Stablecoin is a general term referring to cryptocurrencies that are secured and stabilized by fiat currencies or the exchange of commodities (gold or oil). Stable coins reflect a solution to one of the main problems of cryptocurrencies – their movement. At the same time, stablecoins have a significant drawback – they lack public trust due to the decentralized nature of cryptocurrencies. Typically all the risks associated with stablecoin insurances are the same as with fiat stocks. However, stocks often carry all the risks with coins.
Despite the Contra version with decentralization and risk, you can find some stablecoins on popular stocks and exchange platforms like alligat0r. Here are the most popular types of stablecoins:
- Tether is a set of coins secured with fiat currencies. It is named after the issuer of the same name – Tether Limited. The name unites several cryptocurrencies secured by the most popular global currencies with ratios of 1:1: JYPT (Japanese Yen), EURT (Euro), CNHT (Chinese offshore yuan), and USDT (US dollar). The last coin is the most common Tether coin, and the generic name indicates it, as a rule. Despite the massive share of all cryptocurrency operations (around 48%), Tether LTD has never provided proof of the security of all fiat currencies. In other words, no one believes that Tether Ltd has the same amount of money compared to the number of coins released.
- The Gemini dollar and the Paxos dollar (GUSD and PAX). These coins emerged in response to a drop in trust in Tether. These coins were created with the help of Coinbase. They meet all requirements and regulations of Wall Street.
- Gold cash. This gold is used as a safety tool. Even the most stable currencies are subject to cuts. The main feature of this currency is the quality of investing in gold and its decentralization. Cryptocurrency is traded for 1 gram of gold stored in any gold deposit in the world.
- Terra (LUNA), Ampleforth (AMPL), Dai (DAI) – these are called algorithm stablecoins. They are not secured in fiat currencies or commodities but rely on complex algorithms that stabilize their exchange rates.
As mentioned earlier, the US dollar-secured Tether remains the most popular stablecoin. By the end of 2019, Tether’s global capitalization had reached $4.1 billion.
Why do we use Stablecoins?
There are several reasons for doing this, but the main reason is related to the stability of the exchange rate. Stable coins are less volatile than Bitcoin or Ethereum. Thus, it is more suitable for people who are new to cryptocurrency or want to keep money.
Another advantage is the simplicity of cryptocurrency exchange. First, investors can buy stablecoins and ensure that their exchange rates can withstand market fluctuations. After that, they can exchange the stablecoins for other currencies. Note that cryptocurrency pairs are not mandatory – you can trade USDT against the Euro (eg (https://alligat0r.com/coin-pairs/usdt/eur/info).
Finally, stablecoins are likely to meet all regulations regarding cryptocurrencies, both current and future. The government has begun to dominate the cryptocurrency space. Nobody can predict the effects of Bitcoin or Ethereum. Stablecoins are already regulated by financial authorities.
Stablecoins have emerged as a solution to many common cryptocurrency problems. Despite its controversial nature, it grows in quantities and variants. Being a pioneer in stablecoins, Tether Ltd continues to issue the most popular coin.