In the blockchain world, most cryptocurrencies experience a degree of volatility and frequently fluctuate in value depending on demand, supply, and various other factors. In contrast to this, stablecoins aim to assume the role of a token that is consistently valued at the same amount. By pegging itself to a reference asset, stablecoins utilize blockchain technology to offer a streamlined trading experience accessible to all users in the crypto space. The most common reference assets include: fiat money (USD, EURO), exchange-traded commodities (gold or other metals), or other crypto assets (ETH, BTC). The existence of stablecoins allows traders to retain the fiat value of their portfolio without removing their exposure to crypto as a whole.

In order to remain ‘stable’, stablecoins utilise a variety of ‘pegging’ mechanisms that ensure that the value of the coin parallels the value of the asset that it references. Each stablecoin operates with their own mechanism, which are subject to failure and exploitation. Ensure that when you purchase a stablecoin, you have completed the necessary research into its pegging mechanisms as it is possible for stablecoins to depeg (decouple from the reference asset in value) as a result of a flaw in the pegging mechanism. While uncommon, this phenomena is not unprecedented.

Short for USD coin, this stablecoin is issued by Circle, a private company. USDC is a stablecoin pegged to the value of the United States dollar (USD). To guarantee this, USDC holders can create a Circle Mint account where they can send their USDC to be ‘burned’, after which they will receive an equivalent sum of USD from the USDC asset reserves. Thus, when the value of one USDC on the market falls beneath one USD, traders will typically recognise this arbitrage opportunity and trade for USDC until the USDC value has returned to one USD. In order to mint new USDC, users have to create a Circle Mint account and deposit USD, after which an equivalent amount of USDC will be minted and issued to them. USDC is currently supported for deposits by Infinex.

Tether, or USDT, is a stablecoin pegged to the value of the United States dollar (USD), and is issued by Tether Limited Inc. In order to mint new USDT, a user must send USD to the Tether account, after which they will be issued an equivalent amount of USDT. USDT is backed by Tether reserves, and can be exchanged for one USD. Thus, when the value of one USDT on the market falls beneath one USD, traders will typically recognise this arbitrage opportunity and trade for USDT until the USDT value has returned to one USD. USDT is currently supported for deposits by Infinex.

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Dai, or DAI, is a stablecoin pegged to the value of the United States dollar (USD), and is issued by MakerDAO. DAI utilises an Ethereum platform dAPP (decentralised application) named Maker Protocol which ensures the value of DAI through a collateral debt system. This involves a process where those looking to mint DAI need to lock their cryptocurrency assets into the Maker Protocol smart contracts, after which they will receive a loan of DAI at a set interest rate. Should the borrower be unable to pay their loan back, the cryptocurrency assets they locked in will be seized and sold by Maker Protocol within an auction to maintain the value of DAI. If the borrower wants to unlock their cryptocurrency assets, they will have to return the DAI they borrowed in addition to a fee. This entire system is ran on smart contracts, which controls the amount of DAI in circulation. DAI is currently supported for deposits by Infinex.

Ethena USDe, or USDe, is a stablecoin pegged to the value of the United States dollar (USD), and is issued by Ethena Labs. USDe utilises delta-neutral hedges in order to maintain its peg to the USD. The minting process involves a user swapping one of the USDe backed assets for new USDe using the Ethena Protocol smart contract. Upon doing so, the protocol opens a short perpetual position that corresponds to the approximate notional dollar value of the asset that was originally swapped and thus ensures the collateralization of each USDe is maintained at 1:1. During bull markets, funding rates for ETH and BTC remain positive for extended periods of time, allowing Ethena to gain yield from their short position. Additionally, backing assets such as ETH are staked with other protocols to earn further yield. This yield is then redistributed to holders of the staked variant of USDe (sUSDe). As sUSDe is not a supported asset on the Infinex Account, Infinex provides yield distributions for USDe at the same APY as sUSDe, allowing users to hold unlocked tokens while simultaneously earning yield.