A Quick Guide to Stablecoins

By Aleksandra Wilson
3 min read September 20, 2021

What Exactly Are They?

Stablecoins, as we know them, are the cryptocurrencies backed up by the currencies issued by the government, also known as fiat currencies. Stablecoins are different from other cryptos because, unlike them, the price of stablecoins is constantly steady. They’re usually used as a value store or account’s units due to their stability. Since creating cryptocurrencies, they’ve been known as volatile assets when we talk about their price. It’s common for the prices to crash or jump, which prevents them from being valuable as everyday services or goods since it implies a high risk for merchants and vendors. 

In theory, a stablecoin has a stable price because it has a fiat currency such as the USD backing it up. In simple terms, their prices are regular because of the fiat currency itself. The most common currencies backing up stablecoins are the US dollar, British pound, Russian ruble,  Israeli shekel, etc. Some can be decentralized, others centralized, and they all can have diverse strategies to reach price stability. 

Examples of Stablecoins

A few examples of stablecoins are Tether (USDT), one of the first and probably the most famous ones. It claims to be backed up by USD called collateral. Other examples can be Gemini Dollar, oneFIL, and CACHE.

The Most Popular

In the crypto space, the most common stablecoins are pegged to the US dollar, such as Tether, True USD, USD Coin, and Binance USD. Although, there are other cryptos backed by different fiat currencies that are also popular. Such is the case of GBP-pegged crypto Binance GBP Stable Coin, EUR- pegged Stasis Euro and backed by gold CACHE.

How Can You Use Them?

Like the majority of the assets in the crypto space, stablecoins are used mainly as a value store or a way of exchange. Because of their low volatility nature, they provide a “safe haven” when the markets are shaky.

Why Are They So Popular?

As the best example of how popular they have become, we have Tether, the second most traded crypto after Bitcoin. Tether has a volume of trading of more than $70 billion every 24 hours. Once you know the principle they’re based on; it is easy to understand why someone would choose them. Their stability and backup provide investors with trust and confidence, knowing that their money is safer than in other assets. 

Disadvantages?

The proof that these coins are backed up by the reserves they claim to have, is hard to get. For example, Tether has never provided conclusive evidence that the currency is backed, which increased the rumor of it being issued out of thin air.

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