What Are Stablecoins?

If you ever buy cryptocurrencies you can clearly see they go up 10% today and down 5% the next day. This makes it very hard to use them as a medium of exchange. For instance, imagine getting paid $1000 in bitcoin today and the next day you decided to buy a nice Phone with it. You go to the store and check your balance and see it drops 15%. Nobody wants that right?

In this article, we will explain stablecoins and their purposes.

Just put it like this: Stablecoins are simply cryptocurrencies that are stable. They are pegged to real world assets such as currencies or commodities. This gives them stability while being cheaper and faster to use.

You might be thinking why would I need a stablecoin? Well remember fiat currencies like the U.S Dollar are not in the blockchain which means in order to exchange in fiat, we would need a centralised exchange to do so. Also, trading would have been very hard to do without stablecoins. Just imagine you have ETH in your metamask and you decided to take profit when the market is pumping. Without stablecoins, you only have two options. you can either send your ETH to a centralise exchange like Coinbase and trade them with USD or Swap them in a Decentralised Exchange like Uniswap for another volatile asset.

While the first option seems convenient, we all know it is not the best way to go in crypto as we say “not your keys not crypto.” And the latter is somewhere you don’t wanna be.

Stablecoins on the other hand are designed from day one to be stable and they are cryptocurrencies just like BTC and ETH. This gives them the best of both worlds.

Stablecoins can be divided into two types:

These stablecoins are backed by cash and cash equivalent aka government or corporate debt held by third parties. The most common ones are Tether’s USDT and Circle’s USDC. They are both pegged to the U.S Dollar meaning 1USDT=$1.

Related posts:

Well done everyone and hearty congratulations for reaching the next level in our computer simulation and what we commonly and collectively refer to as “February”. Alas, there is a stumbling block in…

Cat Ferraz is an artist, painter, color explorer and co-creator of cantravel.today, a travel blog. She and her partner Nick Rother are traveling artists who document life through adventure on the…

The X7TokenTimeLock is a general purpose token time lock suitable for holding the Liquidity Provider tokens for all X7 ecosystem uniswap pairs. There is a global unlock time and token specific unlock…