Tether

Ethereum

TRON

Tron20

Solana

Algorand

Huobi Token

HECO

BNB Smart Chain (BEP20)

STAKE

xDai

Polygon

Avalanche

Avalanche C-Chain

TomoChain

Fantom

Bitcoin Cash

KuCoin Token

OKC Token

OKExChain

Arbitrum

RSK Smart Bitcoin

RSK RBTC

Zilliqa

Velas

Cronos

Harmony

Secret

Boba Network

Terra Classic

Moonbeam

Oasis Network

Aurora

Telos

Klaytn

MetisDAO

Metis Andromeda

Hoo Smart Chain

Moonriver

KardiaChain

IoTeX

IoTex

Cardano

Milkomeda

Meter Governance

Meter

NEAR Protocol

Near

Everscale

Conflux

Fusion

Fusion Network

Waves

Bitgert

Tether (USDT) is a cryptocurrency and operates on the Ethereum platform. Tether has a current supply of 68,160,365,339.33806 with 66,081,540,012.394264 in circulation. The last known price of Tether is 0.99909196 USD and is up 0.00 over the last 24 hours. It is currently trading on 35560 active market(s) with $29,598,294,092.95 traded over the last 24 hours. More information can be found at https://tether.to.

USDT has been the first major stablecoin in the market. Its value is pegged 1:1 to the USD. This is achieved by backing each issued USDT with one USD in cash or cash equivalents. Its mainly used to hedge market volatility as well as in trading pairs for crypto trading. However, Tether Limited failed to deliver a transparent audit that proves that every outstanding USDT is fully backed. The lack of transparency from Tether Limited constitutes a risk, that investors should be aware of. 

USD Coin

Elrond

Ronin

Fuse Network

Fuse

Avalanche DFK

Elastos

Wanchain

Cosmos

USD Coin (USDC) is a cryptocurrency and operates on the Ethereum platform. USD Coin has a current supply of 55,802,605,112.71548. The last known price of USD Coin is 1.00026487 USD and is up 0.04 over the last 24 hours. It is currently trading on 4748 active market(s) with $3,828,925,663.79 traded over the last 24 hours. More information can be found at https://www.centre.io/usdc.

USD Coin is a USD pegged stable coin which is always issued & redeemed in a 1:1 ratio with USD. Investors can interact with products based on USDC on the Circle platform. It gained popularity in recent years through its high transparency and compliancy standards based on monthly audits and the governance through the multi-party consortium of Circle, Coinbase and Bitmain called Centre.

Binance USD

BNB Beacon Chain (BEP2)

Binance USD (BUSD) is a cryptocurrency and operates on the BNB Beacon Chain (BEP2) platform. Binance USD has a current supply of 17,547,224,379.459255. The last known price of Binance USD is 1.00186408 USD and is up 0.20 over the last 24 hours. It is currently trading on 3956 active market(s) with $3,792,196,170.44 traded over the last 24 hours. More information can be found at https://www.binance.com/en/busd.

BUSD Coin is a USD pegged stable coin that is always issued & redeemed in a 1:1 ratio with USD. It gained popularity through the crypto exchange Binance which offered free trades and other rewards for investors holding and using BUSD. Further, it is the native stable coin for the Binance Smart Chain, a popular crypto ecosystem. 

SORA

Sora

Dai (DAI) is a cryptocurrency and operates on the Ethereum platform. Dai has a current supply of 6,911,023,127.94512. The last known price of Dai is 1.00070089 USD and is up 0.05 over the last 24 hours. It is currently trading on 1016 active market(s) with $135,193,100.28 traded over the last 24 hours. More information can be found at http://www.makerdao.com/.

Dai is a cryptocurrency-backed stablecoin issued by the Maker Protocol and governed by the MakerDAO via the MKR governance token. Its main purpose is to offer a secure, fully collateralized, and decentralized version of a stablecoin.  
⁠DAI is issued by the Maker Protocol to everyone who locks collateral in a collateralization ratio of 150%. The collateral can be provided in cryptocurrencies such as ETH or USDC. If a vault's collateralization ratio drops below 150%, the position gets liquidated while being subject to a 13% penalty fee. The liquidated collateral is then auctioned on the open market with a 3% discount. For extreme scenarios where the collateral liquidation mechanism is not enough to maintain the peg, the protocol can mint new MKR tokens to sell at the open market against DAI to pay back the debt of an under-collateralized vault.

