Introduction

What Are Stablecoins?

Stablecoins are cryptocurrencies whose value is pegged, or tied, to that of another currency, commodity, or financial instrument. Stablecoins aim to provide an alternative to the high volatility of the most popular cryptocurrencies, including Bitcoin (BTC), which has made crypto investments less suitable for common transactions [1].

Why Are Stablecoins So Important?

Though Bitcoin remains the most popular cryptocurrency, it tends to suffer from high volatility in its price, or exchange rate. For instance, Bitcoin's price rose from just under $5,000 in March 2020 to over $63,000 in April 2021 only to plunge almost 50% over the next two months. Intraday swings also can be wild; the cryptocurrency often moves more than 10% in the span of a few hours.

All this volatility can be great for traders, but it turns routine transactions like purchases into risky speculation for the buyer and seller. Investors holding cryptocurrencies for long-term appreciation don't want to become famous for paying 10,000 Bitcoins for two pizzas. Meanwhile, most merchants don't want to end up taking a loss if the price of a cryptocurrency plunges after they get paid in it.

To serve as a medium of exchange, a currency that's not legal tender must remain relatively stable, assuring those who accept it that it will retain purchasing power in the short term. Among traditional fiat currencies, daily moves of even 1% in forex trading are relatively rare.

As the name implies, stablecoins aim to address this problem by promising to hold the value of the cryptocurrency steady in a variety of ways [2].

What Kinds of Stablecoins Are There?

Some would argue that stablecoins are a solution in search of a problem given the wide availability and acceptance of the U.S. dollar. Many cryptocurrency adherents, on the other hand, believe the future belongs to digital tender not controlled by central banks. There are three types of stablecoins, based on the mechanism used to stabilize their value.

Fiat-Collateralized Stablecoins

Fiat-collateralized stablecoins maintain a reserve of a fiat currency (or currencies) such as the U.S. dollar, as collateral assuring the stablecoin's value. Other forms of collateral can include precious metals like gold or silver as well as commodities like crude oil, but most fiat-collateralized stablecoins have reserves of U.S. dollars.

Such reserves are maintained by independent custodians and are regularly audited. Tether (USDT) and TrueUSD (TUSD) are popular stablecoins backed by U.S. dollar reserves and denominated at parity to the dollar.

Crypto-Collateralized Stablecoins

Crypto-collateralized stablecoins are backed by other cryptocurrencies. Because the reserve cryptocurrency may also be prone to high volatility, such stablecoins are overcollateralized—that is, the value of cryptocurrency held in reserves exceeds the value of the stablecoins issued.

A cryptocurrency worth $2 million might be held as reserve to issue $1 million in a crypto-backed stablecoin, insuring against a 50% decline in the price of the reserve cryptocurrency. For example, MakerDAO's Dai (DAI) stablecoin is pegged to the U.S. dollar but backed by Ethereum (ETH) and other cryptocurrencies worth 150% of the DAI stablecoin in circulation.

Algorithmic Stablecoins

Algorithmic stablecoins may or may not hold reserve assets. Their primary distinction is the strategy of keeping the stablecoin's value stable by controlling its supply through an algorithm, essentially a computer program running a preset formula.

In some ways that's not so different from central banks, which also don't rely on a reserve asset to keep the value of the currency they issue stable. The difference is that a central bank like the U.S. Federal Reserve sets monetary policy publicly based on well-understood parameters, and its status as the issuer of legal tender does wonders for the credibility of that policy.

Algorithmic stablecoin issuers can't fall back on such advantages in a crisis. The price of the TerraUSD (UST) algorithmic stablecoin plunged more than 60% on May 11, 2022, vaporizing its peg to the U.S. dollar, as the price of the related Luna token used to peg Terra slumped more than 80% overnight [3].

Tether (USDT)

What Is Tether (USDT)?

