Stablecoins combines the best characteristics of fiat money and cryptocurrencies. On the one hand, stablecoins have more or less predictable prices as they are usually pegged to fiat currencies. So these stablecoins are less volatile than usual cryptocurrencies. On the other hand, stablecoins are still cryptocurrencies, so they are suitable for nearly instant cross-border transactions and don’t depend on banks and governments.
However, not all stablecoins are pegged to fiat money. Several notable projects are the tokens, pegged to precious metals, cryptocurrencies, and other assets. In this article, we will observe the best stablecoins worth your attention if you want to add some stablecoins to your portfolio. We will speak about worthy stablecoins and review some of the best coins of different types. Read the article in its entirety to learn which stablecoins will be the best in 2023!
Stablecoins: What You Need to Know?
Volatility has been a frequent argument in the rhetoric of crypto skeptics. It’s clear that not everyone is willing to be paid in a currency whose price may decrease severely in a short period of time. And not everyone will eagerly give their money, knowing that the buying power of this money can unexpectedly skyrocket the next day. Stablecoins addressed this issue. The American dollar is quite a stable currency. That’s why most of the popular stablecoins are pegged to USD. However, many stablecoins are pegged to other assets.
Stablecoins Are Becoming More Popular
Cryptocurrencies have become more popular, but their prices have decreased concerning the USD. It’s not hard to grasp why stablecoins pegged to fiat currencies (mainly USD) are popular. For those who don’t want to deal with crypto tokens’ volatile prices, stablecoins are assets that have a predictable price while not sacrificing the general characteristics of cryptocurrencies. That’s an easy entry point to the world of crypto assets and all operations involving cryptocurrencies.
Stablecoins involve lower risks compared to investing in other cryptocurrency types. Also, they allow using crypto as regular currency. In the exchanges that don’t support fiat money, stablecoins can serve as liquidity indicators and replace functions of fiat money. Fiat money-pegged stablecoins are more transparent than other cryptocurrencies due to ties with banks. It makes such stablecoins an easy option for institutions to dive into the crypto market. In diversified portfolios, stablecoins can serve as a risk management tool. Another use case is access to open banking systems.
Types And Categories of Stablecoins
Stablecoins are differentiated based on the asset type they are pegged to.
In this article, we will cover four basic types of stablecoins:
- Fiat backed stablecoins
- Crypto backed stablecoins
- Algorithmic stablecoins
- Commodity backed stablecoins
The most popular stablecoins are pegged to USD, so they are fiat-backed stablecoins. However, some popular projects use crypto collateral. One example is DAI. Algorithmic stablecoins rely on multiple automatic operations inbuilt into their protocols. Algorithmic stablecoins are more volatile than stablecoins of other types. Finally, commodity-backed stablecoins use commodities (gold, real estate, precious metals, baskets, etc.) as collateral.
What Are the Best Stablecoins?
Now, let’s explore the best stablecoins to date. We will use different characteristics as factors. One of the main characteristics is the ability to maintain a constant price. However, other features will be taken into consideration, as well. We’ll split our list of the best stablecoins by type.