Stablecoins are a type of cryptocurrency that is designed to maintain a stable value relative to a particular asset or basket of assets. While the concept of stablecoins has gained popularity in recent years, the idea of a stable currency is not a new one. In fact, the history of stablecoins can be traced back to the mid-19th century, when governments began to issue fiat currencies backed by gold reserves. However, it wasn’t until the advent of blockchain technology and the rise of cryptocurrencies that stablecoins as we know them today began to emerge. Over the past decade, stablecoins have grown in popularity as a way to mitigate the volatility of traditional cryptocurrencies and facilitate transactions within the crypto ecosystem.
Other stablecoins were developed in the years that followed, including TrueUSD (TUSD) and Circle’s USDC. These stablecoins were developed to offer a more stable alternative to existing cryptocurrencies, and they also employ a centralised system and are tethered to the US dollar.
In 2018, MakerDAO developed the decentralised stablecoin DAI on the Ethereum network. DAI is tied to the value of the US dollar through the use of a decentralised autonomous organisation (DAO) and a collateralized asset called Ether, unlike other stablecoins that are tied to a fiat currency (ETH). DAI is able to do so without the need for a centralised authority to guarantee stability.
More and more stablecoins have been released in recent years, each with a unique peg and collateralization strategy, such as gold, oil, and others. Additionally, more institutions, including governments and central banks, are investigating the possibility of producing their own stablecoins.
Stablecoins have a brief history overall, yet over that brief existence, they have experienced substantial growth and innovation. Stablecoins have the potential to offer a more secure and open substitute to conventional fiat money and other cryptocurrencies, and it is anticipated that their adoption will increase in the coming years.