Digital currencies used in the execution of smart contracts are in a special category. A smart contract uses “If This Then That” (ITTT) logic to execute various actions, programmed on the blockchain. Once a contract is executed, the code is updated on the blockchain ledger. Stablecoins, one of the tradeable categories of digital currencies, use these blockchain ecosystems (stay tuned for more on stablecoins in the next section).
Ethereum is the most famous blockchain ecosystem, and all stablecoins used to be Ethereum-based. Now there are other options, but Ethereum is still the most used because it’s the biggest and most accessible. Ethereum smart contracts have built-in regulation, on-chain logic, go through multiple audits and are closely watched to maintain security. Tron is a runner-up in this category.
Now things get a little more complicated. Ethereum and Tron are usually called digital currencies, but this isn’t quite exactly true. They are in fact the platforms for their corresponding cryptocurrencies, Ether (ETH) and Tronix (TRX) respectively. Both can be traded at Coin Cloud BTMs, and both are mined cryptocurrencies … but "special" cryptocurrencies.
Ethereum is a programmable blockchain. Hundreds of decentralized applications, or DApps, are built on Ethereum using smart contracts. These DApps can create new kinds of digital money, assets, decentralized property, virtual worlds, and web apps that can’t be censored. While Bitcoin miners are compensated in Bitcoin, Ethereum miners are paid with Ether.
Ether is more than digital currency; it’s a digital commodity. It’s the fuel that powers the Ethereum platform. Ether is needed to run applications and smart contracts built on the Ethereum blockchain, generate tokens and facilitate transactions. It’s basically programmable money. While Ethereum has a lot of different applications, Ether only has one function: to enable operations on the Ethereum blockchain.
Similarly, Tron is a blockchain-based platform and Tronix (TRX), sometimes called Tron Coin, is its currency. If Ethereum is the platform for digital currency applications, Tron is the platform for entertainment.
Tron was founded in 2017 by the non-profit Tron Foundation in Singapore. It was designed specifically for content creators to remove the middleman when trying to reach content consumers. It’s kind of like self-publishing; anyone can create and host their digital entertainment content or gaming app on Tron’s blockchain network, and get paid directly by anyone in the world who wants to see or use it.
Originally launched as a token on the Ethereum blockchain, Tron swapped out the tokens a year later for coins on its own Tron blockchain. The Tron ecosystem even allows users to create and issue their own personal tokens, which can be used as DApp currency or whatever they want.
ETH and TRX aren’t the only smart contract currencies that you can trade on Coin Cloud BTMs. The third option in this category is the Loom Network’s LOOM, which is not mined and therefore not technically a cryptocurrency. It’s built on the Ethereum blockchain and allows developers to run large commercial-scale DApps that store and streamline data. Loom’s goal is to be the go-to tokenized app protocol of the decentralized web, specifically focusing on enterprise solutions, such as secure document workflows, for government departments and healthcare providers.
Stablecoins are not mined, but are backed by another currency or commodity, whether fiat currency, cryptocurrency or exchange-traded commodity. This is designed to reduce risk and increase stability (hence the name). However, they are subject to the same volatility as the backing asset they are tied to. So, if the USD goes down in value, so does any USD-backed stablecoin.
Primarily, stablecoins are used by investors for trading, since it gives them some security against market volatility. This is the largest category of digital currency available to trade at Coin Cloud BTMs, and includes stablecoins backed by fiat and crypto. Most of the currencies in this category should technically be referred to as digital tokens rather than digital coins, since coins have their own blockchains and tokens are built on existing blockchains.
The value of these stablecoins is pegged in a fixed ratio to a fiat currency – most often the US dollar, but sometimes the Euro or the Swiss franc. The amount of money that backs the stablecoin reflects the circulating supply of the stablecoin, so the issuing company can only distribute as much digital currency as the corresponding amount of fiat currency they hold. For example, if a stablecoin is backed by USD at a 1:1 ratio, the number of digital tokens in circulation can’t exceed the dollar balance in an FDIC-insured bank account.
Supply of the stablecoin changes based on demand. If greater demand drives up its price, more can be created to meet that demand and maintain the 1:1 ratio with the fiat collateral. This is similar to how the US dollar used to be on the gold standard, backed by actual gold bullion.
The currency backing these digital tokens are part of third-party regulated financial institutions, not the blockchain, although their transactions are still maintained on the blockchain – traditionally Ethereum. You might hear them referred to as “Ethereum-based” for this reason. Now other blockchains are used as well, such as Tron, Omni, Bitshares, EOS and Neo.
Fiat-backed stablecoins you can trade at Coin Cloud BTMs are USD Coin (USDC), TrueUSD (TUSD), Binance USD (BUSD), Paxos Standard (PAX) – all on the Ethereum blockchain – and Tether USD (USDT) on the Omni blockchain.
Crypto-backed stablecoins are more decentralized than their fiat-backed cousins, because there’s no third-party regulation. Instead, these stablecoins are tethered to the blockchain with smart contracts. This is a more complex process, and hence comes with the risk of technological glitches and bugs in the code.
Dai was the world’s first decentralized stablecoin, built on Ethereum. It was designed to allow people to take out loans by using Ether as collateral. It’s global and borderless because you only need an internet connection to access it. It’s meant to allow underbanked people around the world to use digital currency, without worrying about restrictions or volatility, in a best-of-both-worlds scenario.
Dai (DAI) and Sai (SAI) are part of the MakerDAO ecosystem, which includes the MKR governance token. They are maintained on the Ethereum blockchain, like fiat-backed stablecoins, but only soft-pegged to fiat USD in a 1:1 ratio.
These tokens have gone through some evolution, but the current lingo distinguishes between the original Single-Collateral Dai (SCD) system, renamed Sai (trading as SAI) and the revamped and upgraded Multi-Collateral Dai (MCD), trading as DAI.
Disclaimer: The information and views supplied on the Coin Cloud blog are for educational and entertainment purposes only. We are not financial advisors, so please do your research and consult with a trusted financial specialist before investing your money.
Founded in 2014 in Las Vegas, Nevada, Coin Cloud is the leading digital currency machine (DCM) operator. With over 4,500 locations nationwide, in 48 states and Brazil, Coin Cloud operates the world’s largest and fastest-growing network of 100% two-way DCMs, a more advanced version of the Bitcoin ATM. Every Coin Cloud DCM empowers you to quickly and easily buy and sell over 40 cryptocurrency options with cash.
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