Stablecoin. Types and advantages

Stablecoin. Types and advantages

Cryptocurrencies are often talked about as a tool capable of changing the system of economic payments and replacing the dollars, rubles and euros that we are used to. But in order for them to really become indispensable, they must be at least somewhat stable, which is not the case right now. The rate of cryptocurrencies can change during a day by 10% or more, making it hard to use them for settlements between physical and juridical persons.

Until this problem is solved, cryptocurrencies are unlikely to be widely used. For popular cryptocurrencies like Bitcoin, Litecoin, Ethereum to become more stable, their capitalization should increase tens of times, so a person with 10-20 billion dollars cannot manipulate the market. Well, until there is no such capitalization, we recommend to use cryptocurrencies, which have fixed rate - stabelcoins.

What is Stablecoin

Stablecoin is a type of digital money that has a fixed exchange rate that can change within 1% in either direction. Stablecoin can be pegged to the value of various assets whose value does not change much due to external factors - dollars, gold, oil. Although I guess the value of oil changes a lot))

The purpose of creating Stablecoin was to integrate new economic inventions into existing businesses without the risk of losing money on exchange rate fluctuations. Therefore, Stablecoins can be used for various settlements between two counterparties outside the banking system and with maximum privacy.

Types of Stablecoins

The most popular stabelcoins are those that are pegged at a ratio of 1 to 1 to the U.S. dollar. These cryptocurrencies include - Tether(USDT), TrueUSD, USDC and eUSD. The value of these digital currencies remains virtually unchanged all the time.

Less popular among investors, but not neglected are those that are backed by raw materials. Even now, there are at least 2 cryptocurrencies whose value depends on the value of different commodities. We are talking about Digix DAO cryptocurrency - secured by gold, and El Petro cryptocurrency - secured by oil.

There are also cryptocurrencies whose value is partially secured by the value of more popular digital currencies, such as Bitcoin and Ethereum. An example of this stabelcoin is MarkerDAO.

Advantages and disadvantages

When we wrote the article about Tether cryptocurrency, we said we had high hopes for these types of digital currencies. And now, we feel the same way. The first of the three advantages of Stablecoins today is, oddly enough, exchange rate stability, which allows stable cryptocurrencies to be used for settlements between users. The second advantage is the massive popularization of cryptocurrencies, because with their help people can get the opportunities of digital currencies, without taking the risks associated with cryptocurrencies. The third advantage is independence. Despite the fact that stablecoins are backed by the dollar, they are not dependent on the state, so they endure the ideology of digital currencies.

The disadvantages of stabelcoins are their potential centralization, because behind their release is a clump of people, from whom you do not know what can be expected.

Completion

Friends, these are the advantages and disadvantages of Stablecoin digital currencies. So, if you have not started using Stablecoin yet, we strongly recommend you to do it, the more so because it is the most profitable way to deposit money to the exchange with them.