Taxonomy and a detailed list of stablecoins
Crypto

Taxonomy and a detailed list of stablecoins

By Fabio Lugano - 8 Sep 2018

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Cryptocurrencies are characterised by very high volatility, in which double-digit percentage deviations from one day to the next are far from exceptional.

In this situation, the daily use for payment services or ordinary financial services, such as grants and financial advances, is quite cumbersome because in the first case it requires daily price adjustments, in the second, it is hard to predict the real economic result of the investments.

A particular solution to compensate for these problems has been the creation of stablecoins, whose purpose is precisely to maintain as far as possible a fixed value.

This result can be obtained with different stabilization tools used to identify different types of stablecoin. For simplicity we can group them into 3 different classes:

  1. stablecoin with collateral in fiat currencies which makes it centralized;
  2. stablecoin with collateral in decentralized cryptocurrencies;
  3. stablecoin without collateral, but with different stabilization systems and seigniorage.

Stablecooins are particularly suitable for a number of purposes such as:

  • ordinary payments ;
  • periodic payments such as subscriptions or rents;
  • financial loans;
  • fixed-income investments;
  • asset management.

Let’s try now to give a short, non-exhaustive list of stablecoins by dividing them according to the taxonomy presented above. Let’s start with those that are backed by a fiat currency and therefore have a centralized treasury service:

  • AAA RESERVE is a currency with collateral consisting of cash, securities and triple A class investments, meaning they have maximum security. In circulation from January 2018;
  • Digix Gold Token: each Digix gold token has the value of one gram of gold. Their ICO collected 453 ETHS in the first quarter of 2018.
  • EURS: stablecoin part of the Stasis system backed by the euro. Operating from July 2018, it has certified reserves;
  • Tether: the oldest stable currency, created in 2015, and now in the top ten. It is pegged to the dollar:
  • TrueUSD, part of the Trust token system, aims to become a payment system based on Ethereum’s blockchain;

Let’s now consider stablecoins backed by virtual currencies or assets, and that, therefore, can also have a decentralized nature.

  • Bitshares: complex stablecoin system that is backed by different categories of assets, including cryptocurrencies, active from 2014;
  • Havven: a cryptocurrency for payments backed by the relative fees, a pool of virtual values and the control of the quantities issued;
  • Staticoin: the Staticoin system is based on two tokens, Staticoin and Riskcoin, both based on Ethereum. The risk of losing or the opportunity of earning from the backing ETH is transferred from Staticoin to Riskcoin. Practically if the value of ETHs changes, volatility will first be absorbed by Riskcoin.

Let’s now give examples of stablecoins based only on seigniorage, i.e. on the emission control of the token itself:

  • Steemdollars are part of the steemit remuneration system, and are kept stable through interaction with Steem and regulation of supply and demand;
  • Bitbay, in circulation since 2015, tries to maintain a constant value through a system of cash and “frozen” currencies. In case of inflationary pressures, a part of the tokens is frozen, decreasing the supply and increasing the value.

Not all stablecoin projects have been successful. Many, especially those in the second and third categories have failed to retain stable value either because of the failure of the seigniorage system or because the values used as backing have not retained their validity, but these are considerations related to specific projects and not extendable, in itself, to the entire category.

The concept of stablecoin, i.e. of a less volatile currency, is in itself positive, even if its realization over time has proved not to be simple.

Fabio Lugano
Fabio Lugano

Graduated with honors from Bocconi University, Fabio is a consultant for companies and wounded shareholders of the Banche Venete. He is also the author of "Scenari Economici", and lecturer and analyst of cryptocurrencies since 2016.

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