USDT is a stablecoin (stable-value cryptocurrency) that mirrors the price of the U.S. dollar, issued by a Hong Kong-based company Tether. The token’s peg to the USD is achieved via maintaining a sum of commercial paper, fiduciary deposits, cash, reserve repo notes, and treasury bills in reserves that is equal in USD value to the number of USDT in circulation.

Originally launched in July 2014 as Realcoin, a second-layer cryptocurrency token built on top of Bitcoin’s blockchain through the use of the Omni platform, it was later renamed to USTether, and then, finally, to USDT. In addition to Bitcoin’s, USDT was later updated to work on the Ethereum, EOS, Tron, Algorand, and OMG blockchains.

The stated purpose of USDT is to combine the unrestricted nature of cryptocurrencies — which can be sent between users without a trusted third-party intermediary — with the stable value of the US dollar.

Stablecoins are increasingly used as an inflation hedge in recent times; compared to keeping fiat currency in a savings account averaging 0.06%, users can lend their stablecoins and earn yields ranging from 3% to as high as 20%. However, keep in mind that regulatory, platform risks and more entail [4].

What Is USD Coin (USDC)?

USD Coin (known by its ticker USDC) is a stablecoin that is pegged to the U.S. dollar on a 1:1 basis. Every unit of this cryptocurrency in circulation is backed up by $1 that is held in reserve, in a mix of cash and short-term U.S. Treasury bonds. The Centre consortium, which is behind this asset, says USDC is issued by regulated financial institutions.

The stablecoin originally launched on a limited basis in September 2018. Put simply, USD Coin’s mantra is “digital money for the digital age” — and the stablecoin is designed for a world where cashless transactions are becoming more common.

Several use cases have been unveiled for the USD Coin. As well as providing a safe haven for crypto traders in times of volatility, those behind the stablecoin say it can also allow businesses to accept payments in digital assets, and shake up an array of sectors including decentralized finance and gaming [5].

Overall, the goal is to create an ecosystem where USDC is accepted by as many wallets, exchanges, service providers and dApps as possible.

What Is DAI (DAI)?

DAI is an Ethereum-based stablecoin (stable-price cryptocurrency) whose issuance and development is managed by the Maker Protocol and the MakerDAO decentralized autonomous organization.

The price of DAI is soft-pegged to the U.S. dollar and is collateralized by a mix of other cryptocurrencies that are deposited into smart-contract vaults every time new DAI is minted.

It is important to differentiate between Multi-Collateral DAI and Single-Collateral DAI (SAI), an earlier version of the token that could only be collateralized by a single cryptocurrency; SAI also doesn’t support the DAI Savings Rate, which allows users to earn savings by holding DAI tokens.

Multi-Collateral DAI was launched in November 2019 [6].

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Methodology

I choose this topic to investigate since Stablecoins is a major problem in the cryptocurrency area and it has not been solved yet, since cryptocurrencies aim to become more decentralized, Stablecoins should go to this as an important part of this business, but unfortunately some decentralized stablecoins like UST have crashed over time and destroyed user trust. on the other hand, Central or Fiat based stablecoins have the risk of freezing our assets. in this board i will compare the main Stablecoins like USDT, USDC, DAI, BUSD etc. on the Ethereum network last month in terms of the number of transactions, headlines, volatility of these assets and inflow and outflow of these assets Pools and, At the end, I will write a summary on this board and tell the result of my research.

if you have any questions, you can send a message in Discord.

My Discord handle: Berg#0013

Observations

• USDT is the most popular stablecoin among all stablecoins in terms of transaction numbers with around 3.75 million transactions and then USDC is second with around 1.65 million transactions and then DAI and BUSD are third and fourth place. In terms of the proportion of these coins, USDT has the highest proportion at around 65%, USDC has around 28.5%, and DAI only has 3.5%.
• Furthermore, USDT has the highest number of senders and receivers in the last month. on the other hand, USDC has the highest volume among all stablecoins with around 520.5B USD and after USDT with around 129B USD it comes second. Also, USDC has the highest ratio of stablecoin volume at around 71.5% and USDT has around 18%, but BUSD has the highest average volume among these coins at around 301K USD and after it USDC with around 224.3K USD.

