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Title : What Are Stablecoins and Differences (DeFi, CeFi and Stable Con Elastic Supply)
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What Are Stablecoins and Differences (DeFi, CeFi and Stable Con Elastic Supply)

Stablecoins might all look the same, but they are not. First of all, we need to clarify what a stablecoin is.

A stablecoin is a cryptocurrency that maintains its value, more or less stable against the dollar (so I own a cryptocurrency, being able to get all the advantages of the case, without exposing myself to the volatility of the same. What are other advantages? market, I trade in a stablecoin allowing me to have non-volatile value without having to pay high fees to convert into fiat currency). Conceptually they are born thanks to Tether (USDT) to make the most of arbitrage (practically in 2013, 2014 and in general 5/6 years ago the price of Bitcoin varied a lot from one exchange to another and it was possible to exploit arbitrage to earn about 5%, simply by buying on an exchange at a lower price and reselling BTC on another at a higher price; Tether in fact almost zeroed the fees to carry out these operations rather than converting into fiat currency).

Then a distinction must be made between CEFI and DEFI. Stablecoin DEFI are uncensored, decentralized, unregulated and unsecured by real assets (very often the dollar) because smart contracts are used. Secondly, the mechanisms for putting stablecoins in place are very different. 

Then there are stablecoins with elastic supply (therefore they modify their value in a more or less high way but through a mechanism called "rebase" they return to anchor, broadly speaking, to the dollar). 

Tether (USDT): it is the most widely used stablecoin ever (third as market capitalization globally, behind only Bitcoin and Ethereum) but also the most controversial. This stablecoin is theoretically minted in a 1: 1 ratio to the dollar. For example, there is USDT 15 billion lying around -> somewhere there will be USD 15 billion in a bank account.

In reality it seems this is not the case because Tether uses fractional reserve and only 74% of the USDT is hedged by fiat currencies (the rest is used as loans and other issues, this poses the risk that liquidity is not always available, leading to insolvency risk). It is an unregulated stable, however accepted on Binance and on most exchanges, apart from Coinbase. 

Originally, Tether was introduced on the Omni protocol. This protocol uses the Bitcoin blockchain to enable smart contracts. Due to this choice, the currency has inherited the high transaction fees and slowness in transactions that characterize the Bitcoin blockchain.

Regarding the dollar peg and litigation, Tether argues that these reserves, which are actually simply the firm's bank accounts, hold a similar USD dollar amount to the amount of total USDT currently in circulation. 

The rapid increase in the number of USDT in the market often coincides with the record growth of Bitcoin and other cryptocurrencies so many are of the opinion that a sudden collapse of the company could have a devastating impact on the market.

Currently the token operates on the Omni, Ethereum, Eos, Algorand, Liquid and Solana networks.

On January 24, the website tetherreport.com argued that the digital currency was responsible for 48.8% of the growth in the price of Bitcoin in 2017. The authors, who remained anonymous, concluded that more Tethers are created when the price of Bitcoin. Bitcoin goes down. On the other hand, there are those who believe that the collapse of society would have the opposite impact. Just as the market has argued, Tether could also be responsible for a 30-80% price correction, the authors say.

Tether is managed by the same CEO of Bitfinex, one of the largest cryptocurrency exchanges in the world (born in 2012). Like Tether, Bitfinex too often came under the eye of the cyclone by US regulators. The fact that both companies are run by the same management has raised suspicions of collusion in supporting the cryptocurrency market.

Some analysts quoted by CNBC over the years have argued that an increasing number of USDT is being transferred to the Bitfinex exchange from time to time. This could hide the exchange's creditworthiness defects.

iFinex Inc, the parent company that manages USDT and Bitfinex, has been accused of mixing funds between the two companies to hide an 850 million dollar loss incurred by Bitfinex due to its relationship with shadow bank Crypto Capital. Basically there are people who accuse Bitfinex of creating USDT out of thin air by manipulating the markets, without having any collateral behind them (dollars).

According to CoinMarketCap, Tether's capitalization has increased approximately 430% from $ 4.1 billion in early January to over $ 24 billion today.

USD Coin (USDC): linked to the value of the dollar and guaranteed by underlying funds in a bank account (also here it is possible to make fractional reserves). It complies with US law and there also appears to be an independent law firm that checks the USDC backing assets (a report comes out once a month). It is open source. Widely used on CEFI platforms (BlockFi, Nexo, Celsius Network) and is the reference Stablecoin on Coinbase.

Paxos Standard (PAX): This stablecoin is always linked to the value of real assets (dollar in this case). The company also issues Pax Gold (cryptocurrency pegged to the value of gold). In this case we do not find the fractional reserve therefore the dollars are entirely present in the current accounts. Little present on exchanges.

Binance USD (BUSD): always provided by the Paxos company and in collaboration with Binance. Similar to PAX but owned by the Binance exchange. It is a real giant in the sector, having the largest exchange behind it. 

TrueUSDT (TUSD): They seek to ensure maximum transparency and trust to users. The funds are 100% liquid and are not held by the company providing TUSD but by escrow (third party company). Nobody can access the funds unless they have the authorization of the owner of the TUSD.

