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Home » Blog » What Is Stablecoin? How It Works Read Our Complete Review
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What Is Stablecoin? How It Works Read Our Complete Review

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Last updated: 03/02/2023 4:55 PM
Coinworldstory
5 years ago
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What Is Stablecoin? How It Works Read Our Complete Review
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Stablecoin is a type of cryptocurrency or currencies designed to maintain a stable exchange rate (as the name suggests, stable) with respect to a given asset, the most common denominator. They are typically used on cryptocurrency exchanges (centralized as well as decentralized), markets, or payment processors to maintain the same value during the exchange and not to lose at fluctuating cryptocurrency rates.

Contents
  • Examples of Stablecoins
    • Also worth noting are stablecoins such as:

The technical nature of stablecoins is that, on the one hand, they use blockchain technology for the transparency and security of transactions, and, on the other hand, they rely on security in counterfeit currencies (such as the dollar or the euro) or other types of assets (such as silver or gold). The cover should reflect the amount of stablecoin in circulation. For example, by issuing 1 000,000 stablecoins based on the US dollar, our security should also cover 1 000,000 US dollars.

The stablecoins aim to create a bridge between traditional banking and the world of cryptocurrency. Many stock exchanges use stablecoin as a substitute because of the difficulty of introducing a trustworthy currency, this is due to the regulations imposed by some countries. In the event of major fluctuations, stablecoins are very popular when users want to keep their earnings for a certain period of time.

Examples of Stablecoins

The first stablecoin was the bitUSD cryptocurrency created in the 2014 year by BitShares, reflecting the dollar rate 1:1, its cover is in BitShares (BTS). Initially, it was underdeveloped and the course changed rapidly even a few days after it was issued. For a long time now, the volume has fluctuated to a maximum of a few hundred dollars per day, which means that this cryptocurrency is virtually unused.

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Another stablecoin is DAI, a project created in the 2015 year by MakerDAO, written in the form of smart contracts on the Ethereum platform, linked to the US dollar in response to 1:1. MacerDAO’s smart contracts are blocked by more than 2% of the entire supply of ether.

The highest stablecoin is Tether (USDT), which is subject to numerous controversy, as many people believe that this cryptocurrency is issued uncovered and artificially created. The company that created Tether admitted that their collateral is not only in dollars but also in cryptocurrencies and credits provided by Tether. Tether is built on a bitcoin (BTC) blockchain through the Omni Layer platform. A small proportion of USDT flows also exist in the form of ERC20 contracts based on the Ethereum BlockChain.


Also worth noting are stablecoins such as:

True USD (TUSD) from TrustToken, in the form of ERC20 contracts on the Ethereum blockchain, fully secured by the US dollar, Paxos (PAX) from itBit, also in the form of ERC20 (Ethereum), created by the company under New York State Bank Law and regulated by the Department of Financial Services,
Gemini Dollar (GUSD) by Gemini, the first regulated stable coin by the New York State Service Department, created by the Winklevoss brothers (the first creators of Facebook).

The vast majority of stablecoins are based on their dollar rate, but there are also projects based on the euro rate such as bitEUR or xEURO. Similarly, with the blockchain on which they operate, the majority here is built on the Ethereum blockchain in the ERC20 standard.

As cryptocurrency becomes more popular, stablecoins can also become desirable as they avoid the obstacles posed by banks. The Libra project, which has the potential to become global digital money with stable points features, is worth noting. However, so far it is effectively blocked by governments from various countries that fear competition for traditional currencies, which are fully controlled by them.

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