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Stablecoins backed by BTC or Bitcoin-stablecoins

Brand Voice
·11-min read

Stablecoins are cryptocurrencies that are backed by fiat currencies, physical or digital assets.

One of the features of stablecoins linked to fiat currencies is their low exposure to price fluctuations in the market, so in the short term they are suitable for preserving the value of cryptocurrency savings in a case of a market fall.

Stablecoins backed by BTC are more suitable for long-term storage. The idea of such stablecoins is that the growth of Bitcoin, although permanent, but high volatility allows you to correctly fix the profit in a year or several years after the investment.

For a better understanding, fast forward to the past and consider November 25, 2019, when Bitcoin was trading around $7,850. A short-term strategy of investing in the flagship cryptocurrency could lead the holder of Bitcoins to losses, for example, at the price of $3,782, to which BTC fell on March 9, 2020, where many are not long-term speculators and were sold on panic. However, after holding digital gold longer, their annual profit could reach up to 157%, because on November 25, 2020, Bitcoin is trading at $18,845, and on January 6 of the next year, 2021, the price soared to new ATH (All Time High) or in other words, historical highs, almost taking the milestone of $36,000 (on different exchanges in different ways).

Based on the above, USDT, a US dollar-backed stablecoin, is suitable for cases where, for example, you are engaged in active trading and want to temporarily fix profits in order to return to trading later, when you have enough time for this, well, in all other cases, Bitcoin will suit you, which like everything in our life cyclically falls and rises, but what is really stable is that it constantly updates its maximum.

But beyond simply holding Bitcoins in their wallets are now offered to users and more advanced options for its storage, one of these is SIMBA, secured BTC stablecoin, which belongs to specialized cold storage Simba.Storage, providing its services worldwide and which are also suitable visionary investors who wish to have a guaranteed amount of BTC that allows you to profit from such investments in the long term and not worry about the safety of their funds.

Let’s look at which stablecoins linked to the price of Bitcoin are the most well-known in the cryptocurrency community today.

What stablecoins backed by BTC are present on the market

Synthetic Bitcoin (sBTC)

sBTC is a synthetic token backed by Bitcoin and supported by the Synthetix protocol. In short, Synthetix is a platform for synthetic assets, that is, assets created (in this case) on the basis of digital currencies. In turn, synthetic assets completely copy the behavior of the underlying currency or asset, in simple words, they have the same price as the currency, stock, bond, precious metal to which they are tied. In the case of sBTC, the underlying asset is Bitcoin.

The price of Bitcoin is tracked by the sBTC token using the Chainlink decentralized network of oracles. The token is presented on the Synthetix.Exchange platform built on Ethereum. Cryptocurrencies, stocks, precious metals and other assets are represented on the platform as synthetic assets in the form of ERC-20 tokens.

Considering the sBTC token, we can say that it is an attractive asset for trading, providing opportunities to exchange Bitcoin, for example, for oil shares.

However, it should be taken into account that the most successful strategy for interacting with Bitcoin is its long-term retention, since the profit from storing BTC for several years exceeds the potential profit from trading. Bitcoin, being digital gold, is more in need of secure storage than new exchange options.

The total number of coins is 512.53000000 sBTC

pToken BTC (pBTC)

Following the example of synthetic tokens, pToken is tied to the underlying asset, which means that by exchanging their Bitcoins for pBTC, the user will receive an equivalent number of pBTC (1:1 rate).

The issue of pBTC occurs after the receipt of BTC in the Trusted Execution Environment (secure sandbox), and the burning of tokens occurs due to the reverse exchange of pBTC for BTC.

Other pToken tokens, such as pETH and pLTC, work on the same principle. Similarly to synthetic tokens, pToken are actually copies of cryptocurrencies, but on the Ethereum blockchain.

You can manage your pToken tokens, namely, store, change and trade them on the Eidoo, KyberSwap, Bancor, Equilibrium, DMEX, Paraswap and so on platforms.

