Stablecoin Selection Guide: Analysis of Mainstream Coins to Watch in 2024

What Are Stablecoins

Stablecoins are a special class of cryptocurrencies whose value is pegged to a specific asset or currency. This peg is usually to fiat currencies (such as USD, EUR), but can also be to precious metals, commodities, or other digital assets. Due to this anchoring mechanism, stablecoins tend to have lower volatility compared to mainstream coins like Bitcoin and Ethereum, making them an important bridge between traditional finance and the crypto world.

However, it is important to note that there have been cases in history where stablecoins have decoupled from their pegged assets, serving as a reminder for investors to choose carefully.

Why Are Stablecoins Growing Rapidly

The demand for stablecoins is increasing due to several key factors:

Central Role in DeFi Ecosystem

Decentralized Finance (DeFi) is a financial service system built on blockchain technology, offering advantages such as trustless operation, high transparency, and low costs. Stablecoins play a crucial role in DeFi—as a primary source of liquidity and collateral. Compared to volatile crypto assets, stablecoins maintain relatively constant value, making them the preferred tool for lending platforms, liquidity pools, and other scenarios.

Dollarized Investment Value

For users in developing countries, holding stablecoins is almost equivalent to holding USD. In regions with high inflation or ongoing currency devaluation, stablecoins help users protect their assets’ value. More importantly, combined with blockchain technology, stablecoins enable international transfers without relying on traditional banking systems, allowing users to make cross-border payments at very low fees. This is especially significant for areas with limited access to financial services.

Practical Need for Trading and Settlement

Whether it’s crypto-to-crypto trading, leveraged trading, or derivatives settlement, stablecoins are essential as units of account and settlement.

In-Depth Analysis of the Seven Mainstream Stablecoins

1. USDT (Tether)

USDT is a longstanding stablecoin issued by Tether Limited since 2014, and it is the most liquid coin in the market. USDT is pegged 1:1 to the USD, with each issued USDT backed by corresponding USD assets held in reserve.

According to the reserve report as of September 2023, Tether holds assets worth $86.3 billion, with obligations of $83.2 billion, providing strong backing for its issued tokens. Thanks to its deep history and broad ecosystem support, USDT dominates in mainstream exchanges, DeFi protocols, and on-chain payment scenarios.

Advantages: Highest liquidity, supports the most chains, diverse trading pairs
Risks: Past controversies over reserve transparency

2. USDC

USDC was launched by Circle in 2018, pegged 1:1 to USD like USDT, with a circulating market cap of $75.4 billion. Managed by an international payment consortium, USDC ensures compliance with strict financial and technical standards.

Compared to USDT, USDC has advantages in compliance, with many large institutions preferring to use USDC. It is widely available on major exchanges and DEXs, especially within the ERC-20 ecosystem.

Advantages: High compliance, strong institutional recognition, a key reference for stablecoin innovation
Features: Close relationship with a well-known exchange

3. TUSD

TrueUSD, launched by TrustToken and PrimeTrust in 2018, was designed to address trust and transparency issues in the stablecoin ecosystem. TUSD’s unique feature is that user funds are held by independent third-party custodians, and the issuer cannot misuse them, greatly reducing risk.

The coin also supports real-time reserve transparency checks, with strict standards for transparency. Its current circulating market cap is about $494 million.

Advantages: Highest transparency, strict risk control
Application Scope: Performs well in high-compliance scenarios

4. BUSD

BUSD is a product of collaboration between a globally recognized exchange and on-chain payment company Paxos Trust, deployed on both Ethereum and BEP-2 chains. Its supply adjusts dynamically based on demand, managed by Paxos Trust, which handles minting and burning.

However, it is worth noting that in November 2023, the exchange announced it would cease supporting BUSD, leading to a decline in its market position, though it remains relatively stable.

Features: Multi-chain deployment, liquidity remains but watch for ecosystem changes

5. DAI

DAI is the only truly decentralized stablecoin on the market, issued by MakerDAO (a decentralized autonomous organization) through the Maker protocol, fully collateralized by crypto assets (mainly ETH, WBTC, etc.).

Users generate DAI by depositing digital assets into Maker Vault smart contracts as collateral. This mechanism gives DAI its fully decentralized nature, with no reliance on a single issuer. Currently, DAI’s circulating market cap is about $4.43 billion.

Advantages: Truly decentralized, no single point of failure
Risks: Requires over-collateralization, capital efficiency is lower
Target Users: Users seeking full autonomy and trust in blockchain technology

6. eUSD and peUSD (Lybra Finance Launch)

Lybra Finance is a protocol designed for the ecosystem of liquid staking tokens (LST), with eUSD and peUSD as its innovative products. The disruptive feature of these tokens is—they are interest-bearing stablecoins.

Holders can maintain dollar value stability while earning continuous yields from the protocol. This combination of features has never been offered by traditional stablecoins. peUSD is an optimized DeFi version with more functions. These tokens are especially suitable for users seeking stability and income.

Core Innovation: A new model combining stablecoins with yield generation
Use Cases: Long-term holding, stable income needs

7. Synthetic USD

Synthetic USD adopts a completely different logic—users achieve stability by hedging two related assets. For example, a user might go long $100 worth of Bitcoin on a derivatives exchange while shorting an equivalent position; the gains and losses offset each other, resulting in a stable USD exposure.

The Stablesats feature launched by a Bitcoin infrastructure company is an implementation of this model, allowing users to exchange Bitcoin for USD-pegged stable assets.

Features: Suitable for users distrustful of traditional banks but holding digital assets
Advantages: Fully on-chain native, no third-party intermediaries

Core Risks of Stablecoins

1. Issuer Risk: If the pegged assets depreciate or the issuer faces financial/legal issues, the stablecoin may decouple from its peg
2. Regulatory Uncertainty: Regulatory frameworks for stablecoins are still evolving, with significant regional differences
3. Network Congestion: On-chain transaction delays may prevent timely withdrawal of funds
4. Liquidity Risk: Some stablecoins, while safe, may lack sufficient liquidity, making liquidation difficult

It is recommended that investors use third-party risk assessment tools to understand the safety level and collateral backing of each stablecoin.

How to Purchase Stablecoins

Most Convenient: Buy directly with fiat currency on major centralized exchanges
Alternative 1: Exchange other cryptocurrencies like Bitcoin or Ethereum
Alternative 2: Trade on decentralized exchanges (DEXs) via peer-to-peer markets, which do not involve fund custody, allowing users to retain full control of their private keys

Summary

Stablecoins have become an integral part of the crypto ecosystem, with applications ranging from daily payments to advanced DeFi strategies. Whether users aim to participate in DeFi yields, conduct cross-border transfers, hedge against local inflation, or maintain portfolio stability, there are suitable stablecoin options available.

From USDT’s comprehensive coverage to DAI’s full decentralization, from TUSD’s extreme transparency to eUSD’s innovative yield mechanisms, the diversification in the stablecoin market is sufficient to meet various user needs.

However, as with all crypto investments, thorough research is essential before allocating to stablecoins—understanding each coin’s operational mechanisms, risk features, and applicable scenarios.