Gemini Dollar (GUSD): Always a company governed by strict US laws. Also supported by the BlockFi passive annuity platform. Centralized, transparent and there is always a monthly report showing the presence of liquid funds. The problem is that it is poorly supported.

DEFI

Dai (DAI): the main stablecoin linked to DEFI (i.e. there is no entity behind it). It is not tied to physical assets but completely virtual. It works through an interest lever that aims to balance supply / demand on the value of 1 dollar. It is created on Maker by collateralising Ethereum and other Erc20s using a network of oracles that guarantee the price and its reliability. How is it minted? I provide Ethereum as collateral, by asking for a loan, I will receive DAI (2/3 of the collateral blocked). What is the risk? The high volatility of frozen assets and liquidation leading to the loss of collateral. It is not reprehensible and there are no regulations to protect users. 

xDai (XDAI): it is a stablecoin anchored to the value of Dai. It is possible to convert Dai to Xdai and vice versa via bridges (POA network). Blocks are created in just 5 seconds and transactions have a gas of only 1 Gwei. It is possible to move xDai through Metamask but you have to configure the network.

For a guide: Layer2? Configure Metamask With Matic (Polygon), xDai and ZKSwap 

TerraUSD (UST): it is a stable algorithmic collateralized by Luna (crypto of the Terra blockchain). UST is in a 1: 1 ratio with Luna. For every UST mint, 1 $ of Luna is burned which lowers the supply and increases its intrinsic value. If Luna falls below $ 1, the arbitrage will bring back the price (because it is convenient to sell it in exchange for $ 1 of Luna). 

Here to learn more: 

The Earth-Moon-UST Ecosystem: Could the

UST Seigniorage Lose The Peg? Abradacabra, Degenbox and Le Stable Algoritmiche

Vai (GO): this is a very interesting ecosystem based on Venus Protocol and therefore active on the Binance Smart Chain. It is very similar to MakerDAO (which "produces" Dai), although stable Vai does not have a mechanism that can "pegg" it to the dollar so it is much more volatile.

sUSD (SUSD): it is the stablecoin of the Synthetix platform (which concerns synthetic assets). It is possible to operate on the collateralization of cryptocurrencies with traditional assets (gold, dollars, BTC, tesla, etc.). Basically to trade on Synthetix I have to have sUSD (which is an Erc20). Through this platform I can buy metals (sXAU is gold, sXAG is silver), other real assets, expose myself to the world of cryptocurrencies (iBTC is the derivative of Bitcoin), Forex, Apple shares, Tesla, Amazon, currencies fiat, etc To exploit this mechanism, we use the native Synthetix (SNX) token used as collateral and which creates sUSD (750% is blocked, ie 1 SNX creates 0.133 sUSD).

mStable USD (MUSD): this is a stablecoin backed by other stablecoins pegged to the dollar. mStable is a meta-asset platform that aims to create assets stronger than the sum of their parts. The mUSD dApps include SWAP - Swap USD stablecoin with zero-slippage.

Reserve (RSV): tries to anchor itself to the value of the dollar through an inflation mechanism (with constant purchasing power). It is the RSR token that guarantees its stability. Aim for complete decentralization.

Ampleforth (AMPL): it is a "volatile" stablecoin with an elastic supply, anchored to a very variable price range. The target is 0.96-1.06 dollars, however AMPL can also fall below this threshold or go up a lot (exceeding 4 dollars). How is the stable value maintained on that preset target? By increasing and decreasing the total supply of the token. When you are out of that interval, the Rebase takes place (once a day, at 2 am Italian) which can be positive or negative. When it exceeds $ 1.06, the total supply of the token is increased ... this leads investors to sell the token and decreases its value. If, on the other hand, it falls below 96 cents, the supply is reduced, so when someone buys the AMPL value increases, bringing it to the predetermined target.

Clearly in my Erc20 wallet I will see my tokens increasing and decreasing, based on the circulating supply so rather than owning a certain number of tokens, I will own a part of the total% of AMPL's market capitalization. If the rebase increases the circulating supply by 10%, even in my wallet I will have a 10% increase in the tokens I own.

It is clear how this stablecoin aims to combine: volatile cryptocurrencies (such as Bitcoin, albeit with much better volatility), classic stablecoins and fiat money. I can have a more or less stable store of value but also speculate on it in the short term, making a profit.

For further information: How Ampleforth Works and How To Claim By Forth (Metamask, Trust and Kucoin)

Ditto (DITTO): it is very similar to Ampleforth so it is a stable with elastic supply. If AMPL aims to become the benchmark on Ethereum's DeFi, Ditto instead was created on the Binance Smart Chain. The other difference is that up to 6 rebases can occur per day (which makes it much less volatile than AMPL) and that transactions are faster and with very low fees.

These systems use a network of external oracles for price feeds.

To configure the BSC: Configure Metamask With The Binance Smart Chain and Complete Guide For The Binance Smart Chain (Autofarm, Beefy, Pancake, etc)

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