For cryptocurrencies, one of the biggest barriers to achieving mass adoption is price volatility. While a stablecoin is also a cryptocurrency, it aims to minimise the volatility and offer price stability by pegging itself to a fiat currency, like the US dollar, or a commodity such as gold.
The USD Coin (USDC) is such a stablecoin.
The history of stablecoins in a nutshell
The world’s first stablecoin, BitUSD, was released on 21 July 2014 and issued as a token on the BitShares blockchain. It was the brainchild of two leading figures in the cryptocurrency industry, Dan Larimer and Charles Hoskinson.
From there, stablecoins grew from strength to strength, and since 2017, over 200 stablecoin projects have been announced.
Despite the abundance of stablecoins that have come to market, the vast majority fall into three categories based on how they’re collateralised: fiat-collateralised (centralised), crypto-collateralised (decentralised) and non-collateralised (algorithmic).
Tip
Keen to find out more about how they’re collateralised? We explain it nicely in this blog post.
While the mainstream media attention have often been around big-name projects like Facebook’s Diem and JP Morgan’s JPM coin, the reality is that those projects aren’t live yet (Diem) or don’t really qualify as global stablecoins due to their institutionalised nature (JPM Coin).
Stablecoins offer all the security and flexibility of a cryptocurrency, but without the beforementioned price volatility.
Tip
Now that you know what a stablecoin is, you might want to know what some of the benefits are. Find out more about that here.