For example, a $1 stablecoin might be backed by $2 worth of ETH collateral.Ĭrypto-backed stablecoins need to be overcollateralised because assets like ETH are volatile. That means that the underlying asset backing the stablecoin must exceed its value. Whatever happens, a provider has to issue the tokens.Įxamples of fiat-backed stablecoins include GUSD, PAX, USDC and USDT, all of which are available in Monolith (other than PAX, they can all be used to top up the Monolith Visa debit card).Ĭrypto-backed stablecoins work differently to fiat-backed tokens: they’re backed by crypto assets, and they must be overcollateralised. This is to ensure that the custodian stays compliant and their reserves are sufficient.įiat-backed stablecoins rarely fluctuate in price, but they are centralised. They require a custodian, and are also subject to regular audits. That means the equivalent fiat value is always held in a reserve and can be issued in exchange for the stablecoin. The most commonly used stablecoins are collateralised with fiat. Stablecoins come in various forms, and each has their own advantages and disadvantages. It’s the first example of stablecoins being used to fight hyperinflation.
In addition to their partnership with Visa, Circle recently helped provide medical workers with USDC amid Venezuela’s economic crisis. Stablecoins could also improve the lives of people in deprived countries around the world. That’s something the payments giant Visa has doubled down on: in late 2020, it was announced that they would be partnering with Circle to facilitate USDC payments to 60 million merchants worldwide. Transactions are settled on the blockchain, so they’re often faster and more affordable than fiat money. Moreover, stablecoins can be used as an alternative to fiat currencies. ADAI, available through Aave with Monolith
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