Multiple gold bars in a pile.

For both owners and observers, cryptocurrency is primarily an investment asset. This approach has driven trading, caused Goldman Sachs to announce a dedicated trading desk, and (to a significant degree) has driven the speculative price swings of the cryptocurrency market.

However, this is not what the most dedicated members of the crypto community have in mind for their invention. They see cryptocurrency as the future of money. For developers up to (and possibly including) the infamous Satoshi Nakamoto, the plan was that someday we’ll all be paying our bills and buying coffee on the blockchain.

The trouble is that these two ideals are perhaps irresolvable. Bitcoin and its progeny are built around the idea of digital gold, with online miners digging it out of the ether and a fixed amount that will ever exist. What its advocates never fully understood is that gold makes a terrible currency. Here are some that might work better:

The trouble is that these two ideals are perhaps irresolvable. Bitcoin and its progeny are built around the idea of digital gold, with online miners digging it out of the ether and a fixed amount that will ever exist. What its advocates never fully understood is that gold makes a terrible currency. Here are some that might work better:

Name Description Year Launched Number of Social Followers Stabilized Asset Quality of Team Stabilization Mechanism Score
True USD True USD is a one-to-one stable currency which pegs its value to $1 U.S. per token. 2018 6.6k U.S. Dollar The young team behind this project boasts some of the most impressive technolgoy names in the field, although little financial experience. Escrow: Each True USD is backed by $1 U.S. held in an escrow account by third parties. Qualifying institutions can participate in the True USD system, eliminating the need for trust in a central project (albeit replacing that with the need for trust in third-party accounting). With only two minor deviations, the price has remained stable within $0.02. 4.5
USD Coin (USDC) USDC a stablecoin that was launched by Centre consortium, which was co-founded by Coinbase and Circle. USD Coin is fully collateralized by US dollars. 2018 39.8k U.S. Dollar The CENTRE and CIRCLE team have founded and helped run numerous high-profile technology companies including Brightcove and Macromedia. Collateralized: Each USDC token has a corresponding $1 U.S. invested in an owned account. Decentralization will be ensured by allowing numerous different projects to join a network of USDC issuers overseen by the CIRCLE project, each of which maintains its own cash reserves to stabilize the tokens it issues. While the oversight of CIRCLE can insure against value fluctuation, allowing third parties to independently issue the USDC does invite potential concerns of individual error or bad actors. 4.4
AAA Reserve This token is backed by a bundle of currencies and investment products, and should be more accurately considered a financial product rather than a currency. 2018 845 Numerous currencies and investment vehicles A leadership team with extensive experience in finance and economics A private investment fund with a token mechanism, it has maintained extremely high price stability due to its diverse portfolio. 4.3
Dai (DAI) Dai is a decentralized stable currency which is pegged to the U.S. Dollar at a 1-to-1 ratio. 2017 13.1k U.S. Dollar MakerDao’s Founder has almost no experience, having graduated in 2014. It has made up for this lack by hiring other executive level talent with a deep bench of relevant experience. Collateral Against Ethereum: To create Dai tokens, users have to purchase and stake an equal value (in U.S. Dollars) of Ethereum tokens. As the price of Dai rises, users will be incentivized to create more. As the price falls, users will be incentivized to sell their assets back to the pool. 4.25
Digix Gold Token (DGX) Digix takes the idea of a blockchain gold standard literally, promising that each DGX token represents 1 gram of actual, solid gold in a vault in Singapore. The utility of this over purchasing gold outright or an options contract remains uncertain, but the mechanism is sound. 2016 15.7k Gold Digix is run by a team with extensive experience in both finance and blockchain development at some of the world’s largest firms. Asset-Backed: A Digix token is minted once the underlying Proof of Provenance Protocol confirms that a corresponding ounce of gold is in the vault. The price has fluctuated within approximately 25 percent since inception. 4.2
Tether (USDT) Tether is one of the most well known, high-value, and reliable stablecoins on the market. 2015 27.4k U.S. Dollar Bloomberg, among other outlets, has published very serious questions regarding the accounting practices of Tether. The company’s founders have a range of professional experience, ranging from fintech to retail. Collateralized: Each Tether token has a corresponding $1 U.S. invested in an owned account. While serious questions have been raised as to the company’s accounting practices in this regard, the token’s price has remained stable within $0.05. 4.1
Gemini Dollar (GUSD) The Gemini dollar (GUSD) combines the creditworthiness and price stability of the U.S. dollar with blockchain technology and the oversight of U.S. regulators. 2018 77.7k U.S. Dollar The Gemini exchange is run by experienced bitcoin entrepreneurs Tyler and Cameron Winklevoss, who have played a significant role in bitcoin turning into a legitimate investment asset class. Collateralized: Each GUSD is backed by one U.S. dollar held at State Street Bank and Trust Company. 4
