The Concept and Classification of Stablecoins
A stablecoin is fundamentally a cryptocurrency with an “anchoring” attribute, usually pegged to fiat currencies like the US dollar or other assets with stable value. This ensures minimal price volatility. Stablecoins primarily serve as a medium of exchange. The earliest stablecoin, USDT (Tether), was introduced in 2014 by Tether Limited, with its value pegged 1:1 to the US dollar.
Due to the significant volatility in crypto assets, investors require a relatively stable bridge currency for preserving the value of their on-chain assets. For instance, in a BTC/USDT pair, investors expecting a Bitcoin price drop might sell BTC for USDT as a value preservation strategy.
Stablecoins generally fall into two categories: collateralized stablecoins and algorithmic stablecoins.
Collateralized stablecoins are backed by certain assets to maintain price stability. Depending on the type of collateral, they can be further divided into: ① Fiat-collateralized stablecoins, where fiat currency is used as collateral to mint tokens on a 1:1 basis, such as USDT, TUSD, USDC, etc. ② Crypto-collateralized stablecoins, backed by other crypto assets, like DAI.
Algorithmic stablecoins do not require collateral nor any other valuable assets as backing. They rely on a set of algorithmic monetary policies, adjusting the supply of the token to maintain a stable price, examples include UST, BAC, AMPL, etc.
What are Mainstream Coins, and Which Ones are Included?
Cryptocurrencies that rank at the top in market capitalization are usually referred to as mainstream coins. They typically have a large community, numerous users, and high market activity. Mainstream coins generally have strong consensus in the crypto market or significant practical value and liquidity, making them widely recognized crypto assets.
Currently, the leading mainstream coins in the crypto market include BTC, ETH, ADA, XRP, BCH, LTC, etc. Bitcoin (BTC) is the frontrunner among mainstream coins, dominating the market cap since its inception in 2009. It usually sets the trend for the crypto market; other mainstream coins tend to follow Bitcoin’s price movements.
Ethereum (ETH) is the native token of the Ethereum network, developed by Vitalik Buterin, inspired by Bitcoin. It aimed to build upon Bitcoin’s capabilities, enhancing transaction speed and supporting more applications with smart contracts. Ethereum is the second-largest cryptocurrency after Bitcoin.
Cardano (ADA) is often referred to as the Japanese Ethereum due to its early funding mainly from Japan and its co-founder, Charles Hoskinson, who was also a co-founder of Ethereum.
Ripple (XRP) is the base currency of the Ripple network, operated by Ripple Labs (formerly OpenCoin). With a total supply of 100 billion, it aims to become a standard transaction protocol for major banks worldwide, making currency transfers as easy and cost-effective as sending emails. However, Ripple is currently embroiled in a lawsuit with the U.S. Securities and Exchange Commission (SEC), which regards XRP issued by Ripple as a security.
Bitcoin Cash (BCH) emerged from a hard fork of Bitcoin in December 2017. It increased block sizes to handle more transactions and speed up transaction processing.
Litecoin (LTC) is another crypto asset inspired by Bitcoin, using a proof-of-work mechanism, and has been a well-established mainstream coin since 2011.
What are Altcoins, and What are the Popular Ones Now?
The term “altcoin” originally referred to imitations or copies of existing tokens. The distinction between mainstream coins and altcoins isn’t always clear. For instance, Litecoin, initially inspired by Bitcoin, was once considered an early Bitcoin altcoin, though this designation is rarely used now.
For example, Dogecoin (DOGE), launched in 2013, is one of the older crypto assets in the industry. Before 2021, Dogecoin’s price was low, and it ranked relatively low in market capitalization, categorizing it as an altcoin. However, its recent surge, fueled by figures like Elon Musk, propelled it into the top ten in market capitalization. Given that Dogecoin’s rise is driven by short-term market sentiment, its future trajectory remains uncertain, making it difficult to definitively classify it as an altcoin or a mainstream coin.
Altcoins are not counterfeit or fake crypto assets; they too are developed using blockchain technology. However, they generally have less recognition and liquidity compared to mainstream coins.
As the market evolves and speculation drives capital flows, each phase sees the emergence of “star altcoins.” Recently, animal-themed tokens have become popular, inspired by the surge in Dogecoin. Examples include SHIB (Shiba Inu coin), SDOG (Small Dog coin), AKITA (Akita Inu coin), PIG (Pig coin), etc. Concurrently, DeFi-related altcoins and NFT