If we agree to the definition above, we get the following implications:

Stablecoin is the opposite to fiat money in a following way: fiat money is regulated by governments and is perceived as money with intrinsic value;

Stablecoin is a store of value but also (as a cryptocurrency) can be used as a transparent medium of exchange with minimum fee and trackable history on a publicly available blockchain.

So basically it’s “all-in-one”: not regulated by a third party (like government or other central institution) and at the same time stable(ish) in price; it’s a store of value but also an asset, a payment medium with attributes of gold.

Stablecoin with all these characteristics would be the perfect solution for popularizing cryptocurrency as a medium of exchange on daily basis.

Please think about all the requirements and implications for a moment (this is probably why it’s been so hard to implement the concept!).

The implementation

In the last few days, I did the research on projects related to stablecoins. As expected most stablecoins base their price on gold (in other words they are asset-­pegged cryptocurrencies) or try to maintain the price against the value of the U.S. Dollar. Currently, there are only few functioning stablecoins; majority of the projects I’ve found are in progress or they provide too little information about their status. Let’s look at two (in my opinion) most interesting projects, that peg their coins to U.S. Dollars.

Tether (USDT)

Contract Address:

0xdac17f958d2ee523a2206206994597c13d831ec7

The idea:

It’s quite simple. As we read on the official site “Every Tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD” [from the official site].

Total supply:

Currently the total supply of USDT is 1,650,000,000.

[source: coinmarketcap, January 25]

Blockchain:

Until recently Tether used Bitcoin blockchain (via the Omni Layer protocol) and now, in January, has switched to the Ethereum.

How the price stays “stable”?

Taken from their official site: “because they are anchored or ‘tethered’ to real-world currencies” and from their whitepaper “Tether’s Proof of Reserves configuration is novel because it simplifies the process of proving that the total number of tethers in circulation (liabilities) are always fully backed by an equal amount of fiat currency held in reserve (assets)”. So what they actually do is promising that you can exchange dollars for Tethers and number of Tethers will always be equal with the amount of dollars they have. They have regular audits regarding their accounts so that users can be sure, they always can exchange Tethers for dollars and the company is solvent.

Price: