can soar in a matter of hours by several times, and then just as lightning-fast fall to the initial level or even lower.
A special place in this volatile crypto market is occupied by stablecoins, coins with a fixed or stable value. The price of such coins is tightly tied to another asset: fiat currency, precious metals or other digital currency.
Why stablecoins are needed?
The volatility of cryptocurrencies is the force that can turn a poor person into a millionaire, or vice versa, ruin. Rapid changes in the exchange rate of cryptocurrencies make it difficult to use them for everyday expenses. To solve these problems, stablecoins were created.
In addition, the crypto world is still very fragmented and the coins of different blockchains are not always compatible with each other and do not always form trading pairs.
The main functions of Stablecoins are:
- As a link between fiat currencies and cryptocurrencies.
- As an intermediary coin in the exchange of rare altcoins.
- As a store of value.
- For digital transfers in dollar terms.
Now let us see the top five stablecoins that you can buy to trade cryptocurrency. You can easily urchase these coins on popular exchanges like Letsexchange.io and others.
1. Tether (USDT)
First described in a white paper published in 2012, Tether is the first stablecoin to be listed on crypto exchanges. It has a $78 billion market cap, making it the largest stablecoin in the world. The coin is a low-risk investment, meaning price manipulation is unlikely.
The coin is a fiat-based stablecoin, meaning each coin is about equal to the value of one U.S. dollar held by the parent company, Tether Operations Ltd. i.e It is a platform that facilitates the use of fiat currencies virtually.
2. Binance USD (BUSD)
Paxos, a New York-based digital asset trading company, partnered with Binance, a major cryptocurrency exchange, to create the stablecoin, the BUSD. It was launched in 2019 which makes it fairly new stablecoin in the crypto world. The goal of BUSD is to offer users a way to hold US dollars and receive a stable, liquid, and digital asset.
The token was initially launched on the basis of the Ethereum blockchain, and after the launch of Binance Smart Chain, it received the support of its own blockchain. There are currently two versions of BUSD that comply with the ERC-20 and BEP-2 standards. The price of the coin is pegged to USD in a ratio close to 1:1.
While there are currently over thirty-six exchanges supporting BUSD, it is one of the most reliable & trustable stablecoin in the crypto world. Also, It is highly regulated with monthly audit, so it is a safe bet.
How much ETH can be bought for 1 BUSD?
For convenience in everyday use, all currencies are divided into fractional parts – change coins. Sovereign fiat currencies are usually divided into 100 parts.
The same principle and with the same goals is implemented for digital currencies. Only the number of exchange parts is much more than 1,000,000. The smallest indivisible part of Ethereum coin is wei. 1 ETH = 1.000.000.000.000.000.000 wei.
In addition to wei, there are larger change parts of the coin, which are named after the creators of cryptography. One thousandth ETH is named after Harold Thomas Finney II, who created the first cryptocurrency algorithm 5 years before the launch of Bitcoin. 0.000 001, ETH is named after Nick Szabo, the founder of the idea of smart contracts
Such small parts of the main coin are not needed in the physical world, but in the virtual space they are of great importance. We do not carry tenths or hundredths of a cent in our wallet, but these are quite real fees in the blockchain.
At the time of writing, the ETH/BUSD exchange rate is 1:2500. Accordingly, for 1 BUSD you can buy about 0.0004 ETH or 4 finnies.
3. USD Coin (USDC)
The next contender for the best stablecoin, with a market cap of more than $52 billion, USDC is the second-largest stablecoin in the crypto space. Released in September 2018, USDC is a decentralized cryptocurrency that is pegged to the US dollar and is available on several blockchains, including algorand, ethereum, and Solana to name a few.
It’s a crypto-backed stablecoin, which is created on CENTRE technology created by Coinbase and Circle. Its fund reserves are held in FDIC-insured US banks. Even though USDC is a bit more volatile than Tether, it’s still considered a low-risk cryptocurrency by many investors.
4. Dai (DAI)
Just like above stable coins, DAI’s price is pegged to the price of US dollar. However it is collaterlized by the use of Ethereum-based cryptocurrencies deposited into MakerDAO’s vaults (Decentralized autonomous organization) which eventually makes it stable.
DAI has also attacted institutional inverstors to invest in MakerDAO which helps in keeping the coin’s value stable. While DAI is slightly more volatile than Tether, we can still consider this stablecoin as low risk.
5. TerraUSD (UST)
TerraUSD is a bit riskier than the likes of Tether and Binance USD as TerraUSD’s protocol is balanced by Terra’s own native cryptocurrency, Terra (LUNA). When the Terra platform protocols were first released, the intention was to bring the price of UST back up to parity with USD, but in doing so, it has actually driven the price of UST to the moon.
LUNA’s smart contracts will automatically create TerraUSD when the coin’s price is below a dollar, while TerraUSD will be created when the coin’s price is above a dollar. The platform will also allow users to exchange TerraUSD for LUNA or dollars (and vice versa). When LUNA is worth less than a dollar, the UST pool contracts.