How to Pick the Blockchain When Buying a Stablecoin

Stablecoins are digital currencies that aim to maintain the same value by being pegged to a fiat asset or to the price of a commodity such as gold. Stablecoins gained significant traction in the crypto market in the past few years, with the total market capitalization of stablecoins surpassing $119 billion in early 2023. Stablecoins are popular among crypto traders because they provide a way to hedge against volatility and facilitate trading across different exchanges.

However, it’s not always an easy way to join the Crypto World by just buying stablecoins. One thing that some of the traders are getting confused by — the amount of blockchains that some of the top stablecoins are operating on. Why is that happening? Which one to choose and what to consider before the purchase? Let’s try to figure it out.  

A few reasons why stablecoins operate on multiple blockchains

Many stablecoins are now operating on multiple blockchains simultaneously. There are several reasons for that:

1. Increased accessibility
   
   By issuing stablecoins on multiple blockchains, issuers can increase accessibility and provide users with more options to choose from. This is especially important as different blockchains have different features and use cases. By offering stablecoins on multiple blockchains, issuers can tap into different user bases and reach a wider audience.
2. Risk diversification
   
   By issuing stablecoins on multiple blockchains, issuers can spread out their risk and reduce the impact of any issues or bugs that may occur on a single blockchain. This is especially important in the volatile and rapidly changing crypto market, where even small issues can have significant consequences.
3. Cost efficiency
   
   Some blockchains have higher transaction fees and longer confirmation times than others, which can make it expensive to transfer stablecoins. By issuing stablecoins on multiple blockchains, issuers can take advantage of cheaper and faster networks, reducing the cost and time required for the transfer.
4. Regulatory compliance
   
   Different jurisdictions may have different regulations and requirements for stablecoin issuers. By issuing stablecoins on multiple blockchains, issuers can comply with different regulations and provide users with a stablecoin that is tailored to their specific needs.

Thus, stablecoins operating on multiple blockchains provide users and issuers with more options, reduce risk, improve cost efficiency, and ensure regulatory compliance. As the crypto market continues to evolve, we will probably see more stablecoins being issued on various blockchains at once in order to meet the diverse needs of the crypto community.

How to choose?

When choosing which blockchain to use while buying a stablecoin, there are a few critical factors to consider. 

1. Firstly, you should consider the transaction fees associated with each blockchain, as these can vary significantly between different networks. 
2. You should also keep an eye on the confirmation time for each blockchain, as some blockchains may take longer to process transactions than others. 
3. Additionally, pay attention to the security and reliability of each blockchain, as well as the level of decentralization and community support for each network.
4. Do not forget to check if your crypto wallet is compatible with the chosen network — if it doesn’t, create another one or choose a different network. 
5. Various stablecoins may have different use cases such as being designed for specific industries or payment systems. It's important to understand the intended use of each stablecoin to determine if it meets your investment needs.

All in all, the choice of blockchain depends on your individual needs and preferences, and there is no one-size-fits-all solution.

The real case

It’s always better to check the theory on true existing examples. So let’s take a look at USDT, one of the most popular stablecoins in the market. According to Coinmarketcap, the USDT’s market cap amounts to over $80 billion as of April 2023. This stablecoin is pegged to the US dollar, and each coin is backed by 1 dollar kept in reserve.   

One of the unique features of USDT is that it operates on multiple blockchains at the same time. Currently, USDT is available on fourteen different blockchains, including Ethereum, Tron, Omni, EOS, Algorand, Solana etc. This allows users to choose the blockchain that best suits their needs and preferences.

The reason for USDT's availability on multiple blockchains is the same we talked about earlier — to increase accessibility and provide users with more options to choose from. Different blockchains have different features, transaction fees, and confirmation times, and by offering USDT on multiple blockchains, Tether can cater to a wider audience of users. Additionally, having USDT on multiple blockchains reduces the risk of any issues or bugs that may occur on a single blockchain, and ensures that users have access to USDT regardless of which blockchain they prefer to use.

To learn more about USDT and its background, make sure to read this Blog post. 

Conclusion

In this article we have learnt about the reasons for stablecoins operating on multiple blockchains at once. We have also discussed the significant points which have to be considered if you’re deciding to buy any stablecoin and observed a real case of USDT. If you need to choose or change the USDT network, you are welcome to SimpleSwap service. Now all you need to do is to “choose your fighter”, the blockchain which you sympathize with the most.   

Always remember to do your own research before making any purchases — it’s an important step to protect yourself from many unexpected problems connected to crypto. 

If you are interested in stablecoins, you might also like our previous articles: Stablecoin War, Do We Still Need Stablecoins? and Stablecoins Guide or Everything You Need To Know About Stablecoins.

SimpleSwap reminds you that this article is provided for informational purposes only and does not provide investment advice. All purchases and cryptocurrency investments are your own responsibility.