What is a stablecoin?
Stablecoins are cryptocurrencies whose value stands as a compound (pegged)
with some traditional currency, commodities (e.g. gold, silver…) or
some other financial instrument. The most famous stablecoins
the dollar, which is the tehter’s usdt (
you can buy on our kriptomat), Circle’s USDC and Binance-
this bus. The teams behind these coins claim that every
The coin that exists in circulation has a coverage worth one
dollars. This means that if you decide to sell at any time
some of the above stablecoins you can do this at a price
from one dollar. Stablecoins offer alternative to leading crypto
currencies such as bitcoin and ethereum, and their biggest advantage is that
It’s not nearly as volatile as other cryptocurrencies.
Why were stablecoins created?
In the past when you sold some cryptocurrency on an exchange, received
you have the requested currency into your bank account. This means that every time
you were selling or buying cryptocurrencies you needed your bank. In order to
has avoided this need for banks within the crypto market made
with stablecoins. This has made it easier to trade cryptocurrencies, and
a larger number of pairs, i.e. the emergence of a larger number of altcoins. Another
the advantage obtained from the creation of stablecoin is the possibility of
withdrawing some traditional currency to your crypto wallet. That means
that if you own a stablecoin (e.g. USDT) you can withdraw it
on a crypto wallet whose keys are controlled by you. This is you
allows you to have a stable currency such as the dollar, in your
wallet and do not depend on the exchange office or bank. The only problem with this
the method is that the team behind the stablecoin you keep on your
wallet at any time can freeze (blacklist) your
address.
What is the best stablecoin?
When we talk about the best stablecoin, it is necessary to know what we
stablecoin is needed and how long we plan to keep it. If we
is required liquidity with another cryptocurrency, it is likely
The best option of Tether’s USDT. On the other hand, if we want to be
safer, long-term Circle’s USDC should be somewhat safer with
Because it is highly regulated in the U.S., so it shouldn’t have
problems with losing connection, i.e. peggs, with the dollar. Sure, more
we are not always fully regulated, safe and credible
stablecoin, you will need to additionally work with regulators in order to
came to the final solution.
Decentralized stablecoins
One type of stablecoin that appeared not so long ago are
decentralized stablecoins. These cryptocurrencies claim to be successful
Take over Bitcoin’s decentralized nature, and merge it with value
some traditional currencies such as the dollar. The most famous example
This type of decentralized stablecoin is UST, but if you look at it
You will see that the price of UST does not equal one dollar. Namely, after
finding numerous problems related to UST, stablecoin has lost
peg, i.e. the junction with the dollar and the price fell. This led to the
the collapse of the entire Terra ecosystem and in just a few days investors
They lost over $40 billion. There are numerous reasons for
this fiasco, but one thing is obvious, decentralized stablecoins are still in
development and will probably take some time to find
the balance between decentralization and security in order to gain
investor confidence.
The great advantage of stablecoin
With the advent of stablecoin, a solution has emerged for citizens of countries with high
the rate of inflation. Recently, inflation has been all around us.
There are countries whose currencies are affected by triple digits
Inflation. The citizens of these countries do not have too many solutions for
this new problem. Bitcoin was originally created.
to solve this problem, it is still too volatile and insecure.
This is where stablecoins come into play. The citizens of these countries are full of
more convenient to keep savings in digital dollars, which currently
Inflation is slightly more than 6% than in domestic currencies.
the value of which changes drastically from day to day. Still, this is far away
from the long-term solution, since we all know full well that everything
The world’s currency is gradually moving towards zero. The only right long-term
the solution is a currency with a limited supply, which is precisely Bitcoin.
Problems with stablecoins
There are numerous problems with stablecoins, from what they
centralized, up to the possibility of lost connections, i.e. pegga s
property to which they are attached. Arguably the biggest problem is
lack of transparency of their coverage. Teams that issue these stablecoins
often keep some data private, so we can not with certainty
to confirm the coverage of the same. This creates fear of investors and pushes some
the type of uncertainty due to the possibility of a lost link with an asset for which
They’re tied up. For example, arguably the largest stablecoin USDT, which issues
Tether, it’s still not fully covered by the dollar but by various
the value of which can be oscillated. Probably all USDT coins
covered, but there are also probably days when derivatives that
USDT covered have fluctuations in price and if a sale is requested
All of the USDT coins, the Tether Foundation would not have enough money to
pay off all coin holders. However, it is unlikely that USDT users will claim redemption over seventy in one day
billions of dollars worth of USDT.
Central Bank Digital Currency (CBDC)
The Central Bank of England is a digital currency that
Issued by central banks around the world. They are currently in development in the United States-
in the European Union and some other countries. With a view to making them
the bank’s value would be tied to the currency that
The bank manages. The idea of these currencies is the absolute control of the bank over the
the user’s money. The problem that many people see is absolute.
control that banks and governments could abuse. They would have
the possibility of freezing the funds of users, who say do not agree with
some new rules. This is precisely why it was created
Bitcoin. Decentralized, autonomous currency, where access to your
Only you have the means.
Conclusion
Stablecoins have emerged as a mixture of cryptocurrency and traditional
Currency. Nowadays, it will be difficult to get deeper into the crypto market without
owning stablecoins, therefore we recommend that you
get administrative on our cryptomates. Stablecoins use
blockchain technology, and thus transactions are made publicly
in the meantime, on the other hand, the stability of the
They offer traditional fiat currencies. The biggest problem is the lack of regulation and
uncertainty due to lack of records of coverage of these coins I make
Currencies. One thing is obvious, the central banks have recognized this
a fast-growing part of the crypto market, and they themselves became interested in
developing their digital currencies. So-called CBDCs, which banks
develop, could drastically reduce the freedoms of the individual, from the previous
For these reasons, we must resist them.
We hope you enjoyed reading today’s blog, and we would love to share your experiences with stablecoins with us on our
social networks (Twitter, Instagram).