EURS EURS is the stablecoin introduced by Stasis. 2018 1.5k Euro The Stasis team comes from both a blockchain and a finance background, but with no significant corporate names in either field. Collateralized: Each EURS token is backed by a fixed amount of euros held in an owned account. The company’s published plan for upper limit price stabilization leaves much to be desired. However the token has remained within a variance of $0.07 since its launch, which deserves note. 3.8
StableUSD (USDS) StableUSD is a cryptocurrency pegged to the U.S. dollar, with each token set to $1. 2019 287 U.S. Dollar Stably has a team with experience in both technology and finance. While little background in blockchain, their c-level leadership has worked with impressive firms in this space. Collateralized: Stably will hold $1 U.S. in reserves for each token distributed, with quarterly audits. 3.65
PAX Standard Token (PAX) Paxos Standard (PAX) is a regulated dollar-pegged stablecoin. 2018 968 U.S. Dollar Paxos is a regulated financial institution that builds infrastructure to facilitate the movement between digital and physical assets. Collateralized: 1:1 by the U.S. dollar, approved and regulated by the NYDFS. 3.5
White Standard The White Standard is the first of three stablecoins from the White Company. Backed by the U.S. Dollar, the subsequent coins will be stable to the pound and the euro. 2018 3k U.S. Dollar The team behind the White Company boasts a range of experience, from impressive financial credentials to vague claims of “luxury brands.” Collateralized: Each WSD token is backed by a $1 deposit held by the White Company. This is audited monthly. The WSD token is intended chiefly as a banking product, allowing deposits, withdrawals, and transfers around a stable currency. The token was launched one month ago and has varied by more than 30 percent since then. 3.45
Alchemist SDUSD Alchemint uses the NEO blockchain. Its SDUSD token is intended to be stable against the dollar, based on holdings of the NEO token. 2018 4.1k U.S. Dollar Little English information is available about the Alchemint team. Mortgage Backing: To purchase a SDUSD, a user must make a deposit in NEO tokens. The system requires purchasers to stake deposits at a 5-1 rate, meaning that at any time Alchemint holds approximately 20 percent of the stable value of the SDUSD in assets. The rest is considered vested value held by SDUSD holders. 3.2
JPM Coin JPM Coin is a digital currency designed to enable JPM’s corporate customers to make instantaneous payments using JPM Morgan’s private blockchain. Currently, the digital coin is in a testing phase with a set of the bank’s institutional customers. The coin may be rolled out to individual customers at a later date but the coin is not tradabe on digital asset exchanges and there are no plans for that. 2019 445k U.S. Dollar JPM Morgan has been on the forefront of blockchain development in the banking sector and its digital coin is one of the newest innovation it is rolling out. Collateralized: Each JPM Coin is worth $1 which is backed by dollar held by the Wall Street giant. 3
USDX Information on USDX is difficult to come by in English. The token is pegged to the U.S. Dollar through an automated system. 2018 n.a. U.S. Dollar Little English information is available about the USDX team. Network Value: USDX’s value will be automatically maintained by its network. Tokens will be released and burnt based on the current market price. Token holders will verify the exchange rate. Similar models have not proven succesful elsewhere. 2.9
Stronghold USD (USDS) Stronghold USD is a proposed stablecoin from IBM. While not suitable yet for review, it is worthy of note due to the involvement of both IBM and Stronghold. 2018 2.1k U.S. Dollar IBM and Stronghold are developing this currency for IBM’s use. N/A – This currency has not yet been developed. 2.8
Corion Corion is a stablecoin pegged at a 1-to-1 ratio to the U.S. Dollar. Their system appears to have failed. 2017 1.7k U.S. Dollar Corion’s executive team has a reasonable amount of experience in fintech and blockchain development. Network Value: Corion’s currency is based on the fees charged by its network. If its currency gets too valuable, the system automatically triggers new token release. If the currency drops in value, the system automatically uses network fees to burn tokens. Based on the coin’s historic price, this model has failed. 2.6
Nomin (aka nUSD) Nomin is a token backed by the value of the Haven transaction network. With no centralized asset or fiat currency, the value of the nomin (as well as its supply) will be system-regulated as the underlying value of Haven fluctuates. 2018 11.5k The Haven Network The Haven team has little to no experience in technology or blockchain. While a seemingly serious, committed group, the LinkedIn profiles of Haven’s top executives claim recent positions selling cheeseburgers, writing novels, and selling cell phones. Network Value: Nomins are backed by a secondary currency, the Haven. Havens have a fixed amount, making their total value at all times equal to the value of the Haven transaction network. The supply of nomins floats against this total value, keeping their price stable and backed by the aggregate network value. It is a novel approach, but the token’s price has had a 30 percent variance since launch. 2.55
NuBits (USNBT) NuBits was a decentralized cryptocurrency which pegs itself against the dollar. While still in operation, it is no longer price stable. 2014 15.5k U.S. Dollar Little information is available, and none published on NuBits’ website Voting shares and rewards for users who take action to stabilize the network. This mechanism was unsuccesful. 2.5

