Tether (USDT) coins may have a bad reputation - and yet the idea of a crypto coin with its value fixed to a "real-world" asset has been making the rounds since the beginning of crypto coins.
And there have been options before, with various mechanisms of fixing the price. Here some options beyond USDT for storing value in crypto coins.
Dollar-Pegged Coins
BitUSD: Currently at $1.14, this asset has held its peg to the US dollar for years, but the last three months saw it fluctuate more. Yet the coin has hardly appreciated more than 20% beyond its peg levels, and has not fallen to lower ranges. The mechanism that bitUSD uses is a collateral, making a guaranteed price of $1. The problem is that sometimes, the market price remains higher, potentially leading to losses. But over the long term, bitUSD remains relatively stable. The risk of BitUSD is that it is only traded on decentralized exchanges: the BitShares and the Open Ledger DEX, and there is no known off-ramp for fiat.
NuBits: Trading at around $0.99, this asset relies on a mechanism similar to central banks. More NuBits are created to bring the price down. Then, some users are incentivized to lock away NuBits if the supply grows. NuBits, opposite to bitUSD, has troubles protecting from downside risk. At one point, the asset crashed to $0.22 in 2016, but has since recovered. The price of NuBits is also manipulated via NuShares, a fluctuating price asset. For now, the system works by acting as a currency controller, and NuShares is a highly volatile asset. There is inherent risk that NuBits does not manage to keep the peg, if the centralized resources run out.
Theoretically Possible Assets
Basecoin: A still-hypothetical crypto asset, promising an "algorithmic central bank". The coin's supply would be manipulated to affect prices, but by a transparent algorithmic mechanism. The asset is still not traded and does not reveal any information, as for now the pegged value and the potential for a price stability mechanism are just theoretical. Fedcoin is a similar theoretical opportunity.
Digix DAO: The coin, pegged to gold, does not exist yet, but it managed to lift the fortunes of the Digix project. In the recent market slide, even just the promise of a gold-pegged coin lifted the price of DGD beyond $500. More will be known as the coin is issued, pegged to one gram of gold.
Gold-Backed Coins
Similar to bitUSD, there is the bitGold asset, where the price fluctuates more, but remains stable over the longer term. Traded solely on BitShares, this asset is not finding a wide usage, and may not even be suitable as a store of value, since it would be hard to change back to another more liquid crypto coin.
GoldMint is another coin with a relatively stable price at between $2 and $3, but this asset is just out of the ICO and will have to prove its mettle, as it relies on Bancor and YoBit for its price. GoldMint will also have to prove that its mechanism of buying physical gold or ETF-traded gold will be sufficient to control the price of the asset.
There are constantly new coins appearing promising some form of stability. In the case of Steem Dollars (SBD), the price pegging mechanism was abandoned and the asset was left to appreciate to as much as $10.
Royal Mint Gold, or RMG, the asset promised to be backed by the Bank of England, has yet to establish itself among the crypto community.
Additionally, this official coin would lack the privacy and immediacy of similar assets. The project has also spoken harshly of Bitcoin, and seems to be set against the spirit of the crypto community.
The trouble with fixed-price tokens is that the mechanisms used to control the price may backfire, in the end creating more losses. Additionally, it is hard to move out of the token, which does not fluctuate, but also cannot be easily changed back to other assets. And for most fixed-priced tokens, the last few years were a disaster, since we could say they lost all their power against BTC.
This article appeared first on Cryptovest