Ultra Salescloud

Ultra Salescloud (UST) is a cryptocurrency and operates on the Ethereum platform. Ultra Salescloud has a current supply of 1,000,000,000 with 0 in circulation. The last known price of Ultra Salescloud is 0.00088562 USD and is up 0.00 over the last 24 hours. More information can be found at http://www.ust.top/.

UST is a decentralized and algorithmic stablecoin in the Terra Ecosystem. It is pegged 1:1 to the USD through an algorithmic stability mechanism based on a mint-and-burn system with Terra's native cryptocurrency Luna. The main purpose of UST was to boost Terra's defi ecosystem which offered a high yield for UST staker. In May 2022, UST experienced a death spiral by losing its peg and the investor's confidence in its ability to regain the value of $1. This led to arbitrarily high inflation of Luna caused by the algorithm to push UST back to its peg. However, the trust of the investors could not be recovered and UST still trades significantly below the value of $1. 

TerraUSD

TrueUSD

TrueUSD (TUSD) is a cryptocurrency and operates on the BNB Beacon Chain (BEP2) platform. TrueUSD has a current supply of 1,208,140,248.0634747. The last known price of TrueUSD is 1.00114833 USD and is up 0.05 over the last 24 hours. It is currently trading on 268 active market(s) with $51,016,808.11 traded over the last 24 hours. More information can be found at https://www.trueusd.com/.

TUSD has been launched in 2018 by the company TrustToken. Its value is pegged 1:1 to the USD. This is achieved by backing each issued TUSD with one USD in cash or cash equivalents. Its mainly used to hedge market volatility as well as in trading pairs for crypto trading. TUSD can be minted and redeemed on the TrustToken platform. Its main purpose is to hedge against market volatility and as a stable asset for trading. In late 2020, TrueUSD was acquired by Techetryx, an Asian conglomerate. 

Pax Dollar

Pax Dollar (USDP) is a cryptocurrency and operates on the Ethereum platform. Pax Dollar has a current supply of 945,642,940.11. The last known price of Pax Dollar is 1.00005799 USD and is up 0.04 over the last 24 hours. It is currently trading on 62 active market(s) with $29,708,237.03 traded over the last 24 hours. More information can be found at https://www.paxos.com/usdp/.

USDP Coin is a USD pegged stable coin that is always issued & redeemed in a 1:1 ratio with USD. It is fully backed by cash and cash equivalents and audited monthly through an independent auditor. USDP is issued either on the Ethereum mainnet or the Binance Smart Chain. 

Neutrino USD

Neutrino USD (USDN) is a cryptocurrency launched in 2019and operates on the Ethereum platform. Neutrino USD has a current supply of 772,857,581.9970356 with 772,856,977.936984 in circulation. The last known price of Neutrino USD is 0.98935231 USD and is up 0.36 over the last 24 hours. It is currently trading on 59 active market(s) with $3,732,415.89 traded over the last 24 hours. More information can be found at https://neutrino.at/.

USDN is a decentralized algorithmic & crypto-backed stablecoin in the Waves Ecosystem. It is pegged 1:1 to the USD through an algorithmic stability mechanism based on a targeted backing ratio of 1.5 (in Dollar terrms) with Waves native cryptocurrency WAVES. If the backing ratio falls below 1, the protocol issues NSBT (Neutrino Governance token) in a bonding mechanism at a value below 1 USDN which can be exchanged in a 1:1 ratio against USDN as soon as the peg is restored. The main purpose of USDN is to boost Wave's defi ecosystem which offered a high yield for USDN staker making it an interest-bearing stablecoin. The stablecoin has depegged already twice but was always able to repeg again. However, the risk of experiencing a death spiral as seen with UST is imminent. 

Fei USD

Fei USD (FEI) is a cryptocurrency and operates on the Ethereum platform. Fei USD has a current supply of 426,116,732.6917724 with 424,996,177.78890556 in circulation. The last known price of Fei USD is 0.99020294 USD and is down -0.46 over the last 24 hours. It is currently trading on 51 active market(s) with $2,268,619.48 traded over the last 24 hours. More information can be found at https://fei.money/.

