So which stablecoins are the best? Which ones are the safest? Let's talk about it.
Algorithmic Stablecoins
Algorithmic stablecoins because an extremely hot topic in crypto land recently. Largely in part due to the collapse of the UST (Terra USD) stablecoin that was pegged to $1 and backed by LUNA. When this pair of tokens collapsed and wiped out billions of dollars, causing investors to lose tons of money... People because even more skeptical of algorithmic stablecoins.
Being skeptical of crypto tokens is actually a good thing. We are responsible for the safety and storage of our own crypto, after all. This is why it's extremely important to look at the fundamentals of different tokens before dumping tons of money into them. I decided I'd share my top stablecoins of 2022 picks in hopes of helping people decide which ones to trust.
I have to preface this by saying - nothing here is financial advice, and I'm not an expert. I'm just sharing my opinion on my favorite stablecoins, so don't be upset if your favorite one isn't one of my picks.
HBD & pHBD
Here on the Hive blockchain, we have our very own native stablecoin called HBD (Hive Backed Dollars). HBD is actually one of the longest-standing algorithmic stablecoins that has existed, so it has truly stood the test of time. As an algorithmic stablecoin, it is pegged around $1, usually hovering between $0.95 and $1.05 which makes it great for locking in your value in a non-volatile token.
HBD is very unique because the HIVE token that backs it is generated by users creating content. I've said it before - I see it as HBD is backed by not just the HIVE token... But by this insane amount of content that lives on the Hive blockchain. The community is incredibly strong, the content on this chain is incredibly valuable, and the constant development never slows down.
There are a lot of reasons that HBD is my top pick for a stablecoin, one of them being it has the best way to earn interest on crypto with its built in Savings that pays 20% APR. Yes, I said 20% APR, and before you say that's not sustainable or too good to be true... You have to realize that HBD is very different than UST. You can lock your HBD up for 3 days and earn 20% APR on your stable token.
If 20% isn't good for you, let me let you in on a little secret... You see, HBD recently got a major upgrade when it was bridge to the Polygon blockchain as pHBD. HBD & pHBD offer the best interest rate on crypto on both blockchains! Right now, you can provide liquidity to the pHBD-USDC pool on PolyCUB and earn 43% APY! Yes, you read that right. A liquidity pool of 2 stablecoins is paying out 43% APY right now, so even if you want exposure to DeFi without risk... Here you go.
If 43% APY on a stablecoin doesn't excite you, then I don't know what will. Typically when you have money in a savings account, you're earning 1% or less. This is a major flaw with the traditional financial system because that's not even enough in 1 year to account for inflation. You're actually losing money in a savings account that pays less than 7% APR due to inflation, so this is why I opt for the financial system of the future. The financial system where we are in total control of our money and we're able to transact freely with no middleman.
RAI
RAI Reflex Index is a very unique algorithmic stablecoin that you've probably never heard of. It has been around for quite a few years, and it isn't pegged to a specific dollar value. When people think of stablecoins, they've been programmed to assume that the value of the token is supposed to be $1. But what if you could have a stablecoin that wasn't pegged to a specific dollar amount, but still very stable? This is exactly what RAI by Reflexer Labs offers. It's also the first actual stablecoin.
RAI is backed by ETH (Ethereum) and the exchange rate is determined by supply and demand. People are able to mint RAI with the ETH by locking it in the SAFE, similar to taking out a collateralized loan. There's some very complex mechanics behind it, and I won' try to explain them because I don't want this article to get too long or boring. I'll leave the "do your own research" piece up to you, as it should be anyway.
RAI offers the safest option for a stablecoin on Ethereum in my opinion just based on how long it has been around. There's no risk of a mass depegging event like there was on UST because it isn't pegged to any specific dollar amount. The price has typically stayed around $3 with the exception of when the market was trying to decide the best price for it to be. I've always been a huge fan of the way RAI works, and the mechanics behind it.
In the financial system of the future - DeFi, do we really want to denominate value in terms of fiat dollars? Or do we want to have stablecoins that determine their own value? If we want to remove the banks from the equation, we have to remove dollars from the equation. This is obviously very far out, and may never happen, it's just something to think about.
What are your favorite stablecoins?