Stablecoins are Here to Stay, Research Report Shows

Blockchain has released a report examining stablecoins that finds the asset as unlikely to leave the market soon. These fixed-value digital assets are becoming one of the tools for adoption in the crypto ecosystem. While Tether (USDT) remains the best-known dollar-pegged token, the report shows that there are a total of 57 stablecoins in various states of development, either fully deployed or awaiting launch in the coming months.

Out of 57 assets, 23 are fully launched, and 34 are in the pre-launch phase. The research divides stablecoins into two categories - asset-backed and algorithmic. Among asset-backed coins, not all use

’collateral in fiat, and some coins back their value by a reserve of other crypto assets, such as Ethereum. Algorithmic coins use various controls of supply and demand to keep the dollar peg.                                                                                                                                                                        

The research finds that despite the proliferation of new stablecoins, only a handful have reached large and established exchanges.

“Stablecoins have had success gaining listings on major exchanges, with eight stablecoins (42% of live coins) featuring one or more Tier-1 exchange listings: Tether (6), TrueeUSD (5), SteemDollar (4), NuBits (2), BitBay (2), Gemini (2), Paxos (2), Numins (1), STASIS (1), HelloGold (1),” the research reveals.

At the moment, USDT makes up more than 93% of the entire value in the fixed-price asset category.

Other discoveries show that Ethereum is the platform of choice for most stablecoins, as currently, the best-established wallets are in no hurry to support stablecoins. On the other hand, if the asset existed as an ERC-20 token, it would be immediately accessible through MyEtherWallet. A handful of assets use the network of Bitcoin, NEO, or Stellar, to run their tokens.

The Blockchain researchers point out that stablecoins are still in their early stages, and their effect is unknown:

“While there is a great deal of excitement surrounding stablecoins, the technology is still nascent and it is highly unlikely that the perfect stablecoin design exists at present; further experimentation (and innovation) is expected.”

The report pays special attention to algorithmic coins, which could go through unexpected attacks on their pegged value. Some believe algorithmic coins have the potential to be more democratic and decentralized, but so far, the model has not been tested in live trading.

“Stablecoins will continue to see an increase in listings on more cryptoasset exchanges, and these listings will be motivated for reasons beyond simply offering traders options to reduce exposure to market volatility e.g., algorithmic stablecoins may prove popular to list as they could attract ‘Sorosattack’ trading (and significant trading volume) aimed at breaking the automated stability peg,” explained the researchers.

The launch of stablecoins also follows the ICO model, with startups in the sector raising around $350 million this year. The Basis project alone has raised around $133 million. Basis is a type of crypto asset that would use an algorithmic central bank.

Other concerns about stablecoins include regulations. For some stablecoins, limitations on payments and account sizes may apply. A large enough crypto asset could also be seen as competing with fiat. The report authors see an acceleration in launches, expecting to continue seeing a stablecoin announced almost each week. However, all of those assets will need to prove themselves before being accepted as a stable and reliable alternative for storing value.