Stablecoin Is A Digital Currency That Claims To Be Backed By Fiat Currency. Unlike Cryptocurrencies Such As Bitcoin, Which Have Price Fluctuations, The Price Of A Stable Coin Is Fixed.
Stablecoin, Since the advent of cryptocurrencies, this type of capital has fluctuated in price. This has led to price spikes and a barrier to accepting cryptocurrencies for day-to-day trading and service work; Because sellers and traders are aware of this price fluctuation.
This is where stable coins come into play. The theory behind this type of cryptocurrency is to create a digital currency whose price is always equal to the country’s fiat currency, for example, the US dollar, thus achieving relative price stability and avoiding large fluctuations.
This article will fully discuss the uses, advantages, and disadvantages and introduce the most important stable coins.
What is Stablecoin?
Stable coins are cryptocurrencies that claim to have Fiat currency support such as dollars, pounds, rubles, etc. According to each stable coin multiplied, the same amount of real and equivalent currency must store somewhere by the multiplier.
As mentioned, the main purpose of stabilizing coins is to stabilize the price equivalent to the currency they support.
Different stable coins have different strategies for achieving stability, and some of them are focused, and some are decentralized.
What are the types of stable coins?
Stable centralized coins
- Teter (UDST): Tetr is one of the first and most popular stable coins. The exporting company claims that cryptocurrencies back the reserves of real dollars as collateral outside the Chinese block. In the real world, stockpiles are managed by a centralized company. With this reserve, investors can be sure that their tetra is worth a real dollar. Ramirez Tetr accounts for 48% of the Ramzarz market in terms of the trading volume. There is only one problem: Tetra, which multiplies the USDT cryptocurrencies, has never fully proven that the cryptocurrencies are fully dollar-backed; This has created skepticism among investors.
- Dollar Gemina (GUSD) / Paxos Dollar (PAX) / USDC: These cryptocurrencies were created by venture capitalists such as the Vickenloos Brothers, Paxos blockchain startup, and Quinn Base Exchange, respectively. These stable coins focus on corporate investors, closely monitor Wall Street, and operate under local law. The lower the level of trust in Tetra, the more these cryptocurrencies find a place.
- File Coin (oneFIL): This stable coin created by the ICHI protocol to build a “decentralized money license” is a stable coin file network and is called one. This stable coin is supported by another coin stable, UDSC, and the native token of the coin file network, FIL. The purpose of creating this stable coin is to develop the coin file network further, and for those who provide space for this network or those who use this network, a discount is considered and acts as an incentive.
Stable coins with gold backing
Dollars back most stable coins, and these dollars are stored in a bank; But because of the reluctance to use the dollar and other Fiat currencies, stable coins have been created backed by other assets (such as gold). The form and use of this type of cryptography are completely different from other stable coins. All of these types of stable coins are backed by gold with an investment grade.
- Cache Gold is one of the most popular stable coins in this category. Each CACHE is backed by one gram of pure gold, stored in vaults around the world. Sending each CACHE is equivalent to sending one gram of gold, and its tokens are easily redeemed for real gold.
- Tetra Gold (XAUt) and Pax Gold (PAXG): These types of stable coins are equivalent to one troy ounce. These cryptocurrencies have a minimum redemption rate higher than CACHE.
Stable algorithmic coins
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- Terra LUNA is a decentralized Quinn stable that uses a sophisticated algorithm for stability instead of trusting a third party. For this purpose, this type of steel coin keeps its zinc-chain reserves in balance. The assets are held in a smart contract and, based on supply and demand, automatically prevent users from intentionally or unintentionally manipulating the price.
- Amplitude (AMPL) operates on a similar process. Instead of having the physical backing of a dollar, the cryptocurrency uses a process to automatically adjust current inventory to respond to changes in supply and demand. If the AMPL price is 5% higher or lower against the dollar, it will reduce or increase the supply to set the cryptocurrency price to one dollar. Because this process is performed in all states, the share of AMPL holders in the total network inventory will fix.
- Dai (DAI): This steel quin is different from other types; Because while it is decentralized and without the need for trust, it can widely use. Dai, made by China Blockchain MakerDAO, is an ERC20 token worth $ 1. This stable coin can easily move between Atrium wallets.
