A Closer Look At Stable Coins & Centralized Cryptocurrencies
As the original and first cryptocurrency, Bitcoin, was built on the premise of delivering decentralization, removing the control of institutions (governments) that they hold in the form of day-to-day fiat currencies. However, further growth of the crypto universe is bringing with it a large number of coins – that, some may argue, goes against the spirit of decentralization, these would be centralized cryptocurrencies. With further changing of cryptocurrencies, there have arisen a new type of crypto, stable coins, which are pegged to stable real-life assets, such as gold and the US dollar. Here we’ll take a close look at these two asset types and assess briefly why they were created.
There are actually many of them, but we’ve compiled a list of some of the most notable centralized cryptocurrencies for you. Please note that current market caps of these coins are based on the data we gathered by the time the article was written (October 29th, 2018) and it may have changed since then.
1. Ripple (XRP)
Initially released in 2012, Ripple was created as a network that provides a real-time gross settlement (RTGS) system, a currency exchange, and remittance services. Ripple Labs, a tech company based in the US, came up with the idea to provide their own ecosystem to facilitate money transactions. They created their own ledger with their own coin, XRP, to facilitate these transactions. Ripple has had quite a successful run, with their system being adopted by financial institutions all around the world. Due to the currency being controlled by the company, Ripple can be classified as a centralized cryptocurrency. Current market cap: around $17.9 billion.
Often dubbed as the “China Ethereum”, NEO wanted to build a scalable network to facilitate the development of decentralized applications. While the original aim was to clearly provide a decentralized system, the two founders Da Hongfei and Erik Zhang, didn’t convince true decentralization believers. Hongfei, who helped familiarize the Chinese to cryptocurrencies, made NEO’s network dependent on the servers that his team has. If any of these servers are offline, it means the network will also go down. This is in opposition to decentralization, which is to divide power to participants of a network, not centralizing them on some servers that are run by an institution. Current market cap: around $996 million.
Developed by the IOTA Foundation, the project was created to help develop sophisticated protocols to connect the world. With their system that works with a coordinator, though, IOTA is rated by Weiss Ratings as a centralized cryptocurrency. Weiss further stated that if there weren’t any audit for the coordinator, it will remain a centralized coin. For now it seems people’s interest for it hasn’t really died though, since it still holds the #13 spot on CoinMarketCap.com. Current market cap: around $1.27 billion.
And now we’re on to stable coins. Since the world of cryptocurrency is generally very volatile, the demand of something that provides less volatility has arisen. This is where stable coins come into play: their values are pegged to stable assets – the more popular of which is the US Dollar. Below are some of the most popular stable coins available to purchase:
1. True USD (TUSD)
The ultimate goal of the team at TUSD is simple: to build a stable coin that can be used and trusted, enabling businesses and consumers alike to use cryptocurrencies in day-to-day transactions. Since they work with trust companies all around the world, they can ensure that their tokens are safe. Investors will just have to pass an AML/KYC check and store real USD in a trust company of their choice. In return, they can be credited TUSD to their public wallet address. Redeeming TUSD as real USD is also made easy as people basically just have to do the same process in reverse order. Consumers will have to send their TUSD tokens to a registered wallet address, then they will receive real funds in the form of USD from the trust companies.
2. Steem Dollar (SBD)
Another coin created with the promise that its worth would be equivalent to USD $1, it aims to provide exactly one dollar when redeemed by its users. Steem Dollar wants to help businesses worldwide accept payments in a digital currency, making their businesses more practical and flexible, while at the same time safe because they won’t have to worry about the big volatility that other cryptocurrencies have by nature. Converting into USD should be easy as users can choose one of the two available ways: through the use of their blockchain or the internal market.
3. Tether (USDT)
Tether is arguably one of the most talked about stable coins. As a predecessor to True USD, Tether is also designed to always hold a stable worth of $1 per token. However, it seems like the cryptocurrency audience has a love-hate relationship with USDT as the token has raised questions when their audit failed. Tether’s first batch of question-raising activities started when they rapidly expanded the supply of USDT, raising their total value to $2.2 billion in just a few months. This was alarming to investors as Tether claimed they were unable to receive international wire transfers during the same period. Thus, this naturally raised suspicions: how could they print more tokens if they didn’t even have an equivalent amount of money in real USD? Despite this, however, Tether is still in existence and listed on several cryptocurrency exchanges.
It may be too early to speculate on what will become of Tether, Ripple, and other centralized cryptocurrencies and stable coins, but we can be encouraged by the fact that the development of new ideas never seems to cease in the crypto world. It’s under this same spirit that we’ve developed various gold and blockchain-based products. We hope with these choices you can diversify your digital assets. Check out our main website to learn more about these innovative products.