For cryptocurrencies, one of the biggest barriers to achieving mass adoption is price volatility. While a stablecoin is also a cryptocurrency, it aims to minimise the volatility and offer price stability by pegging itself to a fiat currency, like the US dollar, or a commodity such as gold.
USD Coin (USDC) and Tether (USDC) are examples of stablecoins.
The history of stablecoins in a nutshell
The world’s first stablecoin, BitUSD, was released on 21 July 2014 and issued as a token on the BitShares blockchain. It was the brainchild of two leading figures in the cryptocurrency industry, Dan Larimer and Charles Hoskinson.
From there, stablecoins grew from strength to strength, and since 2017, over 200 stablecoin projects have been announced.
Despite the abundance of stablecoins that have come to market, the vast majority fall into three categories based on how they’re collateralised: fiat-collateralised (centralised), crypto-collateralised (decentralised) and non-collateralised (algorithmic).
Tip
Keen to find out more about how they’re collateralised? We explain it nicely in this blog post.
While mainstream media attention often focused on big-name projects like Facebook’s Diem and JP Morgan’s JPM coin, the reality is that those projects failed to get off the ground (Diem) or don’t really qualify as global stablecoins due to their institutionalised nature (JPM Coin).
Stablecoins offer the technological benefits of a cryptocurrency, but with less of the aforementioned price volatility.
This information is not intended to be nor does it constitute financial, tax, legal, investment or other advice; nor is it a call to trade. The information is intended as general market commentary for information purposes only. Before making any decision or taking any action regarding your finances, you should consult a qualified Financial Advisor.