Different types of Stablecoins on CoinDCX & their characteristics

Just like a good investment portfolio has a healthy diversification according to sectors, in the same way traders should also know the different types of stablecoins on crypto exchanges and why they should also diversify their holding into different types of stables to safeguard their capital. So having 100% allocation of your stables only in USDT is surely not a great trading move.

The first few stablecoins we will talk about are the ones which are available on CoinDCX exchange and later we will look at other types of stablecoins that you can refer for you education and research.

USDT

  • Launched in July 2014 under the name RealCoin and rebranded to Tether in November 2014 by Tether Ltd.
  • Controversial, yet the most popular of all stablecoins in the market. Every asset is charted in USDT pair because of the long historical price movement and volume profile
  • Lots of indications that the 1:1 fiat to crypto backing they claim to have is in fact false.
  • In April 2019, tethers own lawyers had to admit that the company had only 74% of the USDT in fiat backing
  • Has been able to keep the $1 peg extremely well which helped their success
  • ERC-20 based token
  • Centralized in nature

Available on CoinDCX in USDT/INR pair

USDC

  • Launched in 2018 as a collaboration between Circle (Blockchain holding company that’s supported by Goldman Sachs) & Coinbase
  • Backed 1:1 with escrow reserves for each USDC in circulation
  • Audits for backing are available publicly for research online
  • ERC-20 based token
  • Centralized (The heavyweights backing it can blacklist or freeze assets if a disruption ever demands them to).

Available on CoinDCX in USDC/USDT (upto 6x leverage), USDC/BUSD as well as USDC/INR pairs

BUSD

  • Launched in September, 2019 ; issued by Paxos.
  • Backed 1:1 with dollars vs their tokens
  • Audits for backing available on Paxos website
  • ERC-20 based token with BEP-2 support
  • This is also a Centralized asset

Available on CoinDCX in BUSD/USDT and BUSD/INR pairs

USDP

  • Launched in September 2018. Rebranded in August 2021 from PAX to USDP
  • Backed 1:1 with dollars vs their tokens
  • You can find the attestions for their three assets. USDP, BUSD and PAXG
  • ERC-20 based token
  • Industry insiders claim that the USDC and USDT reserves are mostly backed by corporate debt obligations.
  • As a result, it is said, USDC is backed only 61% by cash or cash equivalents and USDT only for 5%.

Available on CoinDCX as USDP/USDT and USDP/BUSD pairs

TUSD

  • Launched in January 2018 by TrustToken
  • Backed 1:1 with dollars vs their tokens
  • ERC-20 based token
  • Has multiple partnerships with a number of banks and other third party companies
  • Centralized just like other Stablecoins.

Available on CoinDCX as TUSD/USDT (upto 4x leverage) pair

Education and research purpose:

Alternate stablecoins with limited availability

TerraUSD

  • Launched in September 2020 by Terra
  • One of the very few decentralised stablecoins (uses the Chainlink price feed: https://data.chain.link/ethereum/mainnet/stablecoins/us)
  • Scalable (Scalability is when a cryptocurrency can cope with a large inflow of transactions at a time. This characteristic helps in preventing an assets framework from getting overwhelmed during high-traffic)
  • Algorithmic Stablecoin ($LUNA should preserve UST stability and security)
  1. For example, if the UST value drops below $1, an arbitrageur can burn 1 UST to mint $1 of LUNA, then sell the LUNA for profit. Likewise, if demand for UST climbs, more LUNA tokens will be burned to create UST, decreasing the overall LUNA supply.
  • Fundamentally, as long as LUNA can maintain a non-zero value and enough liquidity to buy/sell and burn, this peg should hold
  • The main success and value of UST are directly dependent on the interest in LUNA

DAI

  • Launched in December 2017 by Maker
  • Decentralized
  • Has some major issues with peg due to its usage in a number of DeFi protocols while not enough of DAI was in circulation
  • It not backed by fiat currencies. Instead it uses smart contracts which are backed by collateralized crypto debts.
  • DAI gets created/minted when a user locks an asset, e.g ETH, into a smart contract and uses it as collateral to take a loan, paid in DAI.
  1. When this loan is paid back and ETH is released, the DAI is destroyed.
  2. This means there are no audits needed to ensure that enough funds are kept in reserve to validate the DAI price.
  • It is partially collateralised by USDC in case of unforeseen events within its ecosystem.
  • Minting of DAI is a very complicated procedure compared to all the other alternatives out there.

FRAX

  • Launched in December 2020 by Frax Finance (formally known as Decentral Bank)
  • It is a part of a two-token model, the stablecoin FRAX and the Frax Share token FXS
  • Fractional-algorithmic stablecoin Protocol (this is the first-of-a-kind decentralised stablecoin that has one part of its supply as collateral and other part is dependent on algorithmic stability)
  • Minting of FRAX can be done by anyone who holds 50% USDC & 50% FXS. Thus, its partially collateralized due to USDC reserve always being lower than FRAX reserve.
  • ERC-20 based token
  • The biggest risk, as with all algoritmic stablecoins is the price fluctuation the coin might face during times of unseen volatility or a black swan event. There might not be enough buyer and sellers to keep the stability framework intact.

Conclusion

Stablecoins just as other cryptos are a must of your portfolio, it is what everyone uses to buy, sell and book profits in. Always remember diversification is equally important here as well and never put all your eggs in the same basket.

Start your trading journey with CoinDCX in 3 easy steps:

  • Signup with your Name, Email and mobile number
  • Accept the CoinDCX’s terms of service
  • Complete your KYC verification and add your bank account details
  • Once approved, deposit Fiat through your approved bank account or transfer crypto from your other crypto wallet and you are done.

#CoinDCXpathbreaker

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I make use of advanced Technical Tools and On-Chain Data to make crypto easy to understand for everyone in the crypto community. #CoinDCXpathbreaker

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Mohnish Isaac Kariappa

Mohnish Isaac Kariappa

I make use of advanced Technical Tools and On-Chain Data to make crypto easy to understand for everyone in the crypto community. #CoinDCXpathbreaker

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