Stablecoin Market 2024 Guide: The Seven Most Notable Projects to Watch

Stablecoins have become the infrastructure of modern crypto trading. These assets are pegged to fiat currencies or other assets, typically at a 1:1 ratio, providing users with price-stable crypto assets. Unlike highly volatile Bitcoin and Ethereum, stablecoins are theoretically able to maintain a relatively constant value. However, there have been cases in history where stablecoins lost their peg, reminding us that stability is not an absolute guarantee.

Stablecoins serve as a bridge between traditional finance and the blockchain world, widely used in scenarios such as payments, lending, and cross-border transfers. Understanding the operational logic of the crypto market and the mechanisms of stablecoins is crucial.

How Fiat-Collateralized Stablecoins Work

Fiat-backed stablecoins represent real currency on the chain. These projects achieve this by locking fiat currency and creating equivalent crypto tokens via smart contracts. The locked fiat ensures the value backing of the stablecoin.

For example, USDC and USDT are both pegged 1:1 to the US dollar, with each stablecoin supported by $1 (or equivalent assets) held in reserves. Compared to traditional fiat, stablecoins offer the possibility of fast, low-cost transfers worldwide, which is a core reason for their rapid growth.

Leading Stablecoin Projects Today

USD Coin (USDC) and Tether (USDT) lead the market due to their larger market sizes compared to other fiat-backed tokens. However, the crypto market is ever-changing—In November 2023, a certain exchange announced it would stop supporting its native stablecoin, which was ranked fifth at the time, but its market share was quickly taken over by other projects.

Understanding how different stablecoins operate is vital for investors. This article will detail the seven most representative stablecoins of 2024.

1. USDT: The Pioneer of Stablecoins

USDT was launched by Tether Limited in 2014, ushering in a new era of digital dollars. As the first project to offer users a platform-independent digital dollar solution, USDT combines the technological advantages of crypto assets with the stability of fiat currency.

USDT is pegged 1:1 to the US dollar. According to the reserve report from September 2023, Tether holds over $86.2 billion in assets, with liabilities of about $83.2 billion. This reserve mechanism allows users to conduct fast, transparent, low-cost transactions globally. The efficiency of stablecoins has led to their widespread adoption in payments, remittances, and ecosystem applications.

2. USDC: The Multi-Chain Ecosystem Choice

USDC was developed by Circle in 2018, focusing on peer-to-peer payments. Like other USD-pegged stablecoins, USDC maintains a fixed price of $1.

As of the latest data, USDC has a circulating market cap of $75.54 billion, managed by the Centre consortium, which includes Circle and its partners. Centre ensures USDC adheres to strict financial and technical standards, maintaining a 1:1 peg to the dollar. USDC boasts high liquidity and is tradable on most centralized exchanges and DEXs, supporting ERC-20 wallet interactions.

3. TUSD: An Alternative Emphasizing Transparency

True USD (TUSD), launched by TrustToken and PrimeTrust in 2018, aims to address trust deficits and transparency issues in the stablecoin market. All user funds are managed by independent third-party escrow accounts, and issuers cannot directly access these funds, effectively preventing misuse.

TUSD also maintains a 1:1 peg to the dollar. Its unique feature is real-time verification of reserves by independent third parties, ensuring on-chain commitments match off-chain reserves. Currently, TUSD has a circulating market cap of about $494 million, offering a reliable option for users seeking high transparency.

4. BUSD: The Exchange Ecosystem Product

BUSD is a native stablecoin jointly issued by a certain exchange and Paxos Trust. It follows the same logic, pegged 1:1 to the US dollar.

The supply of BUSD varies dynamically based on market demand, managed by Paxos Trust through issuance and redemption. When users exchange BUSD for USD, tokens are burned; when users create BUSD with fiat, tokens are minted. BUSD is built on the Ethereum blockchain and also supports the BEP-2 standard on Binance Chain, providing users with multi-chain options.

5. DAI: The Decentralized Stablecoin Representative

DAI is the only truly community-driven decentralized stablecoin. Unlike USDT and other projects that require intermediaries, DAI is generated by the Maker Protocol, a decentralized application on Ethereum.

Launched by MakerDAO in 2018, DAI advocates for fully decentralized operation, collateralized by crypto assets and not supported by fiat. The token maintains a soft peg to the dollar at a 1:1 ratio. The Maker Protocol works by allowing users to deposit assets like Bitcoin or Ethereum as collateral, which are locked in Maker Vault smart contracts. The system automatically generates DAI based on the collateral. Currently, DAI has a circulating market cap of approximately $4.33 billion.

