Analysis of Major Stablecoins in 2024

In this detailed analysis, we will examine three leading stablecoins in the cryptocurrency market: USDC, USDT, and DAI. We will evaluate their mechanisms, risks, and provide practical recommendations for users.

Key Points

This analysis covers three major stablecoins in the market, their unique characteristics, risk factors, and practical recommendations for users. Information is current as of 2024.

USD Coin (USDC)

What is USDC?

USDC is a stablecoin (digital representation of the US dollar) fully backed by reserve assets.

Government Regulation

USDC is issued by regulated financial institutions; In the US, Circle is a registered Money Services Business (MSB) and is regulated by the Financial Crimes Enforcement Network (FinCEN), which is a bureau of the US Department of the Treasury. Circle also has money transmitter licenses in most states. In the UK, Circle is regulated as an Electronic Money Institution (EMI) by the Financial Conduct Authority, which is accountable to the Treasury (responsible for the UK's financial system) and Parliament.

Audit

USDC undergoes monthly audits by leading audit firm Grant Thornton LLP; The latest audit of Circle's reserves backing USDC demonstrated that the actual number of tokens did not exceed the US dollar account balance.

Management

USDC is controlled by the Centre consortium, which was founded by Circle and includes companies such as Coinbase and Bitmain. The consortium sets technical/financial standards and company policy. Circle has a world-class management team. Circle enjoys support from leading venture and strategic investors.

Consortium Member Requirements

To become a stablecoin issuer, companies must meet the following criteria: A regulated institution such as a bank, management company, money transmitter, or other license that permits the provision of financial services in the jurisdictions where the company operates. Compliance with regulatory requirements of the jurisdiction(s) where the participant is licensed, as well as US rules and international principles (such as those adopted by the Financial Action Task Force or FATF) regarding anti-money laundering (AML) and combating the financing of terrorism (CTF). Additionally, participants must undergo regular third-party audits to demonstrate compliance with these requirements. Meet technical and operational requirements of CENTRE protocols. Fiat reserve storage: Must comply with CENTRE's Investment Policy. Accounting: Must be performed by a certified accountant. The participant must meet reserve verification and accounting requirements.

Liquidity

After USDT, USD Coin (USDC) is the largest stablecoin by market capitalization. At the time of writing, 25,199,015,939 USDC were issued. Total transaction volume was $739 billion; 24-hour trading volume - 4,464,049,418 USDC. Supported on public networks Ethereum, Solana, and Algorand.

Strategic Partnerships

Visa announced that transactions can be conducted using USDC coins

Risks

Audit occurs with a delay. In June, only April's audit is available. CENTRE issuers have the ability to earn income from allocated reserve assets according to CENTRE's Investment Policy. Circle does not take responsibility if it is subjected to a cyber-attack and funds are lost. According to the user agreement, Circle promises to always issue USDC to USD at a 1:1 ratio but cannot guarantee price stability on exchanges due to factors beyond its control. USDC is managed centrally by a company subject to US regulators. The USDC token has a blacklist mechanism that can block users if ordered to do so or if they choose to do so themselves.

Conclusions on USDC

Circle and Coinbase are market leaders in cryptocurrency. Coinbase is a public company in the US, and Circle complies with all US and UK regulatory requirements. However, in the user agreement, the company tries to protect itself more, and the investment policy for USDC reserves is not entirely clear. High-yield deposit accounts are quite safe (0.5-0.7% annually) but are considered a riskier instrument than short-term US bonds.

Tether (USDT) - Updated Analysis

Key Improvements

Reserve Composition Change: Tether has completely eliminated commercial paper, which previously constituted a significant portion of their reserves and raised concerns due to potential liquidity risks. US Treasury Bonds: As of 2024, Tether has unprecedented holdings of US Treasury bonds exceeding $97.6 billion, constituting over 75% of their reserves. This places Tether as the 18th largest holder of US debt, ahead of countries like Germany, UAE, and Australia. Audit and Transparency: Tether now regularly publishes quarterly attestation reports conducted by BDO, a leading international independent accounting firm. Financial Performance: As of 2024, Tether's total reserves are approximately $118.4 billion, with liabilities of $113.1 billion, providing an excess reserve of $5.3 billion. Group Equity: Tether has disclosed its consolidated equity, which stands at approximately $11.9 billion as of mid-2024.