The project expands opportunities for Bitcoin owners and provides convenient tools, but does not contain an original idea and does not set global goals. pBTC is less suitable for long-term investments than for trading.

The total number of coins is 21,000,000 pBTC

renBTC (RENBTC)

The open Ren protocol is designed to ensure the confidential transfer of value between any public blockchains.

The main product of the Ren project is a decentralized virtual machine protocol called RenVM. This protocol is the basis of a network of virtual computers, which ensures the compatibility of decentralized applications, providing opportunities for cross-chain landing, currency exchange and more. In simple words, the project aims to ensure the interoperability of decentralized finance (DeFi).

RenVM expands opportunities for decentralized applications by organizing multi-landing, allowing cross-chain assets to be integrated into existing DEX infrastructure, and supporting cross-chain OTC trading.

Currently, Ren supports Bitcoin, Bitcoin Cash, ZCash, and Ethereum blockchains. This list is planned to be expanded in the future.

As with the other Bitcoin-backed stablecoins mentioned above, renBTC is not a profitable long-term investment. Considering the token within the Ren project, we can conclude that it is intended for participation in lending and trading operations, which is not the best use case specifically for Bitcoin.

The total number of coins is 16,746 renBTC

PieDAO BTC++ (BTC++)

PieDAO is a decentralized autonomous asset allocation organization (DAO) for managing a token portfolio. This is an obscure definition of PieDAO given to themselves. In fact, the project itself is a modest analogue of the above, and the positioning of the BTC++ token is inferior to competitors.

The token, according to the project description, was created to provide an opportunity to diversify their funds.

It is difficult to form a serious attitude to this project, since even switching to the Whitepaper tab on the official website of PieDAO is accompanied by a forced offer to pass a test to determine what kind of investor the user is. At the same time, the project documentation states that ” PieDAO is not an investment adviser or money transfer service of any kind.”

Such things cause dissonance, which in combination with other nuances, for example, with the presence of the token only on two platforms, Uniswap and Balancer, does not allow us to consider the BTC++ token as a successful investment either in the long term or even in the short term.

The total number of coins is 89,87534000 BTC++.

Compound Wrapped BTC (CWBTC)

Compound is an algorithmic stand-alone protocol for interest rates that are generated based on supply and demand. All tokens of the Compound ecosystem allow you to access the crypto loan market. Providing assets to the protocol, the user receives Compound tokens, for example with сWBTC (the exchange rate looks like this: 1 сWBTC = 49.52754898570844 cWBTC).

It turns out that cWBTC is a token that opens access to lending services, which is based on the WBTC token. In turn, WBTC is an ERC-20 token backed by BTC in a 1-to-1 ratio. The opportunity to place your Bitcoins on the loan market is certainly a tempting prospect, but the question of the safety of Bitcoins invested in cWBTC remains undisclosed, which does not arise in the case of considering the SIMBA token from Simba.Storage.

The total number of coins is 159,290 cWBTC.

It is worth emphasizing that all stablecoins linked to BTC are positioned as successful solutions for expanding the possibilities of using BTC. At the same time, little attention is paid to how securely the Bitcoins invested in these stablecoins are stored, unlike, for example, the SIMBA token, where the emphasis is primarily on the safety of the funds invested in the asset.

tzBTC – Wrapped Bitcoin on Tezos

Against the background of previous coins, tzBTC stands out. This is primarily due to the fact that stablecoin is at the heart of the entire ecosystem and operates on the Tezos blockchain, which can separately become an additional guarantee of the security of the asset. In this case, the Tezos platform is fully responsible for the token, as it shows it as a tool that allows developers to create new financial applications in the blockchain. In simple words, tzBTC is not designed for abstract perspectives, but is aimed at performing specific tasks.

