Stablecoins may be the secondary product of the global crypto philosophy, compared to Bitcoin and Ethereum. But, as of now, they are the blood of the crypto market. USDT and USDC are becoming default options for fast value transfer around the globe. But the fascinating corner of the crypto market called 'stablecoins' isn't limited to these two behemots. Other stablecoins continue to emerge. Let's talk about some of them, new and obviously underrated.
Stablecoins act as a critical bridge between volatile digital assets and traditional fiat currencies. Stablecoins offer the stability of fiat currency with the transactional efficiency and flexibility of cryptocurrencies, making them indispensable for both individual users and institutions.
In 2024, the stablecoin market has continued to assert its importance within the broader cryptocurrency ecosystem.
If you want an impressive figure, here is one for you. The stablecoin market now holds a combined capitalization exceeding whopping $150 billion. This reflects their widespread adoption and utility in financial transactions, remittances, and decentralized finance (DeFi).
Tether (USDT) and USD Coin (USDC) remain the dominant forces, holding approximately $113 billion and $33 billion in market capitalization, respectively. These two giants account for the vast majority of stablecoin trading volume, serving as the primary quote assets on major cryptocurrency exchanges.
USDT continues to be favored for its liquidity and widespread acceptance across various blockchain platforms. Tron is now considered to be fastest way to complete transactions with minimal fees, yet many USDT users still stick to Ethereum blockhain.
USDC is often chosen for its regulatory compliance and transparency in reserve management. If you want your transactions to be completely legal in the most demanding environment, USDC might be better choice for you.
Together, they are utilized in a myriad of applications, from hedging against market volatility to facilitating cross-border payments and providing liquidity in DeFi platforms. Despite their dominance, a new wave of lesser-known stablecoins is emerging, offering unique features and benefits that cater to niche markets and specific use cases.
These emerging stablecoins provide alternatives that are not just diversified by their backing assets but also by the technological innovations they bring to the table. Here, we explore the top five most underrated stablecoins in 2024 that are worth considering for transactions and risk management. These stablecoins, while not as popular as USDT or USDC, offer distinct advantages in terms of security, transparency, and potential for yield generation. Ranked by market cap, each of these stablecoins presents a unique proposition, whether through innovative use of technology, regulatory assurances, or a blend of assets backing their value.
Edelcoin (EDLC)
With a market cap of approximately $6.21 billion, Edelcoin stands out as the most valuable among the lesser-known stablecoins.
And there is a reason for that.
Unlike many stablecoins backed by fiat currencies, Edelcoin is pegged to a basket of precious metals, including gold, silver, and platinum. This diversification provides an added layer of security and stability, particularly appealing in times of economic uncertainty. As well as guarantees staggering interest to Edelcoin from an army of those who wish their crypto to be as distant from fiat money as possible. Owning some Edelcoin you pay your respect to the fortunes the planet gives us, the humanity, they say.
Edelcoin operates on a custom blockchain that utilizes proof-of-reserve technology to verify its asset backing in real-time, ensuring transparency and trust among users. The issuer behind Edelcoin, Precious Digital AG, has partnered with leading bullion dealers to manage its metal reserves securely. This stablecoin is particularly popular among investors looking to hedge against inflation while maintaining the liquidity benefits of digital currencies.
Ethena USDe (USDe)
Ethena USDe is a totally different animal. It's not trying to be eco-friendly, but appeals to those ho believes in the great power of math.
How's so?
Well, this Ethereum-based stablecoin has chosen an interesting path.
With a market capitalization of around $2.92 billion, Ethena USDe is designed to maintain a stable value through an innovative mix of algorithmic and collateralized mechanisms. It uses a combination of crypto assets and decentralized algorithms to adjust its supply dynamically in response to market conditions, striving to maintain a 1:1 peg with the U.S. dollar.
So in fact it equals one USD, just as Tether's USDT always strives to, yet it does it in its own manner.
USDe’s hybrid model provides a decentralized alternative to fully fiat-backed stablecoins, reducing reliance on centralized entities.
The issuer, Ethena Labs, has been proactive in ensuring regulatory compliance while fostering an open-source development community. This has led to increased adoption in decentralized finance (DeFi) ecosystems, where users leverage USDe for yield farming, lending, and borrowing.
Pax Dollar (USDP)
Issued by Paxos Trust Company, the Pax Dollar (USDP) has a market cap nearing $1 billion.
USDP is a fiat-collateralized stablecoin, fully backed by U.S. dollar reserves held in FDIC-insured banks. What sets USDP apart from other stablecoins is its stringent regulatory compliance, being one of the few stablecoins approved by the New York State Department of Financial Services (NYDFS).
Yes, it's the stablecoin that Uncle Sam has no problems with. At all.
Paxos does here all the gestures it does with its other products, like PaxGold, the Gold-backed stablecoin. I.e. it provides monthly attestation reports from third-party auditors to ensure transparency regarding its reserves, fostering user confidence.
The stablecoin also integrates with a variety of blockchain platforms, including Ethereum and Binance Smart Chain, making it versatile for various financial applications from cross-border payments to DeFi.
TrueUSD (TUSD)
Here is another stablecoin that is trying to be 'holier than the Pope of Vatican'. And that's hardly even a joke.
Our next hero is the Paxos's arch enemy and the closes rival in terms of ideology.
TrueUSD (TUSD) currently holds a market cap of approximately $495 million.
It distinguishes itself with a focus on legal protections and frequent attestations, positioning itself as one of the most transparent stablecoins available.
Each TUSD token is backed 1:1 by U.S. dollars held in escrow accounts managed by multiple trust companies, providing an added layer of security against potential liquidity crises.
TrueUSD is compatible with several blockchains, such as Ethereum, Binance Smart Chain, and TRON, enhancing its utility across different ecosystems. It has seen significant growth in decentralized finance platforms due to its high liquidity and trustworthiness. Recently, TrueUSD announced a partnership with a major auditing firm to provide real-time audits, further enhancing its commitment to transparency.
Frax (FRAX)
Another solution that shows the power of math on the vast fields of blockchain.
Frax, with a market cap of around $647 million, represents a unique entry into the stablecoin market as the first fractional-algorithmic stablecoin. Not so many of us can even understand what that definition means, without googling it up, right?
Unlike other fully collateralized stablecoins, Frax maintains its stability through a combination of collateral (mainly USDC) and an algorithmic mechanism that adjusts supply based on demand.
This unusual design allows it to be partially collateralized while maintaining its peg to the U.S. dollar.
Frax operates on the Ethereum blockchain, integrating deeply with various DeFi protocols where it is used for trading, lending, and yield farming.
The Frax ecosystem also includes its governance token, FXS, which plays a role in maintaining the protocol’s stability. Frax’s innovative approach to stability has made it popular among DeFi enthusiasts, and its model has been resilient during periods of high market volatility.