Comprehensive list of popular stable coins
In the following, we will introduce some of the most popular stable coins available in the cryptocurrency market:
stable coin backed by US dollars
- Tetra (UDST)
- TUSD
- BUSD
- Dollar Gem (GUSD)
- USDC (USDC)
- Paxos Standard (PAX)
- DAI
- sUSD (SUSD)
- mStable USD (MUSD)
- AMPL (Algorithm)
StableQueen backed by the British pound
- GBB Stable Coin Binance (BGBP)
Steel backed by Euro
- Statis Euro (EURS)
Steel Quinn backed by the Turkish lira
- BiLira (TRYB)
Steel Quinn backed by South Korean Won
- Binance CRW (BKRW)
Gold-backed SteelQueen
- CACHE
- Teter Gold (XAUt)
- Paxos Gold (PAXG)
Other stable coins
- Petroleum (PTR) – oil-backed
- Libra – backed by a basket of assets
What is the most popular StableQueen?
The most popular StableQueen at the time of writing is Teter. The cryptocurrency ranks fifth among cryptocurrencies, with a market value of more than $ 65 million and a daily trading volume of more than $ 86 billion. This cryptocurrency has always been criticized for lacking transparency in the distribution of its backed reserves; But so far, it has maintained its position at the top of the list of the top stable coins. In this article in Zomit, we have introduced the complete Queen Teter table.
From this link, you can access the list of other stable coins. On this page, Stable Coins are compared in terms of market value, daily trading volume.
What is the use of Stable Coin?
Like most digital assets, stable coins are primarily used as ” value storage ” and intermediaries as trading. These types of cryptocurrencies temporarily protect traders from market fluctuations. When the market fluctuates sharply, traders turn their cryptocurrencies into stable coins, and if the market calms down, they will buy their previous cryptocurrencies.
Another application of StableCoin in the growing market of decentralized finance (DIFA) and use in profit cultivation, lending, and liquidity.
Most traders and investors buy StableCoin from the exchange platform. Still, a new stable coin can be multiplied by depositing the appropriate collateral in the exporter’s company, including dollars for tetra or gold for CACHE.
What is the advantage of StableQueen over other cryptocurrencies?
Stable coins are (relatively) stable. Because each token is equivalent to Fiat currency, investors can be sure that their token is stable. Of course, this depends on investors’ point of view; if they think that their token has definite support, the token price will remain constant.
Stable coins are a paradise for concerned investors. Most exchanges do not allow users to buy Fiat currency for their users. This means that if the digital currency market deteriorates, users will not cash in on their cryptocurrencies quickly. In such cases, users have to use several different exchanges and even wait for several days.
This is where Stable Coins come into play. Due to their cryptographic nature, they exist in most digital currency exchanges; But because they are worth the same as Fiat currency, investors use them temporarily to maintain their capital in the bear market. Thus, stable coins are a blockchain version of the dollar or other Fiat currencies.
Disadvantages of stable coins
Investors need proof that Quinn Stable has real backing. In the case of Tetra, the cryptocurrency has never been fully compiled and has always raised the suspicion that the cryptocurrency is being multiplied without backing.
Stable coins are not necessarily fixed. The dollar jumped several cents several times last year due to an influx of users. Most of these users came in a situation where Tetra can be traded up to 51 cents in some exchanges. That’s why stable coins are “relatively” stable compared to currencies like bitcoin.
Tetra initially claimed that dollars backed all its cryptocurrencies. Still, when he first released statistics on his reserves after seven years, it turned out that only three percent of the Tetris had real backing.
Politicians, on the other hand, are not in favor of stable coins. For example, Jerome Powell, a member of the US Federal Reserve, says that the Stamens need stricter legislation. He says:
If they become a significant part of the payment world, which we do not think cryptocurrencies will reach; But this is possible in the case of stable coins; Then, we need a proper legislative framework. There is currently no such framework.
Janet Yellen, Joe Biden, Secretary of the Treasury, in July 2021 met with senior lawmakers and interagency activities with them about Kevin Stable discussed. He called on lawmakers to “specifically build the appropriate US legal framework” for stabilizing coins.
In the same month, the People’s Bank of China issued a warning about the stabilization of coins. “Stable coins can pose a serious risk and challenge to the global monetary system and payment systems,” he said. He added that Chinese officials were “quite concerned about this” and had taken vague action.
The future of stable coins
Following the end of the 2017 Cattle Market, investors use Stable Coins to test digital currency technology. In the first half of 2020, the stocks of Coins rose 94 percent to $ 11 billion. Politicians have also become more active in this regard. In September 2020, the US Federal Reserve Audit Office (OCC) gave banks and the Federal Reserve the green light to hold stable coins.
The more prominent actors such as the Windows brothers, Circle and Kevin Bass enter the game, the more tempting the idea of a digital dollar and a blockchain version of Fiat currency.