FEI is an algorithmic stablecoin that is issued by the Fei Protocol and governed via the TRIBE token. It is pegged 1:1 to the USD and the protocol algorithmically ensures that each FEI token can always be minted and redeemed against $1 of collateral from the Protocol Controlled Value (PCV). The protocol accepts DAI, ETH and LUSD as collateral. The target collateral ratio is 100%. If the ratio drops below 100% and the FEI loses its peg, the protocol will buy FEI with newly minted TRIBE and vice versa for a collateral ratio above 100%. 

Gemini Dollar

Gemini Dollar (GUSD) is a cryptocurrency and operates on the Ethereum platform. Gemini Dollar has a current supply of 168,519,882.79. The last known price of Gemini Dollar is 0.99997666 USD and is down -0.11 over the last 24 hours. It is currently trading on 65 active market(s) with $2,601,129.26 traded over the last 24 hours. More information can be found at https://gemini.com/dollar/.

GUSD Coin is a USD pegged stable coin that is always issued & redeemed in a 1:1 ratio with USD. It is fully backed by cash and cash equivalents and audited monthly through an independent auditor. USDP is issued solely as an ERC-20 token whose contract is audited by Trail of bits. The Issuer, the cryptocurrency exchange Gemini, offers different yield farming opportunities for GUSD holders on its platform.

USDD

USDD (USDD) is a cryptocurrency launched in 2022and operates on the Ethereum platform. USDD has a current supply of 723,321,764.61. The last known price of USDD is 0.99175436 USD and is up 0.05 over the last 24 hours. It is currently trading on 66 active market(s) with $128,085,098.68 traded over the last 24 hours. More information can be found at https://usdd.io/.

USDD is a decentralized and algorithmic stablecoin in the TRON Ecosystem. It is pegged 1:1 to the USD through an algorithmic stability mechanism based on a mint-and-burn system with TRON's native cryptocurrency TRX. The main purpose of USDD is to boost TRON's defi ecosystem which offers a yield of 30% for USDD staker. The supply of USDD is planned to be backed by the TRON DAO Reserve with over $10bn of assets in BTC, USDT, USDC and TUSD.  

Decentralized USD

Frax

Frax (FRAX) is a cryptocurrency and operates on the Ethereum platform. Frax has a current supply of 1,366,587,438.658326. The last known price of Frax is 1.00290607 USD and is up 0.40 over the last 24 hours. It is currently trading on 135 active market(s) with $11,927,421.51 traded over the last 24 hours. More information can be found at https://frax.finance/#welcome.

Frax is a fractional-algorithmic stablecoin protocol pegged 1:1 to USD. The protocol is governed by the Frax Shares token (FXS). Frax is combining on-chain collateral with a price-stability algorithm to ensure price stability while maintaining capital efficiency in a decentralized way.  The protocol guarantees that FRAX can always be exchanged against $1 of value allowing arbitrageurs to balance the price around $1. The algorithm for price stability is a mint-and-burn algorithm against its governance token FXS similar to other algorithmic stablecoins. 

Liquity USD

Liquity USD (LUSD) is a cryptocurrency launched in 2021and operates on the Ethereum platform. Liquity USD has a current supply of 166,449,512.53333744. The last known price of Liquity USD is 1.01834981 USD and is up 0.08 over the last 24 hours. It is currently trading on 38 active market(s) with $3,253,368.59 traded over the last 24 hours. More information can be found at https://www.liquity.org/.

LUSD is an ETH-backed stablecoin that is pegged 1:1 to USD and issued through the Liquity Protocol. The Liquity protocol is a fully decentralized borrowing protocol that allows depositing ETH and borrowing LUSD at 0% interest and with a min. collateral ratio of 110%. 
A crucial innovation, the Stability Pool, acts as an additional stability buffer at market downturns. The main USP of LUSD is that the Liquity Protocol is fully decentralized and governance-free. This means that the protocol is deployed and can never be changed.

HUSD

HUSD (HUSD) is a cryptocurrency launched in 2019and operates on the Ethereum platform. HUSD has a current supply of 204,993,823.62705073. The last known price of HUSD is 1.0026039 USD and is up 0.25 over the last 24 hours. It is currently trading on 100 active market(s) with $5,474,365.47 traded over the last 24 hours. More information can be found at http://www.stcoins.com/.

HUSD Coin is a USD pegged stable coin that is always issued & redeemed in a 1:1 ratio with USD. It is fully backed by cash and issued by Stable Universal Limited and labeled as the stablecoin for the ecosystem of the cryptocurrency exchange Huobi. Users can save fees and earn interest via HUSD staking on the Huobi platform. 

