What is a stablecoin?

Stablecoins are tokens which are pegged to the value of another asset. For the most part, stablecoins are pegged to the US dollar, or other major currencies such as the Euro or the British Sterling. Stablecoins can either be backed 1-1 by funds in a treasury, or they use algorithms to keep the peg. Algorithmic stablecoins are much riskier as they can depeg after an attack, as shown by the attack on Terra Luna and UST.

What stablecoins are available on Algorand?

The official Algorand Foundation website lists several prominent stablecoins available on the Algorand chain. The stablecoins they include are:

• Tether USD, or USDT.
• USD Coin, or USDC.
• Realio, or rUSD.

There are also several stablecoins pegged to currencies other than the US Dollar, but I will only be analyzing the USD coins.

USDt (Tether USD)

Tether USD is by far the most popular stablecoin on any blockchain. The peg is backed by 1-1 funds held in the Tether treasuries. Users are able to mint and redeem Tethers whenever they please. Tether has recently come under fire for not releasing audits of their treausuries, but this has not slowed the volume of the token.

USDC

USDC is another very prominent stablecoin, recognized across the entire crypto ecosystem. The difference between USDC and USDt is really just a preference of choice.

realioUSD (rUSD)

realioUSD is another USD backed stablecoin. The money is held in private treasuries owned by the Realio Fund.

Stablecoin usage before & after the fall of Terra USD (UST)

On May 9th, 2022, the stablecoin UST began losing its 1$ peg. UST is an algorithmic stablecoin linked to the coin Luna on the Terra blockchain. UST was widely used for the Anchor protocol, a lending and borrowing protocol on Terra. After UST fully lost its peg, trust in stablecoins was heavily damaged.