• Advertise
  • Submit a Press Release
  • Contact Us
Blockchain & Cryptocurrencies Tabloid
  • Finance & Blockchain News
  • Bitcoin News
    mining

    Increased Demand Requires Increase in Nodes. Here’s Everything You Need to Know About Bitcoin Mining During Lockdown

    Bitcoin wallet

    BitcoinOfficial.org- Create a Bitcoin Wallet. Official Website.

    Bitcoin price

    What Drives Bitcoin Price?

    Mining

    Railway Authorities in Ukraine Shut Down Unlawful Mining Outfit

    Bitcoin

    Economic Crises Will Not Affect Bitcoin: Ledger Founder

    Supply and Demand

    Bitcoin’s Demand and Supply Dynamics are Constant: Bitwise COO

  • Altcoin News
    • All
    • Bitcoin Cash
    • Cardano
    • EOS
    • Ethereum
    • Litecoin
    • Monero
    • Ripple
    • Stellar
    price prediction

    Bitcoin, Ethereum, and Ripple Price Prediction in June 2020

    XTZ

    TEZOS (XTZ) Join the Top 10 Crypto Coin List

    MakerDAO

    MakerDAO to Implement New Security Feature After Loophole Detected in System

    BCH

    BCH Successfully Completed a Scheduled Fork, Added Minor Upgrades

    CUSD Stablecoin

    Canadian BVCI Launches Another Stablecoin CUSD

    EOS network

    EOS Network Is Running on Borrowed Resources After EIDOS Airdrop

    Trending Tags

    • Ethereum
    • Bitcoin Cash
    • Litecoin
    • Monero
    • Ripple
  • Crypto 101
    • All
    • Cryptocurrencies
    • Exchanges
    • Services
    • Wallets
    best crypto airdrops

    List of the Best Crypto Airdrops for July 2022

    How to Withdraw Money from Crypto.com

    How to Withdraw Money from Crypto.com

    4x.fm

    4x.fm Launches a New Copy Trader Technology

    best mining motherboard

    Best Mining Motherboard for Cryptocurrency in 2022

    Where to Buy Evergrow Coin

    Where to Buy EverGrow Coin – A Complete Beginners Guide

    how to buy safemoon on bitmart

    How to Buy Safemoon on Bitmart – A Complete Beginners Guide

  • Blockchain Events
No Result
View All Result
Blockchain & Cryptocurrencies Tabloid
No Result
View All Result

What are Stablecoins? Why are Stablecoins Important?

Vladimir C. by Vladimir C.
October 10, 2018
in Crypto 101, Cryptocurrencies

If you are even remotely informed about cryptocurrencies, then you surely know that one of the biggest problems of the crypto market stems from the fact that most cryptocurrencies are extremely volatile.

Before we go even further, it’s important to note that there’s no such thing as a perfectly stable currency. In fact, even some of the world’s most valuable currencies such as the USD, EUR, and GBP are subjected to various fluctuations. However, just like any person with basic financial knowledge can tell you, these fluctuations are so small that the currencies in question can still be used safely.

Currently, the world is struggling between sticking to the mainstream currencies and adopting cryptos which, truth be told, are still too volatile, hence, fairly impractical for mainstream use. That’s exactly what the so-called “stablecoins” are trying to change.

Stablecoins – simple definition

To put it simply, a stablecoin is a cryptocurrency with very stable prices measured in fiat currency. They achieve this stable grounding by being pegged or directly linked to real-world assets such as typical currencies, and even other types of assets such as oil or gold.

Just like other cryptocurrencies, stablecoins use the blockchain technology. They boast the same advantages as most cryptos, namely, they are decentralized, and cannot be controlled by any nation-wide or central authority or institution.

Source: Medium

Why are stablecoins important?

Designed to be used as a unit of account and even as a store of value (something that most cryptos struggle with), it’s somewhat easy to understand why stablecoins can have substantial effects across the world’s markets. There are some that even believe that stablecoins are the true realization of what blockchain technology and cryptocurrencies are capable of.

This is because stability (the lack of volatility) is incredibly important for any currency, not just cryptocurrencies. Volatility makes currencies unreliable and, in the case of cryptocurrencies, it’s probably the biggest challenge that actually prevents mainstream adoption.

 

Source: Hacker Noon

To put everything into perspective, a perfect stablecoin would have to achieve three properties of a currency: to act as a medium of exchange, to be able to store value, to be used as a unit of account.

 

In short, it would have to be able to allow its users to trade without problems, it would maintain wealth reliably over time, and it would be used as a unit to define and compare market values. Probably the most important trait of stablecoins is their ability to act very much as a fiat currency would, and that alone is enough to bring value to almost all stablecoin projects out there.

Imagine being a merchant and having received a crypto payment in return for your service which is worth $X. If the said crypto depreciates tomorrow by 30%, then you would receive a lot less than what your service is worth. The same goes for customers who use crypto to pay for services. What if the price of crypto would increase by 50% right when you wanted to pay the merchant for a specific service?

That’s why stablecoins are probably the best crypto options, for merchants and “non-hardcore” traders at least.

Some crypto enthusiast might be surprised to hear that there are, in fact, various categories of stablecoins.

Types of stablecoins

There are three types of stablecoins: fiat-collateralized stablecoins, crypto-collateralized stablecoins, and non-collateralized stablecoins.

Source: Hacker Noon

Fiat-collateralized stablecoins are the ones that are being backed by typical fiat currencies and reserves such as USD and EUR. This is the most popular and straightforward type of stablecoin. The main disadvantage of this type of stablecoin is the fact that it requires the presence of a third-party or central authority.

