Pax Alternatives: Stablecoins Similar to Paxos Standard Token

Key takeaways:

• Stablecoins are usually pegged to the common fiat currencies like the USD and they offer price stability.
• PAX is developed on the ERC-20 platform.
• Paxos has the legal backing of the New York State Department of Financial Services.
• Alternatives to PAX are TUSD, USDT, DAI, and GUSD.
• Stablecoins are either backed by fiat, cryptocurrencies or nothing at all.

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Introduction

Paxos Standard Token, is a digital currency introduced by Paxos Trust Company. The token is somewhat different from other tokens available in the cryptocurrency space. Tokens like PAX are referred to as stablecoins.

A stablecoin can be described as a digital currency that has its value pegged to another form of money that is widely accepted as payment globally. A stablecoins' price is usually linked to a fiat currency or precious metals like Silver. However, in this case, PAX is linked to the US Dollar. 1 PAX equals 1 dollar on crypto exchanges.

PAX is described as unique by cryptocurrency enthusiasts because of its legal backing. The digital currency is regulated by the New York State Department of Financial Services (NYSDFS). This signifies that for every PAX token issued, Paxos Trust Company has 1 US Dollar to back that token.

Paxos Trust developed the digital currency that would possess the best of both worlds; the security, immutability, and decentralization of cryptocurrencies, and the stability of fiat currencies. The team behind the company realized the shortcomings of traditional cryptocurrencies like the frequent rises and drops in price. This has practically led many to shy away from the digital currency space, hence depriving them of the benefits they stand to enjoy from using cryptocurrency.

Because of its strict regulation, the removal of a dollar from the Paxos Trust account would lead to the removal of a token. This signifies that no matter what arises, 1 PAX would always be able to be exchanged for a dollar. The fiat currency backing Paxos tokens are held by U.S. government treasuries or FDIC-insured banks.

PAX is an ERC-20 token which means it was developed on the Ethereum platform. This has led to the stablecoin being listed on exchanges supporting ERC20 tokens. It has a market capitalization of $219 million dollars and a corresponding total supply. It is the third most dominant stablecoin according to CoinMarketCap. About $400 million worth of PAX is traded every day.

Apart from PAX, there are other stablecoins available in the cryptocurrency market. You’ll soon be acquainted with the very best. However, before we get to that, let’s run you through the types of stablecoin in the market.

Stablecoin Types

When looked at from a wider perspective, there are three types of stablecoins. Stablecoins utilize varying types of systems; however, the primary goal of a stablecoin is for its price to remain as close to its currency peg as possible. Hence, we introduce to you the three types of stablecoin.

1. Fiat-Supported Stablecoins

This is the most usual type of stablecoin. These coins are supported by fiat currencies which may be the US dollar, Great Britain Pound, Swiss Franc, etc. One unit of the fiat currency would also be equal to one unit of the stablecoin. Basically, the fiat currency is held in bank accounts, providing credence to the fact that a holder can redeem one unit of the coin for one unit of fiat currency. An example is PAX.

2. Cryptocurrency-Supported Stablecoins

These are stablecoins supported by other digital currencies. Usually, the top cryptocurrencies are pegged to the stablecoin for security. Crypto-supported stablecoins make use of a couple of digital currencies rather than a single one for less volatility. An example is DAI (MakerDAO).

3. Non-Supported Stablecoins

This is the only type of stablecoin that has no financial support. Non-supported stablecoins use a system, much like that of the typical national reserve banks to create or destroy coins. They are usually not popular. An example is Basis.

Best PAX Alternatives

There are several other stablecoins you can decide to choose from if you don’t want to buy Paxos tokens. Below, you’ll get a list of the best stablecoins in the market.

1. Tether USD (USDT)

Tether is the biggest stablecoin in the cryptocurrency market, with a staggering market cap of $4.3 billion. USDT was the first stablecoin to become popular in the crypto market, and its massive acceptance led others to create their own stablecoins. It is the 5th most dominant crypto in the market. In fact, on some exchanges, Bitcoin is traded against USDT instead of USD.

