2024 Essential Stablecoin Guide: In-Depth Analysis of Seven Major Projects

What Are Stablecoins? A Quick Introduction

The concept of stablecoins sounds complex, but it’s actually quite simple—they are cryptocurrencies pegged to the US dollar or other assets. The most common method is a 1:1 peg to the dollar, meaning each stablecoin is backed by one US dollar in reserve. This design makes stablecoins a bridge between traditional finance and the crypto world.

Compared to the sharp price fluctuations of Bitcoin and Ethereum, stablecoins are theoretically designed to maintain a stable value. However, history has shown that this stability is not foolproof—some stablecoins have lost their peg, reminding us that risks always exist. Whether you plan to trade stablecoins or not, understanding how they work is essential for participating in modern crypto trading.

How Fiat-Backed Stablecoins Work

Fiat-backed stablecoins are essentially digital twins of real-world currencies on the blockchain. Project teams lock up fiat currencies like USD or EUR and then create an equivalent amount of digital tokens through smart contracts. These locked funds act as a promise, ensuring each stablecoin’s real-world value.

Take USDC and USDT as examples—they both follow a 1:1 peg, with each token representing one US dollar in cash or equivalent assets. This simple math makes stablecoins ideal for cross-border payments: fast, transparent, and low-cost. Compared to traditional remittance methods that can take days and incur high fees, stablecoins offer clear advantages.

The Most Popular Stablecoins Today

Currently, the market is dominated by two giants: USD Coin (USDC) and Tether (USDT). Their market caps far surpass other similar products. However, the crypto market is highly volatile—as illustrated by a case in November 2023, when a well-known exchange ceased support for its native stablecoin, causing that project, once in the top five, to quickly lose market share to competitors.

This phenomenon reminds us that, before choosing which stablecoin to use, it’s crucial to understand the differences and features of each project.

Analyzing Mainstream Stablecoins

1. USDT: The Long-Lasting Power of a Market Veteran

USDT is a pioneer in the stablecoin space. Founded by Tether Limited in 2014, it was the first to offer users a digital asset pegged to the US dollar—independent of any single platform. This innovation combined the technical advantages of crypto with the stability of fiat currency.

According to the September 2023 reserve report, Tether holds over $86 billion in assets, with more than $83 billion in liabilities. These figures show the project’s significant effort to maintain its 1:1 peg. USDT enables global users to settle transactions stably, and its speed and low costs make it a common choice for cross-border payments and fund transfers.

2. USDC: The Trust of Institutions

USDC was launched in 2018 by Circle, a company focused on peer-to-peer payments. Its price is anchored at $1, managed and overseen by the Centre consortium, which includes Bitcoin miner Bitmain and exchange Coinbase—this combination boosts market confidence.

As of the latest data, USDC’s circulating market cap reached $75.62 billion, making it the second-largest stablecoin after USDT. USDC is highly liquid and can be easily traded and exchanged on most centralized and decentralized exchanges. It’s especially suitable for users with ERC-20 wallets.

3. TUSD: The Advocate for Transparency

True USD (TUSD) was launched in 2018 by TrustToken and PrimeTrust. From the start, its mission has been to address industry trust issues by using third-party escrow accounts to hold user funds—these accounts are completely invisible to TUSD’s issuers, preventing misappropriation.

Recent data shows TUSD’s market cap is about $494 million. Its most notable feature is real-time disclosure of reserve backing, verified periodically by independent third-party auditors. For users seeking transparency, TUSD offers an extra layer of assurance.

4. BUSD: The Centralized Exchange Issuance

BUSD is issued jointly by Binance and blockchain firm Paxos Trust. As an exchange-native stablecoin, it also pegs 1:1 to the US dollar. Paxos Trust manages the minting and burning of tokens—minting occurs when users buy with USD, and burning when they redeem.

BUSD is built on Ethereum and also supports Binance Chain’s BEP-2 standard. Its supply depends on market demand—the more people buy, the more tokens are created.

5. DAI: The Decentralized Stablecoin Experiment

DAI is the only truly decentralized stablecoin in the crypto world. Unlike centrally controlled USDT and FDUSD, DAI was launched by MakerDAO in 2018 and operates via the Maker Protocol on Ethereum.

