@CryptoWordsmith
edited
Cryptocurrency FAQ - What is a stablecoin? Because market prices for many cryptocurrencies have fluctuated wildly in the past, using them to make purchases of everyday items can be difficult, since most of those are priced in fiat dollars (money issued by a government's central bank such as $US, or Euro) and they do not change much. Refunds can be tricky too for vendors of goods and services if they are priced with cryptocurrencies. By the time a transaction settles, coins (cryptocurrency) can be worth significantly more or less than they were at the time they were sent, - Binance Academy https://academy.binance.com/en/articles/what-are-stablecoins
*Related reading:* *What's the difference between a coin and a token?* https://read.cash/@CryptoWordsmith/cryptocurrency-faq-whats-the-difference-between-a-coin-and-a-token-348f6fde Because of this, different tokens were needed to solve these types of problems. *Stablecoins* are tokens designed such that the volatility of their price is minimized, relative to some stable asset or basket of assets. They can be pegged to a cryptocurrency, fiat money, or to exchange-traded commodities (such as precious metals or industrial metals). Their use allows individuals to cheaply and rapidly transfer value around the globe while maintaining price stability. Other use cases include providing liquidity, and hedging against volatility. It's notable that a stablecoin's market value can fluctuate, depending on supply, and on demand. https://www.publish0x.com/the-kragles-crypto-journey/throwback-thursday-tbt-comparison-of-historical-volatility-b-xgdqmmr https://www.coindesk.com/which-stablecoin-is-the-riskiest-the-crypto-market-is-pricing-that-in Examples of stablecoins include: DAI: DAI is a token on the Ethereum blockchain that has a steady value of $1 US dollar, and is backed by other crypto assets https://decrypt.co/resources/dai-explained-guide-ethereum-stablecoin USDC: A token issued by regulated financial institutions, and backed by fully reserved assets, and redeemable on a 1:1 basis for US dollars https://www.circle.com/en/usdc GUSD: Gemini Dollar is a stablecoin created by Gemini Exchange. It is pegged at a 1:1 ratio to the US dollar https://blockfi.com/gemini-dollar-gusd#:~:text=Gemini%20Dollar%20(GUSD)%20is%20a,of%20Financial%20Services%20(NYDFS). Paxos: A token that is collateralized 1:1 with the US dollar (USD) https://www.paxos.com/pax/ BUSD: A 1:1 US Dollar-backed stablecoin issued by Binance https://www.binance.com/en/busd Paxos Gold: A stablecoin backed by real gold reserves held by Paxos https://www.kraken.com/learn/what-is-paxos-gold-paxg#:~:text=Paxos%20Gold%20(PAXG)%20is%20a,the%20physical%20gold%20it%20represents. Tether: Although Tether was originally pegged to $1 US dollar, it now supports four stablecoins: the U.S. dollar (USDT), the Chinese Yuan (CNHT) and the Euro (EURT), as well as a stablecoin backed by 1 oz. of gold (XAUT). https://www.kraken.com/learn/what-is-tether-usdt To learn about even more use cases for tokens, please stay tuned for my next article in this series. Thanks for reading, and stay safe! If you would like to support my work, please hit like 👍 and subscribe! 😊 Follow me on Twitter: *@CryptoWordsmith* https://twitter.com/CryptoWordsmith **#EarnFreeCrypto** https://read.cash/search?q=%23EarnFreeCrypto **#EarnPassiveIncome** https://read.cash/search?q=%23EarnPassiveIncome Cover image by **loufre** (modified by the author) from **Pixabay** https://pixabay.com/users/loufre-2697555/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1756278 https://pixabay.com/?utm_source=link-attribution&utm_medium=referral&utm_campaign=image&utm_content=1756278 It's the perfect time to start earning free crypto while you learn about it!
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9 comments
Quality as always
thanks for the kind words, and for your tip! =)
Very nice. 👍 It would be interesting to learn about the different ways that volatility is minimized in different stable coins. You kind of touched on that topic. Will you go more in-depth into that topic in a future article?
thank you! yes, if a stablecoin is pegged to a stable fiat currency (USD, Euro, etc.) and backed by corresponding reserves of the currency, that in itself makes it resistant to the volatility normally associated with most crypto. in theory, you could simply trade in your stablecoins for fiat money any time you wanted. The fluctuating prices of stablecoins are simply a result of supply and demand. High demand can result in those tokens being purchased/exchanged for more then $1US. The opposite happens if there is a lot of selling action, resulting in the market being flooded with unwanted tokens. DAI would be the only one that I listed in my post that has a more proactive strategy to maintain its value at $1US, since it is backed by crypto. I'm not sure i would want to delve more into that since Coinbase Earn did such a great job explaining it. i won't rule it out though, but there are a few other topics that i need to write about before i consider it...Lol. Looking at you, "build your own brand part 2"... 😉
Haha, that's right. That would be very helpful for me. But take your time. No rush from my side. 😊
I've read about stablecoins (eybyoung) and it's really an interesting one to learn so you have an option to keep your assets safe from volatility. But I'm more on a risk-taker lol
You can also use stablecoins for trading other crypto. Usually, it's cheaper to go from crypto to stablecoin and back than from crypto to fiat and back. 😊
thanks for visiting and for the tip! Hmm...is eybyoung Tagalog for stablecoin? as @MoreGainStrategies touched on, most individuals don't invest in stablecoins. but a common strategy is to use them to protect profits. example: - 1 BCH is worth $250 today, and MoreGainStrategies buys 100 BCH for $25,000. - Next month 1 BCH doubles in value to $500, so MoreGainStrategies's BCH purchase is now worth $50,000. He feels that BCH will drop in value, so he trades all 100 BCH for 50,000 DAI. - The following month, 1 BCH drops in value to $200. MoreGainStrategies can now buy 250 BCH with his 50,000 DAI. And MoreGainStrategies doesn't need to deal with a bank!
Very well explained 👍