Crypto-collateralized stablecoins are backed by cryptocurrencies. As one can imagine, these types of stablecoins are probably the most “risky” type of stablecoins, as the cryptocurrencies that account for the price stability of them are still volatile, as mentioned at the beginning of this article. These types of stablecoins are very vulnerable in the face of a “black swan” event. In short, if the assets that back them become worthless, they become worthless as well.

This brings us to the non-collateralized stablecoins that are backed by “nothing.” One could say that they are backed by the expectation that they can retain a certain value and nothing more. Instead, their supply and price stability is governed by a smart contract algorithm. These smart contracts automatically expand and shrink in order to keep the price of the said stablecoin stable.

Currently, there aren’t that many stablecoin projects. Some of the most popular stablecoins are Tether (USTD), TrueUSD (TUSD), MakerDAO (MKR), and Havven (HVN). Tether boasts a 1-to-1 peg ration against the USD. The conversion rate is 1 Tether USDT to $1. In the case of MakerDAO, each “Dai” is worth $1 USD. TrueUSD is a fully USD-backed stablecoin with a 100% rate of collateralization.

Considering everything that’s said, it’s quite clear that stablecoins have both advantages and disadvantages

Pros and cons of stablecoins

One of the main pros of stablecoins is the fact that they offer stability for trading purposes. They are also notorious for ensuring a bit of peace of mind for the holders and traders alike. Also noteworthy is the fact that stablecoins can be liquidated a lot easier in case of market failure than typical cryptocurrencies. Finally, while they are not perfect regarding stability, they do offer protection from extreme volatility.

Unfortunately, stablecoins do come with a series of cons as well. Due to their nature, stablecoins tend to be more centralized when compared to their typical crypto counterparts. All types of stablecoins seem to be very affected by a phenomenon called the “blockchain oracle problem.” Lastly, stablecoins are more prone to manipulation (both supply manipulation and crypto market manipulation).

Conclusion

The future for stablecoins is not a very “stable” one, as there’s really no telling if stablecoins will see mainstream adoption. However, the concepts behind stablecoins are without a doubt very interesting, and the advantages they bring are of a tangible manner.

Be that as it may, the biggest present issue with stablecoins is not their level of adoption but rather the fact that there is still no stablecoin that doesn’t compromise security and decentralization to achieve its goal.

Tags: Blockchainblockchain technologyCryptocurrencyHavvenMakerDAOsmart contractStablecoinsTetherTrueUSD
Previous Post

Banco Santander Announces the Expansion of its Ripple-Powered OnePay FX platform

Next Post

A South Korean Law Breaking Crypto Trading Platform has been Sued

Vladimir C.

Vladimir C.

Invest at your own risk notice : The information on this website and the links provided are for general information only and should not constitute any financial or investment advice. We strongly recommend you to conduct your own research or consult a qualified investment advisor before making any financial decisions. We are not responsible for any loss caused by any information provided directly or indirectly on this website.

Related Posts

best crypto airdrops

List of the Best Crypto Airdrops for July 2022

by Aggrey A.
July 1, 2022

Another month is here, and crypto enthusiasts have another opportunity to claim themselves airdrops that are active in July. This...

How to Withdraw Money from Crypto.com

How to Withdraw Money from Crypto.com

by Aggrey A.
June 29, 2022

Before anyone can learn how to withdraw money from Crypto.com, they should first have an overview of Crypto.com and what...

4x.fm

4x.fm Launches a New Copy Trader Technology

by Hellen
June 27, 2022

Copy trading, also referred to as social trading, has been on the rise for more than a decade and is...

best mining motherboard

Best Mining Motherboard for Cryptocurrency in 2022

by Aggrey A.
June 27, 2022

The era of mining using your CPU is past us, as they tend to have a lower ROI, and their...

Where to Buy Evergrow Coin

Where to Buy EverGrow Coin – A Complete Beginners Guide

by Aggrey A.
June 20, 2022

Where to buy EverGrow coin? the answer is here. There has been exponential growth in the cryptocurrency market, leading many...

how to buy safemoon on bitmart

How to Buy Safemoon on Bitmart – A Complete Beginners Guide

by Aggrey A.
June 14, 2022

Safemoon is one of the tokens created using the popular DeFi technology. The decentralized peer-to-peer payment mode rewards buyers and...

We Recommend

Top Rated Casinos
Bitstarz Casino

BitcoinCasino.io
Top Crypto Betting
1xBit.com
Top Rated Exchanges
Binance Exchange

Bityard.com
Top Advertising Services
Coinzilla Display Network
Top Crypto Wallets
Ledger Nano X

Guides & Reviews

best crypto airdrops

List of the Best Crypto Airdrops for July 2022

July 1, 2022
How to Withdraw Money from Crypto.com

How to Withdraw Money from Crypto.com

June 29, 2022
4x.fm

4x.fm Launches a New Copy Trader Technology

June 27, 2022
best mining motherboard

Best Mining Motherboard for Cryptocurrency in 2022

June 27, 2022
  • Terms and Conditions
  • Privacy Policy
  • Advertise
  • About Us
  • Contact Us

© 2018-2019 theccpress.com by Brantell Media.

No Result
View All Result
  • Finance & Blockchain News
  • Bitcoin News
  • Altcoin News
  • Crypto 101
  • Blockchain Events

© 2018 - 2019 theccpress.com, a Brantell Media project.

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.