USDX [Kava]

USDX [Kava] (USDX) is a cryptocurrency launched in 2020. USDX [Kava] has a current supply of 107,526,703 with 108,783,464 in circulation. The last known price of USDX [Kava] is 0.95003655 USD and is down -0.94 over the last 24 hours. It is currently trading on 13 active market(s) with $232,939.00 traded over the last 24 hours. More information can be found at https://kava.io.

USDX is a crypto-collateralized stablecoin issued on the Kava platform and is pegged 1:1 to  USD. Kava aims for an over-collateralization of USDX. USDX is issued via a loan backed by a collateral of other digital assets. These assets are KAVA, ATOM, wBTC and wETH. The purpose of USDX is to boost the defi ecosystem of Kava, a defi platform connecting the Cosmos SDK with the EVM. 

sUSD

sUSD (SUSD) is a cryptocurrency and operates on the Ethereum platform. sUSD has a current supply of 97,701,102.49886967. The last known price of sUSD is 1.00676437 USD and is up 0.66 over the last 24 hours. It is currently trading on 52 active market(s) with $20,021,204.04 traded over the last 24 hours. More information can be found at https://www.synthetix.io/.

SUSD is a synthetic stablecoin created with the Synthetix protocol and tracks 1:1 the price of USD. In order to create sUSD, an investor has to stake SNX token on the Synthetix platform. A high collateralization ratio is required for security reasons. The synthetic USD has to be burned in order to unlock the staked SNX again. 

Celo Dollar

Celo

Celo Dollar (CUSD) is a cryptocurrency launched in 2020and operates on the Celo platform. Celo Dollar has a current supply of 57,241,566.21607361 with 55,120,142.00903516 in circulation. The last known price of Celo Dollar is 0.99507708 USD and is up 0.03 over the last 24 hours. It is currently trading on 31 active market(s) with $227,365.38 traded over the last 24 hours. More information can be found at https://celo.org/.

Celo Dollar is an algorithmic and cryptocurrency-backed stablecoin issued by the Celo Reserve pegged 1:1 to USD. Its main purpose are peer-to-peer payments as the overall Celo ecosystem targets a mobile-first payment infrastructure. The stability mechanism is based on an algorithm as well as on-chain over-collateralization with digital assets. Arbitrageurs can always mint & redeem Celo Dollar at a value of $1 in CELO token. Celo holds a large reserve mainly in CELO tokens but also other digital assets to provide stability to the stablecoin.

Origin Dollar

Origin Dollar (OUSD) is a cryptocurrency and operates on the Ethereum platform. Origin Dollar has a current supply of 66,719,641.50100996. The last known price of Origin Dollar is 0.99936285 USD and is up 0.24 over the last 24 hours. It is currently trading on 10 active market(s) with $53,967.05 traded over the last 24 hours. More information can be found at https://www.ousd.com.

OUSD is a cryptocurrency-backed stablecoin issued by the Origin Protocol and pegged 1:1 to the USD. Its main value proposition is to earn yield on stablecoins. OUSD is generated through other stable coins such as DAI, USDT or USDC in a 1:1 conversion. Holding OUSD in the Origin Dollar wallet automatically earns yield for the investor which is converted to further OUSD with compounding. 

Vai (VAI) is a cryptocurrency launched in 2020and operates on the BNB Smart Chain (BEP20) platform. Vai has a current supply of 57,498,554. The last known price of Vai is 0.95437797 USD and is up 0.19 over the last 24 hours. It is currently trading on 33 active market(s) with $119,573.71 traded over the last 24 hours. More information can be found at https://venus.io.

Vai is a cryptocurrency-backed stablecoin issued via the Venus Protocol and pegged 1:1 to the USD. The protocol is deployed as a money market on Binance Smart Chain and originated as a MakerDAO fork. The collateralization ratio is targeted to be a minimum of 133% of the borrowed stablecoin amount. If the collateralization ratio drops of depositors into a vault drop below 133%, the position gets liquidated while being subject to a penalty fee.

mStable USD

mStable USD (MUSD) is a cryptocurrency and operates on the Ethereum platform. mStable USD has a current supply of 41,085,970.46059056. The last known price of mStable USD is 0.996 USD and is up 0.36 over the last 24 hours. It is currently trading on 13 active market(s) with $7,231.17 traded over the last 24 hours. More information can be found at https://mstable.org/.

