Bitcoin, like other cryptocurrencies, demonstrated the possibility of transferring value in a decentralized, intermediary-free manner. However, its disadvantage is that its price fluctuates unpredictably over time. This limitation in price volatility spurred the search for a digital asset that combined the speed and security of blockchain with the stability of a fiat currency. The solution arrived in the form of stablecoins, tokens designed to maintain a fixed parity with a reference asset (such as the dollar or the euro), thereby eliminating price uncertainty in every financial transaction.
For companies that need to pay a supplier, using an asset that can lose a significant fraction of its value in just a few hours or minutes represented a risk too great to bear. Because of this, stablecoins emerged as a response to the high volatility of traditional cryptocurrencies in everyday and commercial transactions. In this article, we will explore the history of stablecoins and their origins.
Ancient times
While stablecoins emerged as such in 2014, their fundamental concept (stable money backed by a valuable asset and used as a medium of exchange) is inspired by ancient historical mechanisms of money and credit:
Gold Standard and Ancient Monetary Systems
Many stablecoins are inspired by the gold standard and ancient monetary systems, where coins or banknotes represented a fixed amount of precious metal. Examples of this include gold and silver coins in Lydia (6th century BC), Greece, and Rome, where the value was “stable” because it was pegged to a scarce and universally accepted commodity such as gold or silver.
Tally Sticks
Tally sticks were notched wooden sticks that represented debts or taxes. They were broken in two: one part for the debtor and one for the creditor. These tools have been used since ancient times in many cultures (China, the Mayan, medieval England, and even the 19th century in the British Treasury). These sticks circulated as money because they represented a “promise to pay” backed by the state or by personal trust. They functioned as a debt accounting system that created liquidity.
Modern Era: Mastercoin
A key starting point occurred in 2013 with projects like Mastercoin, which later became what we know today as the Omni Layer. This first experiment demonstrated that the ecosystem needed tokens that could move independently of Bitcoin’s volatility. The technical proposal was simple but ambitious: to issue an asset representing fiat currencies (such as dollars or euros) directly on the infrastructure of an existing blockchain.
Failed Projects
It is important to note that before the well-known stablecoins, there were some failed projects:
BitUSD (The first stablecoin)
BitUSD was launched on July 21, 2014, on the BitShares blockchain. It was created by Dan Larimer (founder of BitShares and EOS) and Charles Hoskinson (co-founder of Ethereum and Cardano). Its model was backed by crypto assets, primarily BTS (the BitShares token). It was an innovative experiment, but it had some limitations: when the price of BTS fell sharply, BitUSD lost its peg to the dollar. Ultimately, the project lost relevance (and its peg) in 2018.
NuBits (NuUSD)
NuUSD was a project launched in September 2014. It used a 100% algorithmic dual-token system: NuBits (stable) and NuShares (which absorbed volatility). The project attempted to automatically adjust the supply using algorithms. While it had some initial success, it ultimately collapsed in 2016 and 2018 during sharp market downturns. The project demonstrated the risks of purely algorithmic models.
Tether and the Consolidation of USDT
In 2014, Realcoin was launched and soon renamed Tether, operating under the USDT name. Its proposition was simple yet powerful: each token would be backed by one US dollar in reserve, guaranteeing a one-to-one parity with the US dollar.
USDT became the first stablecoin to achieve mass adoption, driven by its integration with major exchanges and its usefulness as a store of value in volatile markets. Over the years, Tether expanded the token across multiple blockchains, including ERC-20 on Ethereum, TRC-20 on Tron, Solana, BNB Chain, Polygon, Avalanche, and Arbitrum, among others, while adjusting its reserve reports and consolidating its position as the benchmark stablecoin for international trade and payments.
Diversification and the Creation of New Stablecoins
The success behind USDT paved the way for the emergence of other stablecoins with different approaches. In 2018, Circle launched USD Coin (USDC), a token backed by highly liquid assets and subject to monthly audits by Deloitte, designed to meet the transparency demands of financial institutions.
This diversification broadened companies’ options, prompting them to evaluate differences between USDT and USDC based on their audit needs, reporting frequency, and counterparty requirements. Currently, the stablecoin ecosystem is no longer dominated by a single asset but has become a market with alternatives for different user profiles.
Evolution of Backing Mechanisms
The first backing models were based on promises of parity with cash reserves, but questions about transparency drove an evolution in collateralization mechanisms. Periodic audits, publication of reserve composition, and the adoption of assets such as U.S. Treasury bills became increasingly common practices. This advancement benefited companies operating with crypto assets, as it enabled them to access verifiable information on the quality of the assets backing their holdings.
Use of Stablecoins in International Trade
Stablecoins transformed international trade by offering a streamlined alternative to traditional bank transfers, which often suffered from delays and high fees. Companies across sectors began using tokens like USDT and USDC to settle invoices from suppliers in the United States, Asia, Europe, and Latin America, leveraging the speed and stability of stablecoins.
In countries like Venezuela, the adoption of stablecoins grew exponentially as companies sought solutions to overcome the limitations of the traditional financial system. For this reason, USDT became a fundamental tool in Venezuela for paying international suppliers efficiently and without intermediaries, integrating these transactions into the accounting routines of Venezuelan organizations with international presence.
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