From Tether to Dai: The Best Stablecoins to Hodl

Stablecoins are taking over the crypto world, claiming to offer a crypto dream situation in which you can have your cake and eat it too with a currency that is both stable and decentralized. But not all stablecoins are created equal. 

Some are far more stable than others. And while decentralization and security are a primary concern in the crypto-world, some stablecoins do a better job of achieving these lofty goals than others. In fact, there's recently been a lot of controversy surrounding whether or not some of the most popular stablecoins are actually safe and trustworthy. 

So which stablecoins can you actually trust? What is the best stablecoin? Here are a few of the top stablecoins in 2022 and what to look for when investing in crypto via stablecoins.

Stablecoins are cryptocurrency coins that are pegged to the value of an external asset, such as another cryptocurrency, a fiat currency (most commonly USD), or a commodity (often gold). For example, a stablecoin might be pegged to USD such that one coin always equals one U.S. dollar. In most cases, reserves of this external asset are kept on hand by the stablecoin issuer to back the value of the stablecoin. 

The purpose of this is to create a cryptocurrency that offers the benefits of crypto (privacy, anonymity, transparency, efficiency, and often decentralization) without the volatility that most crypto experience in value. This added stability makes it easier, in theory, to predict how much a stablecoin will be worth a day, month, or even year from now.

The best stablecoins are stable enough to, in theory, act as a secure and lucrative long-term investment. Look for coins that are trustworthy and safe, backed by a reliable asset, and widely bought and sold when deciding on what is the best stablecoin for your needs.

The most popular and largest stablecoin by market cap, Tether is pegged to the USD at a 1:1 ratio and backed by gold reserves. It's also consistently in the top five cryptocurrencies by market cap. You can find tether on most major crypto exchanges, including Kraken, Binance, and Coinbase. 

Tether was first launched in 2014 as RealCoin, and it's seen its fair share of controversy since then in regards to the coin's transparency. In 2017, many investors started suggesting that the coin exists to artificially inflate the price of bitcoin, and in 2018, investigations into Tether failed to verify the issuer's claims that it was fully backed by reserve assets. Most recently, the issuers were caught up in a $1 trillion lawsuit in which several traders claimed that Tether manipulated the cryptocurrency market.

Based on technology built on the Ethereum network, one of the most popular blockchains, USDC is another one of the most commonly traded stablecoins. It was created by folks from Coinbase as well as a few other crypto exchanges. This stablecoin is pegged to the dollar at a 1:1 ratio, and the coin's issuers claim that it's backed by reserves of the dollar as well as other assets it doesn't detail.

This coin is a favorite amongst crypto enthusiasts and one of the most trusted stablecoins due to its overall stability and the fact that its issued by a trusted crypto exchange. Pair this with the fact that it's the second-largest stablecoin by market cap, and USDC easily tops most lists of the best stablecoins. Unlike Tether, USDC has passed audits that attest to the existence of the reserves it claims to be backed by. Coinbase is probably the best place to buy USDC, and it's also easy to withdraw USDC to your bank account through this exchange. But you can also find it on most other exchanges, including Gemini and Crypto.com.

Issued by TrustToken, an Ethereum-based dApp (decentralized application), TrueUSD (TUSD) is another one of the best and most trusted stablecoins. It's fully licensed and regulated, and its value is pegged to the USD at a 1:1 ratio. In fact, issuers claim TUSD is the first regulated stablecoin that's fully backed by USD reserves.

You'll generally pay lower fees to convert TUSD to cash and earn higher interest on this stablecoin, making it one of the most liquid stablcoins on the market. You can buy TUSD on Gemini, Crypto.com, Bitfinex, and a number of other popular crypto exchanges.

Binance USD (BUSD) was created by the founder and CEO of Binance, one of the biggest crypto exchanges in the world. This stablecoin is secure, stable, fully backed by USD, and highly regulated by the New York State Department of Financial Services (NYDFS). It's issued in partnership with Paxos, a New York-based financial institution that specializes in blockchain technology.

This stablecoin is particularly useful if you trade on Binance, but it's known as one of the best stablecoins amongst the wider crypto community due to its stability and trustworthy issuers.

If you prefer a commodity-backed stablecoin, Digix Gold is 100% backed by gold—one ounce of gold for every Digix Gold coin. Independent audits of the stablecoin's issuers, DigixDAO, have verified that the holdings they claim are accounted for. Gold-backed stablecoins track the value of gold rather than fiat currency, and investors who are optimistic about the future value of precious metals (or pessimistic about the future of the USD and other fiat currencies) prefer these stablecoins for that reason.

In fact, gold-backed stablecoins make for an easy and convenient way to invest in gold. By essentially purchasing "digital gold," you're able to add precious metals to your portfolio without having to worry about costly logistical concerns like transportation, security, and storage.

Quickly becoming a favorite amongst stablecoins investors, Dai offers the benefit of complete decentralization paired with relative stability and transparency. While it's not quite as stable as some USD-pegged stablecoins like USDC, it's considered one of the safest and most transparent stablecoins due to its being fully backed by Ethereum and completely decentralized.

DAI is actually overcollateralized—the current collateral ratio is set to 150%, so $1.50 worth of ether (ETC) will get you $1.00 of DAI. While a crypto-backed stablecoin might sound, well, unstable, this over-collateralization allows the stablecoin's issuers to more closely control the value of DAI so that it stays pegged to the USD. On top of that, being backed by crypto rather than commodities or fiat currency makes this stablecoin completely decentralized and more aligned with the principles behind cryptocurrency and decentralized finance (DeFi).

As the biggest crypto exchange by volume, Binance supports a long list of 55+ cryptocurrencies, including a number of the best stablecoins, making it one of the best places to buy stablecoins. You can buy Binance USD (BUSD), Tether (USDT), USD Coin (USDC), Dai (DAI), as well as PAX Gold (PAXG). Binance is one of the best places to buy Binance USD (BUSD) because they don't charge fees to purchase or redeem this stablecoin.

Coinbase is the second-largest crypto exchange in the world by volume, so it also carries many of the best stablecoins. You can buy Tether (USDT), USD Coin (USDC), and Dai (DAI) on Coinbase, as well as Paxos Standard (PAX) and TerraUSD (UST). USD Coin (USDC) is one of the best stablecoins to buy on Coinbase because the platform charges no fees for spending USDC.

BlockFi is one of the best places to buy and store stablecoins due to its extremely generous interest rates. You can earn upwards of 8% to 9% in interest on your stablecoins on this platform, compared to the 0.20% you'd earn from keeping USD with a lot of online savings accounts. BlockFi supports a long list of stablecoins, including USD Coin (USDC), Tether (USDT), Paxos Standard (PAX), Paxos Gold (PAXG), Dai (DAI), Binance USD (BUSD), and Gemini USD (GUSD).