There has always been a contradiction in the stablecoin world.While digital currencies are meant to be decentralized, investors are deterred from buying them because of their volatile market characteristic, which hampering the development of digital currencies. As a result, the stablecoin was born and received a lot of enthusiasm from investors, which made it look like a "savior".As stablecoin grows, problems began to emerge.
First of all, there are no more than a few kinds of stablecoins, which are fiat-backed stablecoin, commodity-backed(such as gold) stablecoin, asset-backed stablecoin, and algorithmic stablecoin.Data shows that the current top four stablecoins in market value are USDT, USDC, DAI and TUSD, all of which are 1:1 anchored to US dollar. Among them, USDT (Tether) accounts for more than 80% of the market value in the stablecoin market and is the fourth largest digital currency with market value just after BTC, ETH and XRP. However, the relationship between Tether and Bitfinex exchange has always been criticized, Tether never provided credible third-party account proof, and Tether's history of additionally issuing USDT many times that led to a sharp drop in Bitcoin, which many users believed was just a matter of time before USDT exploded.
These problems with a high degree of centralization create a natural confrontation between the fiat-backed stablecoin and digital currency, like the elephant in the room, which cannot be ignored.
Looking at other types of stablecoins, the only ones worth considering are stablecoin backed by commodities such as gold and by asset-backed.Due to its constant value, algorithm stablecoin cannot drive miners to pursue profits and promote the development.
Why have gold-backed stablecoin repeatedly failed?
Researchers at Blockdata have identified possible factors that could have contributed to the stablecoin's failure.Research shows that failed stablecoin tend to be backed by commodities such as gold. In particular, gold-backed stablecoins account for about two-thirds of all failed stablecoins.
Blockdata pointed that the gold-backed stablecoin must be able to prove the existence of gold reserves and that they are being held in a safe place. If a stablecoin is backed by gold, it should be strong enough to withstand extreme market fluctuations in digital currencies.
The stablecoin business model is based on the issuer earning interest income from the market rate, which allows the issuer to both conduct business development and repay audit and board fees.But gold itself is difficult to transport and expensive to store, and it is almost impossible to audit its value (how to test its content or authenticity with low fee?).
In this way, the stablecoin with the greatest development potential is backed by digital currency assets.
The most liquid asset - backed stablecoin
At present, the mainstream stablecoins are backed by fiat. At present, QC and DAI are the best asset-backed stablecoins in terms of liquidity. QC is currently the stablecoin with the best liquidity of CNY. The exchange with the most QC users is ZB.com, followed by BKEX.The Maker protocol is one of the largest decentralized applications (dApp) on the Ethereum blockchain and the first decentralized finance (DeFi) application to gain mass adoption.So DAI also has a strong community consensus.
QC (QuickCash) is a stablecoin product based on QTUM chain smart contract.It is a blockchain project initiated by QuickCash Network Pte. Ltd.Each QC is worth about $0.15(≈1RMB).Users can pledge digital assets and allow some QC circulate in the market.Digital assets used as pledges can be mainstream digital assets such as BTC, ETH, EOS, LTC, QTUM, etc.The proportion of pledge shall be above 150%, and the surplus digital assets shall be pledged to the circulated QC as the credit guarantee.All pledge and circulation records are publicly displayed on the chain, which can effectively prevent excessive QC from entering the circulation market, ensuring the stability of exchange rate and the free circulation of QC.
The DAI Stablecoin System, now known as the Maker Agreement, currently accepts as collateral all assets based on Ethereum and approved by the MKR holders, who also have the right to vote on the Risk parameters of each collateral asset.Dai, an asset-backed stablecoin that softly-anchored to the US dollar, has been released on the Ethereum blockchain and a number of other popular blockchains. There is very low barriers to generate, access, and use DAI. Users generate DAI by using the Maker protocol to create a smart contract called "Maker Vault" and deposit the asset.Each DAI in circulation is backed by excess assets.
Future development trend of stablecoin
The invention of stalecoin plays an important role in the development history of crypto market. USDT was launched in 2014 as an early stablecoin, which eliminated investors’ warning of high volatility of crypto market and promoted the crypto market to bull market in 2017.At present, USDT, BTC, ETH and XRP are among the top four cryptocurrencies in market value, surpassing BCH, BSV and LTC. As USDT continues to issue more shares and its market value continues to rise, the regulatory concerns about USDT are even greater.Many mainstream exchanges have listed a variety of alternative stablecoins. For example, ZB.com supports PAX, TUSD, GUSD and USDC in addition to USDT.Coinbase has listed USDC, DAI, PAX, BUSD, HUSD, PAXG, EURS.Centralization is a drawback in a decentralized crypto world.