Stablecoins are cryptocurrencies that have price designed to be pegged to another currency, commodity, or asset. This is most commonly the U.S. dollar but it can be another fiat currency, a different cryptocurrency, or a physical commodity. These are designed to give a cryptocurrency trader an option to go to cash, get out of a volatile cryptocurrency, flee to safety, or make transactions through the blockchain.
Cryptocurrencies as an asset class can be highly correlated, so stablecoins provide a move into the stability of fiat currency without needing to move to a broker outside the crypto space. The top stablecoins, are believed to be backed legitimately, and should have the ability to redeem the asset backing them. Stablecoins are unlikely to fall below the value of the underlying asset peg as arbitrageurs would step in to buy below value.
Backed stablecoins are correlated to the volatility and risk of the underlying asset and also to the risk of the project or company in charge of maintaining the peg. If the stablecoin is backed through a smart contract on the blockchain in a decentralized manner, then the risk is minimal. However, if there is a company or organization behind the stablecoin then their is risk or fraud, theft, or corruption and the risk of a loss of confidence in the backing that could lead to a loss of the peg and devaluation.
Stablecoins were created for people that wanted all the utility of a cryptocurrency with the stability and value or a place to move their money to take risk off.
Here are the current top ten stablecoins 2021:
1 Tether USDT $62.62B $1.00045 Omni
2 USD CoinUSD USDC $23.39B $1.00010 Ethereum
3 Binance USD BUSD $9.36B $1.00010 Ethereum
4 Dai DAI $5.23B $1.00118 Ethereum
5 TerraUSD UST $1.9B $0.99930 Ethereum
6 TrueUSD TUSD $1.44B $1.00008 Ethereum
7 Paxos Standard PAX $1.07B $0.99991 Ethereum
8 HUSD HUSD $814.69M $1.00046 Ethereum
9 Neutrino USD USDN $365.65M $1.00117 Waves
10 Gemini Dollar GUSD $178.42M $1.01251 Ethereum