MUSD is a decentralized and cryptocurrency-backed stablecoin created via the mStable protocol and pegged 1:1 to the USD. The protocol issues MUSD in a 1:1 ratio against other stablecoins such as USDT, USDC, or DAI. The protocol then lends the collateral on lending platforms such as Aave or Compound to generate yield. If an asset in the collateral looses its peg, the protocol liquidates staked META (mStable's governance token) to increase the collateral. If this is not enough, the protocol can mint new META to buy back and burn MUSD. 

Magic Internet Money

Magic Internet Money (MIM) is a cryptocurrency . Users are able to generate MIM through the process of mining. Magic Internet Money has a current supply of 1,933,352,207 with 0 in circulation. The last known price of Magic Internet Money is 0.99374444 USD and is up 0.44 over the last 24 hours. It is currently trading on 266 active market(s) with $5,657,452.48 traded over the last 24 hours. More information can be found at https://abracadabra.money/.

Magic Internet Money (MIM) is a crypto-backed stablecoin pegged to the value of the USD and issued via the abracadabra money lending protocol. The platform is governed by the SPELL governance token. The focus of the protocol is to enable borrowing against interest-bearing tokens as collateral. Its also based on Sushis lending platform "Kashi" to allow for leverage. In a single transaction, the user can borrow MIM against the interest-bearing token, swap this against USDT and borrow again the interesting bearing token used then as collateral for more MIM. This process can create up to 10x leverage depending on the collateral. 

MAI (MIMATIC) is a cryptocurrency and operates on the Polygon platform. MAI has a current supply of 0. The last known price of MAI is 0.99526992 USD and is up 0.51 over the last 24 hours. It is currently trading on 95 active market(s) with $366,628.34 traded over the last 24 hours. More information can be found at http://mai.finance/.

MAI (MIMATIC) is a crypto-backed stablecoin pegged to the value of the USD and issued via  MAI finance and the QiDAO protocol while its governance is conducted via the Qi governance token. It is the first native stablecoin protocol on the Polygon network and specializes in interest-free borrowing. Borrowers can lock a variety of digital assets including interest-bearing tokens into the vaults to borrow MAI. Thereby, a minimum collateralization ratio of 150% is required. Its architecture makes MAI comparable to DAI from MakerDAO although MAI finance works without interest for the borrowers. 

DOLA

DOLA (DOLA) is a cryptocurrency launched in 2020and operates on the Ethereum platform. DOLA has a current supply of 55,701,609.749204 with 0 in circulation. The last known price of DOLA is 0.99509726 USD and is up 0.38 over the last 24 hours. It is currently trading on 7 active market(s) with $46,641.60 traded over the last 24 hours. More information can be found at https://www.inverse.finance/.

DOLA is a debt-backed & over-collateralized stablecoin pegged to the value of the USD. It is issued via the Inverse.finance platform and governed by the InverseDAO via the INV governance token. DOLA can be borrowed from different lending markets on Ethereum and Fantom. Thereby, borrowers can borrow up to 85% against their collateral. The peg stability mechanism is based on a flexible lending rate which can be lowered to increase the DOLA supply if its value is above $1 or increased to bring borrowers to repay their DOLA loans. This repaid DOLA can then be burned to decrease the supply and bring DOLA back to $1 if its value falls below the peg. 

Dola

Stablecoins are cryptocurrencies whose price is pegged to the value of a FIAT currency or any other asset. The growth of defi has led to a huge demand for cryptocurrencies that guarantee price stability. Over the years, many different types of stablecoins have emerged with different price stability mechanisms. 

The first type of stablecoins to go mainstream have been Fiat-backed stablecoins such as USDT. They issued stable token pegged to the USD against a FIAT deposit. However, FIAT backing requires a centralized banking structure. The resulting level of centralization and for some projects, lack of transparency led to the emergence of on-chain crypto-backed stablecoins such as Dai from MakerDAO. Dai is over-collateralized with different digital assets such as ETH in its vaults. This leads to a high stability but low capital efficiency. This inefficiency left room for algorithmic stablecoins to gain momentum. The most prominent algorithmic stablecoin has become UST. Its peg was achieved through a mint and burn algorithm in a duo-token model as its price stability mechanism. However, its recent crash has shown that this mechanism fails to create price stability under adversarial conditions. 

