In the early days of Bitcoin, the idea of a stable cryptocurrency pegged to fiat was laughed at. Today, Tether (USDT) captures more trading volume than most sovereign currencies, including the USD and JPY. Over the past year, a wave of 'stablecoins' has entered the crypto-economy, with many viewing them as essential infrastructure for the future of digital assets.
The 'Second Bitcoin Whitepaper' and the Birth of Stablecoins
The concept of asset-pegged cryptocurrencies was first articulated in JR Willett's Mastercoin whitepaper in 2012, often called the 'second Bitcoin whitepaper.' By 2014, the idea gained serious traction. Early attempts like Nubits (USNBT) initially held its $1 peg but collapsed after June 2016, illustrating the difficulty of maintaining stability.
Tether: The King of Crypto-Dollars
In November 2014, Reeve Collins unveiled Tether, built on the Bitcoin blockchain via the Omni Layer protocol. Each USDT is allegedly backed 1:1 by USD reserves held by Tether Limited — a claim that has sparked intense controversy. Despite this, USDT has remained steadily pegged since its listing on CoinMarketCap in February 2015. Traders use it as a safe haven during bear markets, and major exchanges such as Binance, Poloniex, Bitfinex, OKEx, Huobi, and Bittrex offer USDT trading pairs. USDT now ranks as the ninth-largest cryptocurrency by market cap.
MakerDao and Dai Tokens
Another resilient stablecoin is Dai, issued by the MakerDao protocol on Ethereum. Users lock up crypto collateral to generate Dai, which stays within a tight band of $0.99–$1.02. While less popular than USDT, Dai is used on decentralized exchanges like Bancor, Radar Relay, and Ethfinex, and is gaining traction in lending and leverage markets.
Trust Token Platform and TrueUSD
TrueUSD (TUSD) is issued by the Trust Token Asset Tokenization Platform, with each token backed by USD held in escrow accounts. With a market cap of $60 million, TUSD has been adopted by exchanges including Bittrex, Binance, and Zebpay. Since its debut on CoinMarketCap in March 2018, TUSD has maintained a price of $0.99–$1.01.
More Stablecoins on the Horizon
Several other stablecoins are entering the ecosystem: Kowala (KUSD) integrated with Ledger hardware wallets; NUSD built on EOS by Havven; USDVault backed by gold bullion in Swiss vaults; and Circle Invest's upcoming dollar-pegged coin. Despite lingering trust issues regarding collateralization, stablecoins continue to grow in popularity. The ultimate question remains: can they maintain their 1:1 peg over the long term, especially under stress?