The five best stablecoins to watch in 2021
Stablecoins are all the rage. Even Congress is getting involved. The rise of these tokens as notional stores of corresponding value that combat the volatility inherent in crypto markets has resulted in a meteoric increase in their total captured market capitalization, and everything indicates that this will continue at a steady pace as they progress. that retail investors and institutions will move more. of their chain assets.
All is not rosy, however. There has been widespread criticism of some of the major stablecoin providers, including USDT, BUSD, and USDC, with allegations of harsh practices, concerns that they may not have the necessary guarantees to support their circulation, or fears simpler than the centralization of their inherent anchoring. leaves them prey to manipulation at worst or mismanagement at best.
Additionally, some algorithmic stablecoins have failed to fully maintain their foothold, while large players like the USDT have historically seen their token value drop to 90c: down 10%, and barely stable at all. .
Yet the crypto market is constantly innovating. New stablecoins are emerging to try to offer an alternative to these common tokens. Their technology, decentralized governance, and community-driven approaches provide compelling options for those who want to store their assets securely on-chain.
Here are the top 5 innovative stablecoin protocols to review this year!
Economy protocol (Denoms)
There are many stablecoins for the US dollar, but only a few for other national currencies, again resulting in a lack of accessibility for holders of fiat currencies other than the US dollar. Additionally, most stable assets are siled into specific chains and therefore cannot access opportunities on other blockchain economies.
The Onomy protocol promises a more inclusive monetary experience by connecting the global Forex market of $ 6.6 million per day to DeFi. By attempting to create a cross-chain stable currency economy that simplifies user access through user-friendly user interfaces and transactional efficiency, users will be able to mint virtual denominations of all currencies, be it US dollar, the euro, the Chinese yuan, the Japanese yen or the Swiss franc.
The Denoms of the Onomy protocol are guaranteed and stabilized by the native NOM token via untrusted implementations. NOM derives its value from several sources, including securing the Cosmos-based blockchain network or protocol governance.
When minting Denoms, users can deploy these stablecoins across chains, but also engage in high-frequency Forex trading and trading through the protocol’s hybrid AMM and DEX order book. This ability to mint various fiat currencies as stablecoins and then bring cash reserves into the blockchain economy at a greater speed and scale is what is on offer here, with the adoption expected by institutions. seeking to deploy cash reserves in the crypto market at a rate they have so far. been unable to do. This leads to opportunities not available in traditional markets, including frictionless access to credit markets and / or yield generation.
UST, or Terra, is an algorithmic stablecoin that pegs in the US dollar. UST is a cross-chain stablecoin that attempts to address scalability issues that other single-chain stablecoins like DAI struggle with. Its reserve asset is LUNA, which is burnt at a 1: 1 ratio to mint new Terra coins.
As demand for UST increases, so does Luna’s price, and new USTs are created in response by LUNA holders seeking to claim a reward for securing the protocol. Likewise, when UST contracts, it can be traded for LUNA by those looking to make future gains. LUNA holders also derive a small return from UST transaction fees to incentivize the peg.
It also promises a predictable and stable return in contrast to the somewhat erratic return provided by stable alternatives. Fully resuming its sci-fi inspired heritage, its upcoming Dropship Protocol (of StarCraft fame) will allow Terra to easily migrate to new blockchains and be fully deployable so UST can roam anywhere. what a blockchain ecosystem it needs. UST has so far proven to be stable, with just one ankle breakage very early in its lifecycle, boosting confidence in algorithmic stablecoins.
Synthetix is an encrypted stablecoin protocol that promises not only to offer a stable peg for the US dollar, but for every other asset. Although initially focusing only on currencies, such as EUR, GBP or WON, it is quite expected that Synthetix will also be able to represent other notional pegs like gold (sXAU), indices and stocks.
By creating synthetic versions of deployed capital, the hope is that synthetic USD (sUSD) or synthetic silver will be more easily deployed and traded in blockchain economies.
Through an Ethereum-based protocol, users can generate a synthetic asset by purchasing and locking the SNX governance and guarantee token. Once staked through Mintr (a dApp created by Synthetix), you can then generate synthetic tokens of your choice, which are issued as debt that must be repaid to get your staked SNX back.
The collateral ratio is high, however, at an impressive 600%. This is the protocol’s attempt to quickly build up the pool of collateral required to ensure stability in the face of market forces. Scalability is also a concern. However, the ability to get any stable token you want – and the fact that you can then swap your token for other synthetic tokens like sBTC without having to call in a matching buyer to supply the asset, means that Synthetix has an exciting year 2021 ahead, as shown on its stats page.
Frax is a hybrid stablecoin that uses a dual collateral system to secure its anchor, with USDC reserves underpinning a seigniorage-esque which is an algorithmic model of fractional reserve. His ultimate goal is to move away from using USDC entirely to guarantee it and have his own system take over once trust and adoption solidify its foothold.
It works like this: For every hundred DAI, or other stablecoin, you put in, you get 100 FRX. The collateral placed in the smart contract is then loaned and interest is accrued in the contract itself. Eventually, as more interest is accrued, the reserve rate decreases by a set number, say 1, and 99 DAI will give 100 FRX.
The excess is then paid to the holders of the action token, FXS, so that the money is kept in the system and the FXS holders are incentivized to guarantee the protocol. If the price of FRX drops, the accrued interest is used to grab FRX from the market and bring the price down to one dollar. This fractional-reserve model promises to keep the money flowing through the network and encourage FXS holders to continue to guarantee it, while ensuring that the stablecoin’s peg continues.
Its early success and stable foothold in 2020 may hinge on the large amount of USDC collateral backing the protocol, but the fractional reserve model has the potential to create a perpetually rewarding stablecoin for its holders.
PAX Gold (PAXG)
Not all stablecoins are backed by dollars, pounds sterling or other fiat currencies. Some are linked to other assets. Gold has always been the archetypal store of value throughout human history. Humans, bless them, love shiny things. Bitcoin maximalists happily drool over comparisons to bitcoin as “digital gold,” and your grandfather will sadly say that you should always have gold hidden in the back of the cabinet or buried in the garden.
It is therefore not surprising that crypto-tokens that act as blockchain representations of humanity’s most venerable store of value have emerged. PAX gold (PAXG) is one such initiative. His approach is simple. For each PAXG token held by a user, there is 1 fine troy ounce with your name on it kept in Brink’s vaults and managed by Paxos.
Unlike other gold-backed cryptos, there are no holding fees, fractional ownership is possible, and settlement is instant. The token is burnt when the gold is redeemed and Paxos owns the physical gold bars. It’s not the most technologically fascinating crypto, but it’s intriguing that the touch of Midas still has a hold on us in our modern digital economy, and that even as we move up the chain, the thirst gold never goes away.