The Case for Stablecoins

Why do these stablecoins potentially work better than gold for their intended purpose? Let’s unpack it a bit.

For a currency to work as more than someone’s pie-in-the-sky investment product, it has to reliably store value. Savers need to feel confident that the amount of money they put in the bank on Monday will reasonably reflect their wealth on Friday. To do this, inflation has to stay within safe, stable margins and deflation has to happen almost never.

In a modern economy, this means that someone needs to regulate the supply of currency based on market metrics such as productivity, population, and overall economic growth. Digital gold can’t do that. Neither can a decentralized project since it has no one to exert the necessary judgment.

Fiat currency can. That is why several cryptocurrency projects have taken a new approach. Instead of replacing traditional money, they’ll work alongside it. “Stable cryptocurrencies” peg themselves to a fiat currency of choice, typically the dollar, and automatically adjust the number of tokens in circulation to keep the price stable.

It’s an approach actually taken by several countries around the world; for example, Cambodia pegs its riel at 4,400 to one U.S. dollar. Their goal is to create an electronic wallet that serves as a bank account, not an investment portfolio.

How Price-Stable Are Stablecoins?

When looking at the prices of stablecoins on digital asset data platforms, you will notice that stablecoins often do not remain “stable” at $1.00. For example, at the time of writing this article, Tether (USDT)USD Coin (USDC), and the Gemini Dollar (GUSD) were trading at $1.01, $1.01 and $1.02 respectively.  The reason for that is that the issuers of dollar-collateralized stablecoins need to manage the supply of their coins through issuing and burning/redeeming to ensure the value of their coins maintains roughly one-to-one with the US dollar.

However, there have also been stablecoins that have lost their peg entirely. Steem Dollars (SBD), a cryptocurrency of the Steemit network, for example, was launched to maintain its value at one dollar. However, the startup behind the Steemit network eventually stopped managing the coin’s money supply and let the digital currency float freely. This caused the coin’s value to surge to $15 during the 2017 rally before it came crashing down to as low as $0.51.

Not all stablecoins are really 100 percent price stable. Moreover, due to their centralized nature and lack of transparency, stablecoins are actually riskier than they may seem even if their values oscillate closely around the $1 mark.

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Closer Look at the CENTRE Project’s USDC Token

Some stable cryptocurrency projects have taken this idea a step further. They would like to make spending easier on the internet by making one, seamless currency. This includes the CENTRE project, launched by Coinbase and Circle, and its USD Coin (USDC) token. Per the CENTRE project’s whitepaper:

“CENTRE provides solutions for wallets to exchange value using the same or different currencies… a network scheme for fiat token stablecoins that will allow money to flow between wallets the same way information moves between web browsers and servers, email between mail services, text messages between SMS providers. CENTRE answers the question “I can instantly text someone who uses a different mobile carrier than I do, and I don’t pay money to email someone who uses a different email service than I do, so why can’t I use Alipay to pay someone who uses Square, to pay someone who uses Paytm in India, to pay someone who uses Facebook Messenger — instantly, for free, anywhere in the world?” 

Sharing content is free for consumers globally and is interoperable and not locked into specific software programs or devices; so it will be with value, as money becomes another form of internet content.”

Projects like CENTRE will have to get their markets working. Platforms around the world will have to connect to their system for it to work since interoperability is essential to what seamless currency projects promise.

At the same time, building an effective stablecoin is equally essential to the success of a spending cryptocurrency. Any project hoping to build the global Venmo will need a token that users can affordably buy, and one which users can spend and send in confidence that it will be worth tomorrow what it was today. No one will send a token that soon might double in value, and no one will accept one that might tumble by half.

Stablecoins are the way to make that happen.

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