With the evolution of the crypto industry as a whole came the concept of stablecoins as a decentralised way to parking one’s wealth in crypto without the inherent volatility of the general crypto market. This came to be since over time it became difficult for investors and traders to convert their crypto back to their native fiat currency every time they had to sell so stablecoins were built. Stablecoins are essentially cryptos whose value is pegged, or tied, to that of another currency, commodity, or financial instrument and in our case, the US dollar.
Stablecoins are typically of two kinds – one which is the centrally controlled by a company, for example Tether (USDT) and USD Coin (USDC). On the other hand, we have purely decentralised, algorithmic stablecoin that is controlled through a code built into the blockchain.
So stablecoins are cryptos which aren’t volatile since they are pegged to the US dollar and usually have a value of $1. If it deviates too much on either side, then we usually have a problem, like we saw in the case of Terra’s UST stablecoin – which lost its peg back in May 2022 – that resulted in a near $60 billion implosion of the Terra ecosystem. It must be thus noted that stablecoins are issued by private entities and shouldn’t be confused with Central Bank Digital Currencies (CBDC) which are issued by a country’s central bank as a digital version of the fiat currency.
Now you must be wondering, is USDT same as USDT? If so, why are both of them being used if both perform the same task. Or you might be asking, which is safer: USDC or USDT? We will cover all that in our list of the top stablecoins 2022.
|Crypto||Market Cap||Weekly Volume|
|Tether (USDT)||$68 billion||$286 billion|
|USD Coin (USDC)||$46 billion||$24 billion|
|Binance USD (BUSD)||$21 billion||$51 billion|
|Dai (DAI)||$6 billion||$2 billion|
|Pax Dollar (USDP)||$942 million||$576 million|
The first one in the list of top stablecoins has to be Tether and its stablecoin known as USDT. This is because it was one of the first and the most popular stablecoins ever built. Tether is so large that it is the largest stablecoin by market capitalisation and the third largest crypto by market cap too! Quite understandably, it is thus the most widely used stablecoin in the world. Launched by the company, Tether Limited Inc., the company claims that every dollar worth of their stablecoin is backed by dollar cash or cash equivalent reserves.
Back in May 2022, Tether released a breakdown of their reserves, which consisted of only 2.9% of the total dollar holdings were in actual cash. The rest of the value was derived from commercial paper, a form of unsecured, short-term debt.
However, getting into this space, investors need to be wary since there have been some concerns regarding the dollar reserves behind Tether’s USDT – and many raising suspicions regarding it. However, nothing so far has been revealed to suggest the same. Also, as is evident for the small table above, Tether is the most widely used crypto too, with a $286 billion weekly volume. This is unique because none of the other stablecoins except Binance USD (discussed later in this list) has a weekly volume greater than their actual market capitalisation.
- USDT is the largest stablecoin by market capitalisation.
- USDT also happens to be the most actively used and traded stablecoin by volume in the crypto space too.
- It was launched by a company called Tether Limited Inc.
Additional Read: Top ERC-20 Tokens
USD Coin (USDC)
USD Coin is the next on the list of top stablecoins by market capitalisation. This was built and managed by a consortium called Centre, founded by a company called Circle which includes members from major US crypto exchange, Coinbase and Bitcoin mining company, Bitmain which is also an investor in Circle.
Hence, this is yet another centrally controlled stablecoin that has dollar reserves to show for the market capitalisation it has and the USDC stablecoins it has issued into the open market. According to their own website, USD Coin is completely open-source and free to use. It can be used to build apps to deliver real-time payments, trading and even financial services to their users.
- USDC is the second largest stablecoin by market cap and the fourth largest crypto overall.
- USDC is the third largest most actively traded stablecoin by volumes after USDT and BUSD.
- It was launched and managed by a consortium called Centre which was founded by a firm called Circle.
Additional Read: USDT vs USDC
Binance USD (BUSD)
The next in the list of top stablecoins 2022 is Binance USD (BUSD). As the name suggests, it is a dollar pegged stablecoin issued by crypto exchange, Binance. According to the crypto exchange, BUSD is a fully backed by a 1:1 reserve of US dollars and was founded by them in partnership with Paxos. Paxos holds a partial amount of the reserves as cash in their US bank accounts with the remaining amount being held in the form of US Treasuries.
BUSD is natively issued on the Ethereum blockchain by Paxos as a ERC-20 token. Binance on the other hand creates a Binance-pegged BUSD by locking the ERC-20 BUSD in a smart contract and issuing Binance-pegged BUSD equivalent to the amount that has been reserved in the smart contract. Thus, Binance pegged BUSD is native to the Binance Smart Chain (BNB Chain).
According to Paxos’ website, Paxos and BUSD are approved and regulated by the New York State Department of Financial Services, thus ensuring consumer protection practices are in place.
- Binance USD (BUSD) is the third largest stablecoin by market cap but the seventh largest crypto overall.
- BUSD, however, is the second most actively traded stablecoin by volumes, after Tether and ranking above USDC.
- BUSD is a result of a partnership between Paxos and Binance crypto exchange to create a native stablecoin.
Additional Read: Binance Price Prediction
This next one in the list of top stablecoins 2022 is Dai. This is the most unique one of this list since this is the only decentralised stablecoin on this list. DAI is a stablecoin that is issued by MakerDAO, a decentralised autonomous organisation (DAO). MakerDAO was initially built to provide lending and borrowing services in a decentralised fashion but there arose a need for a crypto that was free from wild price fluctuations that was required when transferring of value from one user to another. That was when the DAI was launched.
DAI is currently the fourth largest crypto by market capitalisation and even in trading volumes. However, what must be noted is that while the above mentioned stablecoins are used primarily for trading and speculative purposes, DAI is a stablecoin that is mainly used in decentralised finance (DeFi) applications, or dApps. And, hence, DAI is the most widely-used stablecoin when it comes to integration of dApps and it supports 400 dApps and wallets, more than any other stablecoin out there.
- DAI is a stablecoin built by the decentralised autonomous organisation called MakerDAO.
- It is the fourth largest stablecoin by market cap.
- It is the most widely accepted stablecoin in DeFi applications, and supports 400 dApps and wallets.
Pax Dollar (USDP)
One of the smaller and not so well-known stablecoins on this list is the Pax Dollar (USDP). It is issued by the same company that also issues the Binance USD (BUSD), which also is the third largest stablecoin by market cap. It is able to do so because it had secured a New York State Department of Financial Services Trust Charter for Digital Assets in 2015 and provides this as a service too.
Paxos Dollar has a relatively much smaller market cap as compared to all the other cryptos on this list. As of writing, USDP comes in just short of a billion dollars in market cap, less than one sixth of its closest competitor, i.e. DAI. It offers pretty much similar experience and services but is dwarfed by the likes of USDT and USDC.
- Pax Dollar is the fifth largest stablecoin by market cap and the 50th largest overall.
- It is issued by the same company that issues the Binance USD (BUSD) stablecoin.
Values as on 11 October, 2022.
Additional Read: Top Altcoins 2022