Cryptocurrency has gained enormous hype in the last few years. After its launch, the backbone of cryptocurrencies like Bitcoin and Ethereum have turned people into millionaires. With many believing that cryptocurrency is a scam and will falter in the future, living examples of people earning millions through trading are another part of the spectrum. However,with so many coins and currencies in the Blockchain system, it becomes difficult and unpredictable for commoners to find out what to buy and what not to buy. Moreover, a new player has jumped into the market that has had an enormous effect at launch. Stablecoins have profoundly bridged the gap between physical currency and cryptocurrency. Let’s delve into the intricacies of Stablecoins and find out how.
What are Stablecoins?
Cryptocurrency, no doubt amazing, has one immense drawback, it’s unpredictability. With enormous bull market turns and unpredictable nature of the currencies, it’s difficult to know what you hold it actually with. This also has another negative impact. It doesn’t allow smooth trading or transactions of the currency for normal day to day tasks. This is one of the major disadvantages of cryptocurrencies, an upper hand that conventional currency has.
However, what if we could find a way to somehow link the normal currencies like the USD, with a digital currency so the fluctuation of the prices is massively reduced. Think no more, presenting you with “Stablecoins”. Stable coins are coins that are linked with the normal currencies,this in turn as the name suggests make them stable hence reducing the massive fluctuations. These coins are pegged to fiat-currencies. If you don’t know what stable currencies are, don’t worry,we have you covered. Fiat-currencies is just a term given to the government-issued currencies like the United States Dollar.
As stablecoins are pegged they do gradually go up and down but the worth of the coin will never drop to zero in the span of a day. This is why it’s important to understand the basics of stablecoins so you can find out exactly how they’re linked and what they’re anchored to. Not all stablecoins are linked with fiat-currencies, some are linked with assets who can’t drop to zero all of a sudden such as precious metals like Gold and Silver.
What are the types of Collateral for Stablecoins?
For stablecoins to be active, they need to be pegged to something and a deposit of reserve is necessary so they can be anchored. The best way to gain in-depth knowledge of stablecoins is to attend stable coin conferences remotely or in person. To put it simply, if somebody is buying a stablecoin, they need collateral to ensure that their money won’t be wasted. For this reason, the launching officials deposit an amount of cash into a bank and peg it to them so their coins can be traded without fear of losing value.
There are several other types of collateral as well. Sometimes, rather than linking them with fiat-currencies, and depositing millions in the Bank,pegging them to stable physical assets is also an option. Hence, gold and other precious currencies like silver and platinum are also used. There are numerous other types of collateral as well, some actually link stable coins with the most stable cryptocurrencies. This can be observed as many stablecoins are linked with BTC and Ethereum because as of now they’re the most stable cryptocurrencies in the world.
What are the Top Ranked Stablecoins in 2024?
Stablecoins depending upon their collateral and pegging are further divided. Let’s look at some already launched Stablecoins.
Tether – Tether is actually one of the oldest and most renowned stablecoin out there. It was launched way back in 2014 and was pegged to the US Dollar and got termed as USDT. Its basic purpose is to exchange currency across platforms. This has made it to be one of the most stable of all coins. Here’s the kicker, people can actually make a lot of money with minor fluctuations in the market exchange of both currencies. Even though they’re linked, they’re still separate entities and minor discrepancies can help generate a healthy amount of cash.
USD Coin – Just like Tether, another famous stablecoin goes by the name of USD Coin. This coin is also pegged with US Dollar but it distincts itself from the Tether by not shifting towards a mixture of collateral assets. Moreover, with its open-protocol, it can be used by anyone to generate or develop new products at their will.
What are the Benefits of Stablecoins?
If you wish to trade in crypto and own it but have a fear of massive bull market losses and unpredictability, Stablecoins are built just for you. They create a bridge which allows the merge of fiat-currencies and physical assets alongside the benefit of owning a Digital currency. This makes understanding stablecoins basics necessary and deems them as the perfect investment. Moreover, you can also trade and save assets in the digital world by using a currency that is not that volatile. This can be a monumental advantage for you as you can benefit from the best of both worlds. Furthermore, International transactions are at the ease of a tap which makes it even better for you to get some stablecoins ASAP.
However, even with humongous advantages, there’s always shortcomings in everything. Stablecoins also come with strings attached. One major challenge is the conspiracy of reserve holding. Many claim that as reserves are held in a third-party bank, they can be tampered and withdrawn without the knowledge of coin holders. However, that being said, they are still one of the safest and well-thought investments to be made. USDT is already used in Blockchain platforms to buy currencies and Ethereum’s Dai is also growing. With a few more years of growth, stablecoins might actually become the next big thing.