More about the different types of stablecoins can be found under the following links:

The recent crash of UST has shed a light on the risks associated with algorithmic stablecoins. Many retail investors, DAOs and protocols have suffered from significant losses and the burst of UST dragged the whole crypto market into heavy losses. The event has also shown that the severe effect for many investors could have been prevented with better education on the risks associated with UST. Stablecoins.wtf has been developed to create transparency and comparability between all different stablecoins and to educate about the risks associated with them. 

Why they are important for the blockchain ecosystem

The Relevance of Stablecoins

Until today, every stablecoin has to balance three main goals. The main target and main purpose of a stablecoin is to hold a stable value pegged to the value of another asset such as a Fiat currency. This price stability can be achieved through different price-stability mechanisms. Often, the issuer of the stablecoin asks for collateral that could be either real fiat currency or digital assets. The lower the achieved volatility of the stablecoin, the better it fulfills its purpose. However, in most stablecoin designs, the goal to achieve high price stability comes with a tradeoff in either the decentralization of the system or its capital efficiency. In the following, we will explain the three dimensions of the stablecoin trilemma and discuss the tradeoffs arising. 

Trilemma.png

Price stability in par with the pegged assets is the main objective of any stablecoin. This is usually achieved through a colalteralization of the issued stablecoin based on the underlying asset. In the case of an US-pegged stablecoin, a 1:1 USD collateralization could ensure that every stablecoin outstanding is always backed with one USD making a depeg almost inpossible over a longer time period in liquid markets.  

The capital efficiency describes how much value is needed to create one unit of the issued stablecoin. A high capital efficiency is needed in order to scale a stablecoin. If for instance, more capital than $1 is needed to create one USD-pegged stablecoin, the stablecoin design would be described capital-inefficient. If less than a dollar is needed, the system can be considered as capital-efficient to enable growth. 

Decentralization plays a crucial role in any token and protocol design. Stablecoins have developed into an important and integral part of defi and the wider web3 ecosystem. Thus, decentralization of the governance and the systems of stablecoin issuers help to mitigate centralized single-points-of-failure and risks. 

The nature of a trilemma is, that under no condition, all three goals can be achieved to the same extent. Stablecoins, whose focus on decentralization is often not able to create a system, where a sustainable stable price can be achieved without becoming capital-inefficient through the requirement of an over-collateralization of the issued token. Over the last years, many different stablecoin designs have emerged to takle the trilemma. Most could not solve the trilemma but focus on specializing in at least two of the three objectives. However, a stablecoins main goal of holding the price of the pegged asset under any condition remains the most important criterion for any stablecoin project. 

Price Stability, Capital Efficiency, and Decentralization

The Stablecoin Trillema

Fiat-backed stablecoins have been the first stablecoins to emerge and have become the most prominent and used form of stablecoins over the last eight years. Fiat-backed stablecoins have the characteristic that each USD-pegged token issued is backed 1:1 by real USD. Therefore, fiat-backed stablecoins require bank accounts to hold USD to back the stablecoin issuing. The most prominent fiat-backed stablecoin is USDT from Tether Holdings. USDT is mainly used for trading on centralized and decentralized exchanges as well as a store of value to hedge the high volatility in the crypto markets. The direct backing with Fiat currency has made USDT one of the most stable and long-lasting stablecoins in the market. Many other fiat-backed stablecoins have entered the market based on the success of USDT such as USDC from Circle or BUSD from Binance. However, the high stability of fiat-backed stablecoins comes with trade-offs in decentralization and capital efficiency.   

Fiat-backed.png

The requirement to hold actual Fiat currency such as USD can only be met with the existence of Fiat-based bank accounts. Thus, fiat-backed stablecoin issuers rely on a centralized structure with a regulated entity. Customers who want to borrow stablecoins against USD will have to go through a KYC and an AML process. However, the practice of issuing stablecoins has no specific regulation by any financial authority yet. This leads to low transparency and a high need for trust by investors for the stablecoin issuer. Regular attestation reports and actual audits of the balance sheets of centralized stablecoin providers remain voluntarily. Tether and its stablecoin USDT have been subject to endless rumors about having large parts of its USDT supply outstanding unbacked or only partially backed by assets that are substantially more volatile and risky than cash and cash equivalents. 