Observations

• throughout the day over the past month so far USDT and USDC have had the highest daily stablecoin transactions and on December 9th the Ethereum Network experienced the most stablecoin transactions and the largest number of transactions pertained to USDT with about 262K and then USDC had about 45K and DAI came in third with about 4.2K. the fewest number of transactions belonged to FEI with 15.

  USDC and USDT have had the highest number of senders and receivers over the past month with DAI coming in third. Also USDC and USDT have had the highest daily volume for the last month among these stablecoins and like the previous sector, BUSD has been in third place. an interesting point was on 13 Dec and that day Volume of BUSD was second after USDC with about 17.9B.

Observations

• in terms of comparing the price of the stablecoins together, on average DAI and LUSD prices were more than $1 as DAI experienced an average of $1.4 over the last month and LUSD was around $1.03 while BUSD and USDN prices were below $1. So it looks like LUSD and DAI have seen a surge in their demand, so prices go up. Also, DAI, LUSD, BUSD, and USDN have had a lot of volatility over the past month and have not been stable.

  the highest price for DAI was on December 5th at around $6.7, this was an incredible price for a stablecoin, but after three days it was back to the price of $1.

  Furthermore, BUSD until November 27 was around $0.90, but after that it reached $1. moreover, DAI has an interesting 7 days moving average and it seems wired while USDN has had downward moving average.

Observations

• USDC was popular on Uniswap v2, v3 and Sushiswap and it seems that users tend to use USDC instead of USDT or other stablecoins on this platform, while on Balancer USDT was popular and people tend to use it. only in the Curve DAI protocol was it popular.
• Uniswap v2 was the most popular platform for USDC, FEI, USDT and DAI users and Uniswap v3 for USDD, TUSD, LUSD and BUSD, also Curve for FRAX, GUSD, USDN and USDP.
• USDC has had the highest number of trades with around 4.5K and also this token has around $565.5 million as the highest stablecoin volume trade for the past month (Swap from).
• USDC has had the highest number of exchange transactions with about 7.8K and also this token has huge volume as a stablecoin volume exchange for the last month (Swap to).

Key Insights

• Cumulative data: USDT has had the most number of transactions with around 3.75 million and after USDC comes second with around 1.6 million. Also, USDT has the most number of senders with around 1.9 million and USDC has around 740,500 but in terms of number of receivers USDC has had the most number of receivers with around 34,500 and after that USDT has had around 27,100.
• Furthermore, USDC has had the highest transaction volume at around $520 billion and after this, USDT is in second place at around $128.8 billion.
• In terms of the number of holders of each stablecoin, USDT has the most holders with around 4 million, followed by USDC and DAI in second and third place with around 1.56 million and 500 thousand. Also, USDT has a share of around 64% of all holders and then USDC has around 25% and DAI only has 8%.
• The transfer was the most popular event among all Stablecoin users and the highest transfer event belongs to USDT with around 3.75 million.
• Also this user 0x74de5d4fcbf63e00296fd95d33236b9794016631 is the most active user on Stablecoins in terms of transaction numbers with around 118.7K and this user 0x56178a0d5f301baf6cf3e1cd53d9863437345bf9 is also the most active user in terms of volume with about 105B USD.
• and finally, from last month to now, some pools have experienced a huge amount of outflow, for example, the DAI-USDC pool on Uniswap has experienced an outflow of about 20 billion from last month to now, so It seems that people have tended to withdraw their tokens from at least the Uniswap pools.
• In summary: USDT has more users than USDC, but USDC has more volume than USDT and these tokens are very close to each other, but semi-decentralized stablecoin like DAI is very far from these tokens. in addition, it seems BUSD tries to give some share of Stabecoins market specifically on Ethereum Network during last month until now.