DAI maintains a soft peg to the dollar (target 1:1), with an innovative mechanism that doesn’t rely on any central authority. Users can lock in cryptocurrencies like Bitcoin or Ethereum in smart contracts called Maker Vaults as collateral to generate DAI. Currently, DAI’s market cap is about $433 million, representing an important experiment in decentralized finance.

6. eUSD and peUSD: The New Era of Yield-Bearing Stablecoins

Lybra Finance has built a platform serving holders of liquidity staking tokens (LSTs). These yield-bearing stablecoins—eUSD and peUSD (the latter being a DeFi tool version)—offer features that other stablecoins lack: they generate returns for holders.

This design transforms stablecoins from mere stores of value into income-generating assets, functioning like a yield account. They provide both price stability and additional income opportunities, which is quite rare in this asset class.

7. Synthetic USD: A New Vision for Hedging Tools

Synthetic USD targets users who want the stability of the dollar but prefer not to deal with traditional banking systems. Its core idea is to achieve price stability by hedging two related assets.

For example, opening a $100 Bitcoin long position on a derivatives exchange and simultaneously taking an equal short position as a hedge—when Bitcoin’s price rises, the hedge loses the same amount, and vice versa, keeping the net position unchanged. Galoy, a provider of Bitcoin-native banking infrastructure, launched the Stablesats feature, allowing users to obtain dollar-pegged prices through Bitcoin—this is a concrete implementation of the concept.

Why Are Stablecoins Becoming More Popular?

The Lifeblood of DeFi

Stablecoins are increasingly central to the DeFi ecosystem. DeFi is an open financial system built on blockchain that promises trustless, transparent, and low-cost services. In this ecosystem, stablecoins flow like blood.

Unlike Bitcoin and Ethereum’s volatility, stablecoins’ stability makes them ideal collateral for lending platforms and liquidity pools. That’s why they are widely used in decentralized lending. Of course, stablecoins have had issues in the past, so users should remain cautious.

Empowering Developing Countries

For regions suffering from currency devaluation or high inflation, stablecoins are a lifeline. Pegged to the dollar, they are akin to holding USD directly—helping hedge against local currency risks and preserving wealth. This is especially valuable in areas facing economic uncertainty.

More importantly, stablecoins and blockchain technology bypass many traditional banking restrictions. In many developing countries, banking services are expensive or hard to access, but stablecoins provide fast, cheap cross-border payment channels, enabling marginalized populations to participate in the global economy.

Risks That Cannot Be Ignored

While stablecoins have bright prospects, they also carry real risks. First, their security depends entirely on the underlying assets and the credibility of issuers. If the peg assets’ value collapses or the issuer faces difficulties, the stablecoin could lose its peg.

Second, the regulatory environment remains uncertain. Given the rapid evolution of crypto markets, many countries have yet to establish clear policies on stablecoins. This uncertainty poses long-term risks.

Additionally, although blockchain transactions are usually fast, network congestion can cause delays, affecting user access to funds. The stablecoin industry urgently needs better risk management tools and infrastructure.

Ratings of stablecoin safety levels published by Bluechip and other institutions can help users assess the reliability of different projects, based on key indicators like peg mechanisms, collateral types, market cap, and price stability.

How to Obtain Stablecoins: Multiple Options

The most straightforward way is to buy stablecoins with fiat currency on centralized exchanges. Users can also swap other cryptocurrencies like Bitcoin or Ethereum for stablecoins.

For those preferring decentralized methods, P2P markets on DEXs offer purchasing options. Many users favor DEXs because they don’t need to entrust assets to third parties, maintaining full control of private keys during transactions.

Final Words

Stablecoins have proven their central role in crypto finance. They build a bridge between traditional finance and digital assets, offering a safer alternative to BTC or ETH for users seeking price stability. With the emergence of decentralized stablecoins like DAI, the stablecoin ecosystem continues to innovate and expand.

As global crypto adoption accelerates, the influence of stablecoins will further grow. Buying and holding stablecoins is no longer difficult, but as with all investments, thorough research before involvement is essential.