Due to the ability to create stablecoins based on real USD, Fiat-backed stablecoin providers are the preferred issuer for large and institutional investors who want to enter the crypto markets. Thereby, they are the entry-gate for professional capital and contribute to further growth of the entire market. As of May 2022, Fiat-backed stablecoins accounted for over 95% of the entire stablecoin supply in the market.  However, the lack of transparency and accountability of centralized stablecoin providers constitutes a known systematic risk for the crypto market. 

The Most Used Stablecoin Category

Fiat-backed Stablecoins

Crypto-backed stablecoins are the answer to the shortcomings and trade-offs of centralized Fiat-backed stablecoins. Trustless systems and decentralization are the main pillars of the crypto ecosystem and thus, the creation of decentralized on-chain stablecoin protocols was inevitable. This type of stablecoin is backed by other digital assets such as BTC, ETH, other stablecoins or any other tokenized asset and is usually created through decentralized protocols to issue and redeem the tokens. Thereby, digital assets are locked as collateral in smart contracts to issue or mint the new stablecoin.  One prominent example of a crypto-backed stablecoin is DAI from MakerDAO. 

Crypto-backed.png

Stablecoin protocols are often governed in a decentralized way, often by a DAO based on the governance token of the protocol. Since these protocols can only have crypto-assets as collateral, they often have to cope with higher volatility compared to Fiat-currency as backing. Thus, most crypto-backed stablecoins are over-collateralized. The Maker protocol for instance requires a collateral ratio of 150% for borrowing DAI. This leads to capital inefficiency since users need significantly more capital than the actual value of the minted stabelcoins to borrow stablecoins from the protocol. This shows, that on-chain and crypto-backed stablecoins often trade-off their capital efficiency for decentralization in order to achieve price stability. 

To lower the required collateralization ratio to maintain and defend the peg of the stablecoin, some stablecoin protocols are accepting other stablecoins as the collateral which have a low volatility reducing the risk of a significant drop in value of the collateral. Other Stablecoin protocols are experimenting with delta-neutral derivative positions to maintain price stability. 

The Trade-Offs for Decentralization

Crypto-backed Stablecoins

Algorithmic stablecoins have been promising a solution for the stablecoin trilemma for a long time. Instead of relying on a Fiat-backing or an over-collateralized crypto-backing, algorithmic stablecoins have implemented a complex algorithm balancing the supply and demand of the stablecoin to maintain price stability via smart contracts. Hence, the price stability mechanism does not rely on any off-chain or on-chain direct collateral. The algorithm usually balances a two-token model with a mint and burn mechanism. Thereby, a second price-floating token is issued. The protocol ensures that investors can always swap one stablecoin for $1 of the price-floating token. Thereby, arbitrageurs are incentivized to buy the stablecoin on the market and exchange it for the price-floating if it's trading below the peg and vice versa. If investors want to swap their stablecoins, the protocol mints new price-floating token while the supply of the stablecoin contradicts. 

algorithmic.png

Algorithmic stablecoins have been the first to create capital-efficient stablecoins. Critics argue that algorithmic stablecoins create value out of thin air and can only survive, as long as the trust in its algorithm is strong enough to manage the demand and supply. Recent events with the crash of UST from the Luna Foundation Guard together with its Luna token have proven the extraordinary risks associated with algorithmic stablecoins. Highly solvent market acteurs have attacked the peg of the UST by heavily dumping UST on the market. If such an attack is only of short duration, the algorithm will balance supply and demand and bring the stablecoin back to its USD peg. But in the case of UST, the well-capitalized attack was coordinated in times of big market uncertainty, and investors more and more lost their trust in UST. This led to a so-called death spiral in which more and more Luna tokens hat to be minted to support the UST price and thus, heavily inflating the Luna price. The lost trust through a further dropping UST price led to more and more people trying to exit the coin. The Luna Foundation guard tried to stabilize the price of UST through the use of its crypto reserve but this was just a drop in the ocean. 

The crash of UST has shown the high risk associated with algorithmic stablecoins. Not only UST but also other algorithmic stablecoins have lost significant market cap caused by the crash. As an answer, hybrid stablecoins gain some momentum. These stablecoin protocols combine an efficient mint and burn algorithm with on-chain crypto-based collateralization. Thus, the risks of a total crash such as in the case of UST are reduced while the capital-efficiency still remains higher than for solely fiat-& crypto-backed stablecoins. 

Top Stablecoins by Market Cap

Educational Resources

WTF! Where to start?

Total Stablecoin Market KPIs

Total Stablecoin Market KPIs