wo years ago, stablecoins were the elephant in the room. Back then, the one thing that crypto markets were lacking was a reliable asset that could be used as a hedge against market volatility without cashing out into USD. The default option, Tether (USDT), was a source of major controversy and thus appeared many contenders, leading some to call stablecoins the “holy grail” of crypto.
The problem seems to be solved by now, at least in terms of better options. We have stablecoins of all shapes and sizes, with different market shares, trading volumes, and long-term outlooks. Likewise, each one has its own features and implementation models that can create new benefits and profitability options for holders.
At the root of these differences, there are two main approaches that are favored by current markets: fiat-collateralized and crypto-collateralized stablecoins. Both have their advantages and trade-offs, as well as specific nuances when it comes to their implementation. Perhaps the best examples of this are seen in the differences between the established, fiat-collateralized USD Coin (USDC) and a new crypto-collateralized contender, Equilibrium (EOSDT).
Note: There is a third approach known as seigniorage which remains mostly experimental and has little market traction as of yet.
We’re choosing these because of their fast growth and popular acceptance. USDC launched in October 2018 and by January it already had a market cap of $370.76 million. It only took a few months for it to become USDT’s main contender for the default stablecoin option in crypto markets.