Most sustainable cryptocurrencies
In order not to suffer from the banking system, long transfers and fat commissions, stablecoins are used in the crypt. Most sustainable cryptocurrencies are coins that are equal to the dollar 1:1. But is it possible to store their profits in them, how do companies manage to keep the volatility of tokens, what are the top cryptos for 2022, and why they are better than fiat and what are the risks? Read in our material.
Buffers or a way to save yourself from volatility: what are stablecoins and why are they needed
Simply put, this is a crypt whose unit is equal to a unit of real currency – euro, dollar or even gold. But why are they needed when, for example, the same dollar is available in the form of fiat on any exchange?
When they started trading Bitcoin and other assets on exchanges, users needed to fix their profits. The withdrawal to the card took a lot of time, devoured part of the money with a commission, plus there were difficulties with the banks themselves – it’s understandable how to explain to the consultant Larisa where $ 3000 dripped into your account and what bitcoin is.
Then in 2015, the first stablecoin Tether USDT appeared, equal to $1 (more on it below). It became:
- A profit fixer. You no longer need to withdraw money from crypto to earn income and keep it from market volatility. For example, they bought bitcoin for $19,000 and sold it for $60,000 in terms of stability. Then we just keep them in the crypt until the rate drops again;
- Temporary asset. Transfer all funds to one asset, and then simply scatter it among other coins;
- An alternative to fiat with an unstable exchange rate. If you live in a country where the national currency is volatile, convert everything to stables and don’t worry about depreciation.
But in order, for the stable to always remain stable and its token is worth 1:1 with fiat, the company must provide the coin with real money. And there are two options for how to achieve this: tie the asset to dollars in bank accounts or tie it to one token or several at once. Which one works best is below.
Most sustainable cryptocurrencies
There are more than 170 fiat stablecoins, but only 4 of them are popular and they are all in dollars. This is due to the banal convenience: these stablecoins are presented on many exchanges, their security is understandable, commissions for transfers are small and, in principle, it is easier for many to calculate profit in dollars, rather than euros or gold. So, the most stable cryptocurrency!
Created by Tether Limited in 2015. Capitalization – $67 billion. The token on the Ethereum network is backed by real dollars that lie in the company’s bank accounts. The availability of money is periodically checked by an independent audit, but how honest everything is in their reports is unknown
The company has often been fined for lying about where they invest their assets. Plus, not only real money in the accounts but also the number of loans issued by the company are considered collateral. In general, you shouldn’t use USDT as storage, but it’s quite convenient as an exchange coin; the amount of loans issued by the company is considered collateral. In general, you shouldn’t use USDT as storage, but it’s quite convenient as an exchange coin.
Developed by Coinbase with the help of Circle based on ERC20 in 2018. The main advantage is the ability to buy a token with VISA. The market capitalization of the coin is $55 billion. All of them are backed by real dollars in the company’s bank accounts. She publishes all statements directly on her website, so you can trust the token. True, STEPN owns most of it, and if the pyramid collapses, there is a small risk that the token can fly with it;
Created by the Binance exchange on the BEP2 network. The capitalization of BUSD is $17 billion. A dollar amount equal to the total amount of BUSD is held by Paxos in US banks and acts as a reserve insured by the Federal Deposit Insurance Corporation and the US Treasury. The money in the accounts is checked by the accounting company Withum. So far, all tokens are honestly backed by fiat.
The main risk
The main risk of centralized tokens is belonging to the issuer. That is, if, for example, the same Binance suddenly decides to block all Russian users, all their BUSD will be frozen and no one can prevent this.
Such a risk is excluded by decentralized tokens. Chief among them is DAI. Released by MakerDAO in 2016. The liquidation and creation of stable cryptocurrency are carried out by network participants in the Ethereum blockchain. ETH is the collateral for this. That is, they give an excessive amount of ether (in case the exchange rate falls) to the liquidity pool and receive a percentage for this.
But regardless of what the asset is backed with, it is still a crypt and its rate is staggering, although not as much as compared to other coins. Supply and demand for centralized tokens is controlled by arbitrage. That is, if the stablecoin falls to $0.999, traders will immediately buy it, thereby creating demand and making a profit of 1% when the rate returns to $1.
Why did UST fall and why won’t the same happen to other stables?
UST is a Terra token issued on its own blockchain. The course was run by an algorithm and backed by their Luna coin. If the price rose, the system itself issued more coins to increase supply and lower the price. If it fell, it burned. In April, everything worked fine, investors bought UST, sent it to the pool and received 20% per annum. Due to the high demand for the token, Luna also grew. Its price has reached – $116.
In May, large investors decided to capitalize on UST. They accumulated 1 billion UST in advance, opened shorts and sold tokens, thus decoupling UST from the dollar. The algorithm started issuing a huge amount of Luna to return the collateral, thereby devaluing the coin. Large investors, seeing the fall, exited the market. As a result, the price of both tokens fell to cents. Now, in order to raise UST, Terra needs to buy back most of the tokens and burn it, but it doesn’t seem to have the money to do so.
Why doesn’t this threaten other stables?
It threatens but to a lesser extent. They have a large capitalization. That is, funds will have to buy a fortune in order to greatly reduce demand and decouple coins from the dollar. In addition, these tokens are used in many places, so their fall can lead to the collapse of the entire market. And the funds themselves can quickly redeem the coins back to prevent the rate from falling. And now you know the world’s most stable cryptocurrency 2022.
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