Negative news has, however, rocked Tether in recent times. Just last year, Tether and its sister exchange, Bitfinex, were discovered to have been hiding a loss of close to $900 million.

Key Tether USD characteristics:

• Created by Tether in 2014
• Top stablecoin by trading volume and market cap
• Backed by the U.S dollar
• Accessible via various blockchain platforms

2. TrueUSD (TUSD)

TrueUSD was developed using Ethereum’s ERC-20 platform and is backed by the dollar. It was introduced to the crypto market in 2018 and famously became highly traded right from its early days. The company behind TUSD possesses a vision to provide transparency on its funds in contrast to the most dominant stablecoin, Tether. TrueUSD is traded on several digital currency exchanges.

Key True USD characteristics:

• Introduced by TrustToken in 2018 
• $1 peg is achieved through USD reserves
• ERC-20 token on the Ethereum blockchain platform

3. StableUSD (USDS)

Officially launched by US-based startup Stably in 2019, StableUSD is a fiat collateralized stablecoin that became the first the stablecoin to be listed on Binance DEX. StableUSD can also be accessed through Binance Chain and Ethereum. Every token of StableUSD is legally backed by US dollar as PrimeTrust handles its USD reserves.

Key StableUSD characteristics:

• Launched in 2019 by Stably
• Fiat-collateralized
• Pegged to the US dollar
• Can be accessed via Ethereum and Binance Chain

4. MakerDAO (DAI)

DAI is a crypto-supported stablecoin. It is backed by Ethereum and several other tokens built on the Ethereum platform. It was developed in 2017 by its parent company, MakerDAO, and is pegged to the US Dollar. DAI tokens can be generated by means of locking up your holdings in the Maker protocol. 

Key Dai characteristics:

• A concept  from MakerDAO launched in 2017
• Collateralized by ETH and ERC20 tokens
• Backed by the U.S dollar

5. Binance USD (BUSD)

Binance USD was created through conjunction between Paxos and Binance, the number one cryptocurrency exchange in the market. It was introduced in 2019 and is quite similar to PAX in terms of characteristics. It is supported by fiat currency and its fiat holdings are held by Paxos Trust.

Key Binance USD characteristics:

• Launched by Binance in 2019
• Fiat-collateralized
• Backed by the U.S dollar

6. Gemini Dollar (GUSD)

Gemini Dollar was introduced in 2018 by a cryptocurrency exchange, Gemini. It is quite similar to PAX and TUSD; it was developed on the ERC-20 platform, is supported by fiat, and is pegged to the US Dollar. Gemini is quite unique in the sense that it performs monthly audits on its bank accounts to convince users of its integrity.

The crypto exchange behind GUSD is owned by Cameron and Tyler Winklevoss, one of the first bitcoin billionaires.

Key Gemini Dollar characteristics:

• Introduced by Gemini in 2018
• GUSD is Fiat-collateralized
• The stablecoin is backed by the U.S dollar

7. Stasis EURS (EURS) - A Euro-supported stablecoin

The Statis EURS stablecoin is a rarity compared to its USD-backed counterparts. Since this stablecoin is backed by the Euro, it will find great use among those who prefer the Euro currency in their dealings. Stasis launched this stablecoin in 2018 and it was designed to operate on Ethereum blockchain.

Key Stasis EURS characteristics:

• Introduced in 2018 by Stasis
• Fiat-collateralized
• EURS is pegged to the Euro

8. USD Coin (USDC)

Introduced in 2018 as a result of the partnership between Circle and Coinbase, USD Coin is the brainchild of CENTRE. USDC is based on the Ethereum blockchain and bolstered by the US dollar. Popular crypto exchange Coinbase offers a 1.25% yearly interest to holders of the USD Coin on their platform.

Key USD Coin characteristics:

• Launched in 2018 by CENTRE
• Fiat-collateralized
• Supported by the US dollar

Conclusion

If you want to be able to select from a variety of stablecoins apart from PAX, you most-certainly can get it going. Depending on which you feel comfortable with, you can purchase a fiat-supported, non-supported, or crypto-supported stablecoin. As it stands, stablecoins developed on the Ethereum platform still take the lead in the cryptocurrency market.