Remaining Risks

Lack of Full Audit: Despite regular attestations, Tether has yet to provide a full comprehensive audit from a recognized accounting firm. The company announced the appointment of a new CFO in 2025 to move toward a full financial audit. Asset Diversification: Besides Treasury bonds, Tether's reserves include Bitcoin, gold, and other investments, which may create some volatility in reserve value. Regulatory Issues: While Tether has improved its relations with regulators, the company still faces various regulatory requirements in different jurisdictions. Centralized Management: Like other centralized stablecoins, USDT has a blacklist mechanism that allows blocking addresses and freezing funds.

Conclusions on USDT

In recent years, Tether has significantly strengthened its position, transitioning from risky commercial paper to highly liquid US Treasury bonds. This has substantially reduced liquidity risks and increased the stablecoin's reliability. The company also demonstrates serious profitability, with a record net profit of $5.2 billion in the first half of 2024, strengthening the organization's financial stability. While USDT has significantly improved its position since 2021, investors are still recommended to diversify their stablecoin assets and closely monitor Tether's further steps toward full audit and transparency.

DAI - Decentralized Stablecoin

What is DAI?

DAI is a decentralized stablecoin created by MakerDAO that maintains its peg to the US dollar through a unique system of over-collateralization with crypto assets.

Decentralized Governance

DAI is governed by the MKR token holder community through the MakerDAO protocol. MKR token holders vote on key aspects of the protocol, including: adding new types of collateral, setting collateral ratios, adjusting stability fees, changing liquidation parameters.

Collateral Mechanism

DAI is supported through a system of Collateralized Debt Positions (CDPs) that require over-collateralization. The minimum collateral ratio is 150%, meaning users must deposit assets worth at least $150 to create $100 in DAI. As of 2024: total collateral value: approximately $8.5 billion, circulating DAI supply: about 5.7 billion, average collateral ratio: 155%.

Types of Collateral

Evolution from single to multi-collateral: Initially supported only ETH. Now accepts diverse assets: cryptocurrencies (ETH, WBTC), other stablecoins (USDC, USDT), tokenized real assets. Collateral structure: over 60% of collateral is USDC, Peg Stability Module (PSM) allows 1:1 exchange between DAI and USDC, DAI Savings Rate (DSR) mechanism allows DAI holders to earn yield.

Resilience in Crisis Situations

DAI demonstrated resilience during USDC's depeg in March 2023. The system automatically triggers liquidation if collateral value falls below the set threshold. Multi-collateral approach helps distribute market risks.

Risks

USDC Dependency: Over 60% of DAI's collateral is USDC, creating dependency on the centralized stablecoin. Collateral Volatility: Sharp drops in crypto asset values can trigger cascade liquidations. Automatic Liquidation Events: Market volatility can trigger automatic liquidations if collateral value falls below the 150% threshold. System Complexity: Multi-layered architecture may be difficult for new users to understand. Potential Technical Vulnerabilities: Smart contracts may contain unknown vulnerabilities.

Strategic Changes

MakerDAO is implementing a stability and liquidity framework for collateral classification. The protocol is actively integrating real-world assets (RWA) as collateral. In 2024, a rebranding to Sky Protocol was launched with the introduction of a new USDS stablecoin on Solana.

Conclusions on DAI

DAI represents a unique alternative to centralized stablecoins thanks to its fully decentralized governance mechanism and transparent over-collateralization system. Its resilience in crisis situations has shown that decentralized stablecoins can effectively compete with centralized counterparts. However, dependency on USDC as primary collateral creates risk for DAI in case of USDC issues. It's worth noting that automatic stabilization mechanisms and active management by the MKR community help reduce these risks. DAI is particularly attractive for users who value decentralization principles and seek to avoid risks associated with centralized management. Current initiatives for real asset integration and expansion to other blockchains (rebranding to Sky) may further strengthen DAI's position as a leading decentralized stablecoin.

Stablecoin Risk Analysis Ranking

After detailed analysis of major stablecoins in the market, I've ranked them in descending order by reliability and decentralization ratio:

Recommendations for Using Stablecoins

Diversification

It's recommended not to keep all funds in one stablecoin but to distribute risks across several.

Targeted Use

USDC: Optimal for long-term storage and transactions requiring high reliability. USDT: Suitable for short-term trading and ensuring high liquidity. DAI: Ideal for users who value decentralization and want to participate in protocol governance.

Risk Monitoring

Regularly monitor news about each stablecoin's development, especially regarding reserve audits and regulatory changes.

Regulatory Risk Consideration

Remember that centralized stablecoins (USDC, USDT) are subject to regulatory risks and can block certain addresses at the request of authorities.