What are Stablecoins and what makes Stablecoins different from other cryptocurrencies?
Bitcoin is the only cryptocurrency that matters, right? Well, rightly so it would seem in a world of people who only talk about Bitcoin, and still don’t know what stablecoins are.
But in the cryptocurrency world there are literally thousands of other coins out there, and more new ones popping up every month. Many of these “altcoins” invariably have features that propel them toward success over others
One of the most popular types of altcoins is called stablecoins-that‘s what Stablecoins are and why they are the cryptocurrencies of the future!
How much are stablecoins worth?
A stablecoin is a cryptocurrency that maintains a stable value against another asset (usually the U.S. dollar). This is done either by having users deposit money into an escrow account, or by having a smart contract hold collateral for a loan that can be used to buy more tokens if the value of the coin falls below its target price. In either case, the goal is to keep the value of the coin at $1 USD (or whatever its target price is). If the coin loses value, more coins are issued. If the coin gains too much value, some are taken out of circulation until its price stabilizes again.
Recently there has been much hype and speculation around stablecoins as they represent a possible way to build on Bitcoin’s successful model without introducing volatility
What are the advantages of achieving consistent price stability using stablecoins?
Stablecoins have many advantages to offer the cryptocurrency community. They have low fees, secure transactions, and can be used almost completely anonymously.
are less volatile than other cryptocurrencies.
They are safer to invest in, as they are stable and backed by assets held in reserve accounts.
What are the disadvantages of achieving constant price stability using stablecoins?
Just by being stable they have a lower return on investment. Traders and investors usually desire higher returns and may resort to other means for financial gains.
Its value is not determined by the free market, but by a centralized authority.
Because they are centralized they may have higher fees than other altcoins
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Example of stablecoins
Tether USDT, True USDT, Binance usd “BUSD” and USD are some common examples of stablecoins; currently Tether USDT is the most popular stablecoin.
Tether: Tether is the most popular type of stablecoin that has recently attracted the attention of many investors. Tether is a cryptocurrency issued by Bitfinex. Tether is backed by U.S. dollars. This means that cash reserves, securities, treasury bills of a specific amount will be set aside as collateral for the minting of the collateral.
Digix Gold (DGX) : Digix Gold (DGX) is a stablecoin backed by gold. The Digix Gold coin is a commodity-based stablecoin built by a Singapore-based company.
TrueUSD: True USD is another popular stablecoin that is attracting investment enthusiasts; True USD is a fiat-backed stablecoin. It is pegged to the US dollar and has a 1:1 ratio.
These are just a few examples of Stablecoins but there are hundreds of them from the most trusted and well-known to the lesser-known ones.
Conclusion about stablecoins
Although Stablecoins seem to be a safe bet for many, one must also consider the harm they can cause to cryptocurrencies. Unlike small traders or investors, whales can affect the entire market with their actions. They can drive the market down and hurt profits while insuring against fluctuations through Stablecoins. For this reason, it is difficult to say that there is a definitive consensus on the existence of Stablecoins.
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