Fiat-collateralised – coins backed by real currencies and gold
Fiat-collateralised are stable coins backed by a real-world asset like the US dollar or gold, which is controlled and owned by a central entity.
These stable coins’ function like a basic IOU system.
Every token is collateralised by an equal amount of fiat currency (dollars), which is held by a central custodian (such as a bank).
Holders can redeem their token at any point for dollars.
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Three stable coins backed by real world assets
Tether – the first and most popular stable coin
Tether is perhaps the most famous example of a fiat-collateralised stable coin.
Every Tether token is equal to $1. Tether should always trade 1:1 with the dollar.
Despite its stable value, Tether has come under a lot of scrutiny. For example, people say the company that developed Tether isn’t transparent. You can’t access any reports, which can truly prove the company has the dollar reserves to back every Tether token.
Because of this, many crypto enthusiasts are now doubting Tether’s validity.
Nevertheless, it’s the most widely used and adopted stable coin right now and it sits with a market cap of R2.7 billion, which puts it in the top #10 cryptos by market cap.
TrueUSD – fully legal, transparent and collateralised
Just like Tether, TrueUSD is another fiat-collateralised stable coin.
But unlike Tether, TrueUSD is a fully fiat-collateralised, legally protected, and transparent, which is verified by a third-party.
In other words, TrueUSD posts on public forums regularly and anyone can receive the reports on Twitter. In addition, their reserves are held in escrow accounts which offer daily auditing and legal protection for holders.
The token is also managed by real people who have worked previously with Google, PwC, and UC Berkeley.
In the future, the company plans to tokenize other real-world assets such as TrueEuro, TrueBond, TrueYen to bring stability into the volatile world of cryptocurrencies.
Right now, TrueUSD is still compared to Tether with a market cap of R92 million. But Tether’s lack of transparency (which is key) will be its downfall and could spark a buying boost in TrueUSD.
You also get stable coins backed by oil and gold. For interest sake, let me briefly explain what they are…
Gold and oil-backed stable coins
Then you also get an oil-backed token called the Petro, which was launched by the Venezuelan government. Each Petro is backed by a barrel of Venezuelan crude oil, to a total issuing cost of $6 billion. However, many say the petro is a scam. Even Venezuela’s own congress declared the Petro token illegal.
Every DGX token is equal to 1 gram of 99.99% London Bullion Market approved gold. The thing is, the value of gold can still fluctuate wildly in different currencies so it’s not necessarily “stable”.
Digix (DGX) is a similar concept to Tether and TrueUSD, except it’s backed by gold.