Unlike previous stablecoins, but following the example of the SIMBA stablecoin, there is a system for managing the tzBTC token by a group of key holders. They, in turn, use the multi-signature mechanism to access the wallets that store the underlying asset, Bitcoin, and control the issue and burning of the corresponding amounts of tzBTC. There is also ongoing interaction with end users to ensure compliance with KYC and AML procedures.

Although this mechanism goes beyond decentralization, it allows you to ensure the maximum possible degree of protection of client assets to date. Additional confidence in the token is given by Tezos’ cooperation with industry giants, including proven Swiss crypto enterprises, in particular, Bitcoin Suisse, Bity SA, Sygnum, Taurus Group SA.

It is also important to mention that the main office of Tezos is located in the Crypto-valley in Zug, Switzerland. This suggests that the neighborhood with all the largest representatives in the industry will allow the project to always remain in good count and successfully develop, and that is why the main office of Simba.Storage is located there along with the entire accompanying ecosystem.

Returning to the tzBTC token, it can be considered for storing Bitcoins in the long term, but the greatest benefit from it can be obtained only if there are plans to work with the Tezos blockchain. The limited use of the token does not make it attractive for an investment.

The total number of coins is 159,290 cWBTC.

Simba stablecoin (SIMBA)

The SIMBA stablecoin is at the heart of the Simba ecosystem, which is primarily created to provide custodial storage of Bitcoins in Simba.Storage.

When transferring BTC for storage, SIMBA tokens are issued and each user receives stablecoins in the ratio of 1 SIMBA = 1 satoshi instead of the invested Bitcoins. Binding to Satoshi Bitcoin is created specifically with a long-term perspective of the growth of the central cryptocurrency, which will ensure the convenience of payments, transfers and payments.

In the aspect of storing BTC, you can notice the similarity of SIMBA with tzBTC. Simba as well as Tezos are based in Cryptovalley, take full responsibility for the storage of Bitcoins invested in the token and use multi-signature technology, KYC and AML procedures to guarantee maximum protection of client funds. All Bitcoins are stored in cold wallets in 4 countries that actively support the development of the cryptocurrency industry, namely, Switzerland, Liechtenstein, the United Arab Emirates and New Zealand.

As with Tezos, Simba can expect successful growth with the fundamental support of the Crypto Valley Association, which provides companies with ample business opportunities and allows them to stay in the trends.

Among other things, SIMBA token was able to adopt the positive aspects of stablecoins on Ethereum, since it is a token of the ERC-20 standard, which gives it the speed and scalability of the Ethereum network and compatibility with all tokens of this standard.

This also means that the token can be used for money transfers, trading, making payments, any kind of payments, depositing and lending, which may be extremely relevant in the near future, as according to the latest information, some countries are gradually starting to introduce bans on the use of stablecoins tied to fiat currencies, in particular in the United States such measures are most actively discussed.

Some EU countries also have a negative attitude to various types of stablecoins, among them the main opponents of digital stable currencies are Germany, France and Italy, where the highest authorities periodically escalate the situation with negative statements about their use.

In Russia, the state’s attitude to this issue is completely incomprehensible, the problem is that it is changing very quickly, we see news mixed up, which first tell us about the launch of the cryptocurrency ruble from the Central Bank, and then immediately there is news that the Bank of Russia opposes any stablecoins for the Russian ruble, as you understand, with such a sequence, it is extremely difficult to learn the truth.

Most likely, we will see in the near future how the whole world will begin to support the idea of banning stablecoins tied to fiat currencies, since this is extremely beneficial for each state. What awaits stablecoins tied to fiat in the near future remains a big question, but it remains extremely unsafe to store most of your savings in them.

Simba.Storage foresaw similar outcomes 1.5 years ago for stablecoins tied to fiat currencies, so they created the SIMBA stablecoin, tied to Satoshi and combining all the advantages of tokens on the Ethereum blockchain and the foundation in the form of a specialized Bitcoin storage, respectively, it is suitable for long-term investments and in parallel can be used for any kind of everyday financial transactions.

(Syndicated press content is neither written, edited or endorsed by ED Times)