By Julián García.
To begin with, it is important to understand what stablecoins are. A stablecoin, such as USDT, USDC or DAI, is a stable cryptocurrency that is equivalent to one US dollar. For this reason they serve to quote the price of the rest of the cryptocurrencies and carry out transactions in the digital world without the need to resort to fiat money.
As you might imagine, not all stablecoins are the same, in fact, they all have different advantages. Here is a brief explanation of each one:
Tether (USDT) is a stablecoin issued by a Hong Kong-based company called Tether Limited, which supports its issuance through cash, bank deposits, treasury bills, secured loans, commercial papers, certificates of deposit, notes of reverse repurchase, corporate bonds, funds and precious metals, among others.
The main advantage of Tether is that it is the most liquid coin on the market. Therefore, large-volume operations can be carried out without significantly affecting the price.
As a main disadvantage, we can highlight that Tether Limited is a private company that does not have a regulatory framework or an audit.
USD Coin (USDC) is a stablecoin issued by the companies Circle and Coinbase, registered with the endorsement of the Financial Crimes Enforcement Network (FinCEN) of the United States Department of the Treasury. In addition, they have a New York Bit License, and an endorsement by the Financial Conduct Authority of the United Kingdom.
All units in circulation of this cryptocurrency are backed by a dollar that is kept in reserve, in a combination of cash and short-term United States Treasuries, with periodic audits. For this reason, the main advantages of USDC are the certainty regarding the reserves that support its issuance and the fulfillment of the regulations of the different organisms.
DAI (DAI) is a stablecoin whose issuance and development is managed by the Maker protocol and the Maker DAO decentralized autonomous organization over the Ethereum network. This means that to issue DAI no institution is required. Anyone can issue it by locking other cryptocurrencies in the protocol’s smart contract vaults. Its endorsement underlies the value of cryptocurrencies that are locked on issuance.
The main advantage of DAI is that it is not a cryptocurrency issued by an institution. This is because the management of reserves is managed in a decentralized way.
To conclude, it can be said that all stablecoins have their advantages and that the choice of one over another depends on the need or priority of each user. For example, the liquidity in the case of USDT, the certainty in the support of the issue and the regulatory framework in the case of USDC or the decentralization of the issue in the case of DAI.