Dai pairs on Bitfinex: Is it aiming to become a stablecoin hub?

Posted: 9 April 2018 6:30 pm
News

Man balancing scales

A recent Dai listing on Bitfinex makes it the new centre of cryptocurrency stablecoins.

12 new coins were made available for trading on Bitfinex on 7 April, all tradeable against BTC, ETH or USD. All of them stand out in their ways, but Dai in particular stands out on Bitfinex.

Why Dai?

Dai is the pegged coin of the MakerDAO paired stablecoin system. It's kept pegged to 1 USD by ETH reserves, (mostly) automatically managed by MakerDAO.

The listing comes about a week after Bittrex added a slightly ridiculous new USD:TrueUSD trading pair, suggesting that more exchanges are taking a serious look at the potential of becoming stablecoin hubs.



It's significant given the immense utility of stablecoins in cryptocurrency markets, and the close relationship between Bitfinex and Tether, along with the related legal battle.

"Dai is a digital, decentralised stablecoin built on Ethereum, developed by the MakerDao team. Dai will initially be made available against BTC, ETH and USD whilst we explore the possibility of adding additional DAI pairs," the Bitfinex announcement says. "Through the combined integration of DAI and USDT we aim to connect currently disparate markets and facilitate new trading opportunities across a diverse range of tokens, markets and exchanges."

Stablecoins have tended to be rare finds on most cryptocurrency exchanges. Just days Bittrex listing TrueUSD, it already accounts for about 60% of the coin's trade volume. Dai is currently being traded on Bitfinex, but doesn't account for much volume there yet. The bulk (~80%) of Dai volume still goes through the Maker-affiliated Oasis decentralised exchange, although its volume shifted upwards considerably after the Bitfinex listing.

Stablecoins

These are cryptocurrencies that are kept pegged to a certain price point. There are several different forms of them, and they are usually, but not always, backed by some form of collateral to ensure that they are actually worth the peg.

Typically stablecoins are pegged to 1 USD. Some of the more popular ones are:

  • Tether – The original stablecoin closely tied to Bitfinex. It's supposedly backed by 1 USD held in reserve by the Tether company, but no independent audits have ever confirmed this, and some are hesitant to trust its value.
  • True USD – A Tether equivalent. It's also backed by USD held in reserve, but more transparently.
  • Maker Dai – A paired stablecoin system that uses automatic balancing and Ether reserves to sustain the Dai coin's 1 USD peg.
  • DigixDAO – One gold-backed cryptocurrency among many, but one of the more prominent and popular ones.

One of the main criticisms of cryptocurrencies is that their volatility means they can't actually function as real money, and that their value always needs to be defined in USD or in relation to a more real asset.

A range of stablecoin systems have emerged, but so far Tether has tended to lock up most volume and dominated the exchanges. Bitfinex's movements towards multiple stablecoin listings – and the ability to trade 1 USD for another 1 USD in exciting new ways – might throw open the doors to wider use of stablecoins.


Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

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