6. eUSD and peUSD: Yield-Driven Innovations

Lybra Finance is a decentralized platform offering liquid staking tokens (LST). LSTs are tokens representing rights obtained after depositing native crypto assets into staking protocols.

eUSD and peUSD are innovative stablecoins launched by Lybra, using LST as collateral, and can generate yields for holders—an uncommon feature in the stablecoin space. Holders of these tokens can earn attractive returns. peUSD is its DeFi utility version. These assets provide users with stable value storage and new income channels.

7. Synthetic USD: An Alternative Technical Approach

Synthetic USD targets users who need USD stability but want to avoid traditional banking systems. Its core mechanism involves maintaining a stable price by holding two related assets simultaneously.

Specifically, users can open a $100 Bitcoin hedge position on derivatives exchanges. When Bitcoin’s price rises, the hedge position’s value decreases, and vice versa, ensuring the net position remains unchanged. Some Bitcoin infrastructure companies offer a Stablesats feature on their platforms, allowing users to access USD-stable prices via Bitcoin, opening new ways for users to utilize their assets.

Why Stablecoins Are Gaining Increasing Attention

The Core Role in Decentralized Finance

Stablecoins play a key role in the DeFi ecosystem. DeFi is an emerging financial service system built on blockchain, providing various financial products and services through trustless mechanisms. Compared to traditional banking systems, this model offers higher transparency and accessibility, while reducing costs by minimizing intermediaries.

Stablecoins are the foundation of this system, especially in peer-to-peer transactions. Compared to high-volatility assets like Bitcoin and Ethereum, stablecoins have relatively constant values, making them commonly used as collateral in decentralized lending platforms. Although stablecoins have lost their peg in some cases, this has not hindered their expansion in DeFi applications.

The Advantages of Dollarization

Stablecoins offer users, especially residents of developing countries, a unique opportunity to earn equivalent returns in USD. Holding stablecoins is essentially equivalent to holding USD reserves, which is particularly useful in countries with unstable or depreciating local currencies. In high-inflation environments, investing in stablecoins can protect assets and even profit from local currency devaluation.

Moreover, stablecoins enable residents of developing countries to participate in the global economy. Many regions’ traditional banking systems cannot serve the masses due to high fees or accessibility issues, but stablecoins and blockchain technology break these barriers, providing fast cross-border transfers at extremely low costs. Stablecoins have become practical tools for dollarizing investment portfolios and providing financial stability during economic uncertainty.

Risks of Stablecoins

Despite their many conveniences, investors should be aware of the associated risks. First, the reliability of stablecoins depends on the underlying assets and the credibility of the issuer. If the pegged assets depreciate or the issuer faces financial or legal difficulties, the stablecoin may lose its peg.

Second, the uncertain regulatory environment poses risks. Given the emerging nature and rapid development of the crypto market, regulators have yet to establish clear policies to ensure long-term stability of stablecoins. Additionally, while transaction speeds are generally fast, network congestion can cause delays, and users may not be able to access funds immediately. Therefore, the stablecoin space still requires more comprehensive risk management tools.

Some security assessment agencies have published economic security ratings for stablecoins, providing important information such as peg data, collateral types, market cap, and price, offering investors reference points.

How to Acquire Stablecoins

The fastest way to buy stablecoins is through centralized exchanges using fiat currency directly. Users can also exchange other crypto assets like Bitcoin or Ethereum for stablecoins. Another option is to purchase via decentralized exchanges or P2P markets.

Many users prefer DEXs because these platforms are non-custodial, allowing users full control of their private keys during transactions without entrusting assets to third parties.

Summary

Stablecoins are a key component of the crypto asset ecosystem and their importance cannot be overstated. By pegging to real assets, stablecoins build a bridge between fiat and crypto assets. Many investors see them as a relatively safe form of crypto investment because their price volatility is much lower than mainstream coins like Bitcoin and Ethereum.

As the crypto market develops, the application scenarios for stablecoins continue to expand, with innovations like decentralized stablecoins (e.g., DAI) serving as clear examples. As adoption of crypto assets worldwide continues to grow, the influence of stablecoins may further strengthen.

Currently, there are no technical barriers to buying and holding stablecoins. However, as with all crypto investments, thorough research and due diligence are essential before committing funds.