What has kept many people from getting into the world of cryptocurrency is the fact that most tokens are not backed by anything of intrinsic value like gold, for example. Fiat money, although not back by gold either, comes with the backing of the government. Cryptocurrencies, on the other hand, oscillate in value more so than any other currency or asset. This has led some companies to work on stablecoins, which are cryptocurrency tokens pegged to either fiat currencies or valuables like gold. In this article series, we will take a look at how stablecoins came about, as well as some of the most popular stablecoins.
Stablecoins were conceived in 2012
Stablecoins have been a subject of debate since 2012 when the idea was first presented in a white paper by JR Willett. The white paper, titled ‘Mastercoin’, created waves in the cryptocurrency community when it was released. Some were supportive of the idea, whilst others were critical and even laughed at it. Two years later, in 2014, the idea had won over a large group of cryptocurrency enthusiasts who began working on a feasible stablecoin. Tether is an example of a stablecoin that is backed by the US dollar — hence the ticker name USDT. Tether uses the Omni Layer protocol to issue the tokens. Not all attempts were successful, however. Nubits (USNBT) was, like Tether, meant to stay at a ratio of 1:1 with the US dollar. However, it had trouble maintaining the same value as the dollar and has since March this year.
Tether is still the favorite stablecoin
Tether was created in 2014 and has so far remained a favorite among stablecoin enthusiasts. The cryptocurrency is using the same network as Bitcoin (BTC), and the Omni Layer protocol. Omni Layer is a network that can grant and revoke access to the BTC chain. What makes Tether so popular is that each token is backed by one dollar. Reeve Collins, who is behind the Tether project, has stated that the dollars backing each Tether coin are kept in Tether Limited’s bank. This claim, however, has been disputed by a number of critics who have questioned the validity of it. Despite the criticisms and skeptics, Tether has remained stable since it appeared on the market in 2015, according to Coinmarketcap. Tether is particularly popular with traders when there is a bear market. When the value of all other cryptocurrency tokens takes a dip, investors tend to move their money over to Stablecoin. As a matter of fact, Tether has enjoyed great success since the crash of early 2018, since so many tokens lost value. It has now made it into the top ten cryptocurrency tokens with the highest market cap. Tether is also practical because they are supported by the majority of the biggest trading platforms. The platforms include popular exchanges like Binance, Bitforex, ZB.com, HitBTC, Okex, Huobi, Poloniex, Fcoin, and Bittrex.
Check in tomorrow when we take a look at Maker Dao, TrueUSD, kowala, and other stablecoins.