It’s no secret that cryptocurrencies are lacking mainstream adoption. Sure, there is a lot of growth in tech, ideas, platforms and the like. But your average person on the street still doesn’t own any crypto, and there’s a common reason why. Lack of stability. People are worried about the drastic price fluctuations we are all accustomed to and how this will affect them and their daily purchases. Take for instance a simple coffee purchase, which although instant and at the same cost as it normally would have been in fiat, the fluctuation of ETH afterward could make that coffee a very expensive one.
The solution to this problem is often labeled “The Holy Grail of Cryptocurrencies.” The actual execution of a stable coin is extremely difficult mathematically and much like the Holy Grail, something that will require a never-ending quest to find.
One solution I heard about multiple times at the recent Blockchain Summit Crypto Valley was Maker and the DAI token. The MakerDAO is a Decentralised Autonomous Organisation in charge of governing the DAI token and keeping it stable. DAI is pegged to the USD at a 1:1 ratio, 1 DAI = $1.
Now we all know the issues with Tether, its auditing issues, and actual reserves backing its stable coin. Without actual backing, the token has nothing stable on which to be based. The DAI token solves this issue by being completely ETH backed. When you purchase DAI, the ETH is locked, and DAI generated.
This DAI retains its value against the USD and is now the perfect way to perform transactions in your everyday life. You don’t have to worry about the constant fluctuation turning your coffees into an expensive purchase, or leaving you without enough funds for your purchase.
The token and DAO are in constant development with the mission of being a stable coin that maintains its purchasing power. There have been suggestions to peg the DAI to a basket of fiat currencies for more stability, avoiding a complete tie to the USD.
TrueUSD operates on an escrow system which holds $1 in escrow for each coin purchased. Tokens are purchased for fiat directly from TrueUSD. As new tokens are bought, they are minted and enter circulation. Tokens redeemed for fiat are burnt and taken out of circulation, the USD then being released from escrow. The entire system runs automatically, and the people behind TrueUSD never touch the funds. The buying process for the average user is as simple as going to Bittrex and typing in TUSD.
So which one is better?
From my findings, TrueUSD has better volume and accuracy of maintaining $1. DAI does, however, bring unique features to the table with its CDP system. Effectively allowing you to leverage your ETH to buy more ETH or other tokens.
I see use cases for both of these options and think we will see more stable coins as time comes. Personally, I will continue researching ways to use TrueUSD as the market climbs to lock in profits. DAI also provide options to leverage funds with controlled risk. A solid strategy would utilize both of these to their benefits.
The final solution is elusive, but I believe so is stability. It will take a continued adjustment to maintain, and perhaps somewhat like the Holy Grail, something that the industry continues to try to find.
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