Stablecoin (stablecoin) - a stable cryptocurrency?

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There is still a fierce debate about the value of cryptocurrencies. The main argument of cryptocurrency opponents is that digital assets are just computer code with no real value, and their value is not backed up by anything tangible.

Many investors are not excited about cryptoassets either. Agree, it is quite difficult to keep your savings in an asset, the price of which changes in one day by 20%, and not always in the direction of growth.

These problems are solved by cryptocurrencies, which are called Stablocon.

What is stabelcoin?

What is Stablecoin?

The Stable Coin or Stablecoin is cryptocurrency, whose price depends on the value of some traditional financial asset. It can be the U.S. dollar, oil, gold, etc.

Linking a cryptocurrency to the price of such an asset is an attempt to adapt digital technology to real life. It makes it possible to use Stablocoin as a means of payment in commodity-money relations, because it allows to determine and compare prices for goods and services.

At the end of 2017, when bitcoin price updated records every dayMany representatives of the crypto-community were indignant that nobody considers BTC as a means of payment and see it only as a way to store capital and an investment tool. Naturally, who will spend bitcoins to buy, say, a car, if its price increases in a year, and for the same amount you can buy yourself a small fleet of cars. To avoid all this, stablecoins were invented.

Types of Stablecoin

All currently available stabelcoins can be divided into three types:

Stablecoins backed by traditional currencies and other assets

This is, so to speak, a classic of the genre. By analogy with the provision of state currency in gold from the gold reserve, a notional volume of, for example, dollars is taken, and for this volume digital tokens are issued at a ratio of 1 to 1. The scheme is simple, reliable and clear for all. The "pegged" asset can be, as we said, gold, oil, etc.

Stablecoins backed by other cryptocurrencies

Everything is the same as described above, but instead of fiat currencies and other financial assets, these staplecoins are "pegged" to top cryptocurrencies, such as bitcoin or on the air. As you can understand, the scheme, compared to the above, is not so reliable. A sharp collapse in the rate of the cryptocurrency backed by stablecoin can almost completely devalue it.

uncollateralized stabelcoins

It's even simpler here. Such tokens have a price, which can be anything, because they are not tied to anything tangible. What makes these coins different from regular cryptocurrencies is that the function of smart contracts is to automatically increase or decrease the volume of supply to adjust their value. A kind of digital central banks.

Benefits of stablecoin

The very essence of stablecoin gives such cryptocurrencies a number of significant advantages:

Stablecoin volatility tokens are several orders of magnitude lower than other cryptocurrencies because their price is directly dependent on the exchange rate of a real asset. This turns their tokens into a means of payment, which can be used for payments in everyday life. In addition, there is little inflation in such cryptocurrency, which is an additional incentive to spend them instead of keeping them in the piggy bank.
The emergence of new opportunities in the development of the cryptocurrency industry and digital assets. For example, stabelcoins, due to their minimal price fluctuations, make it possible for credit and insurance services to appear on the blockchain, avoiding the risk of sharp fluctuations in the rate of conventional cryptocurrencies.
Ideally, stablecThe oin should become a global currencywhich does not depend on fiat currencies and cannot be affected by government or Central Bank actions. First of all, such cryptocurrency will be a godsend for countries with high inflation rates.

Disadvantages of stabelcoins

The picture would be incomplete if we did not also mention the disadvantages inherent in stablecoin:

The first disadvantage lies in pegged to fiat currencies. For example, if the price of a stabelcoin is tied to the dollar exchange rate, such tokens become its derivative, which automatically brings it into the realm of foreign exchange laws.
The main disadvantage that I was trying so hard to avoid Satoshi Nakamoto, coming up with bitcoin, - need for intermediariesThis increases the risks of uncontrolled issuance, and there is not even any talk of decentralization. To issue stablecoins, it will be necessary to create special companies whose functions will include providing them and guaranteeing an unhindered exchange. That is, it will be a kind of digital central banks, which is completely contrary to the very idea behind cryptocurrencies.

The most common stabelcoins

For more understanding, here are examples of the most popular stabelcoins.

Tether (USDT) or "digital dollar

Tether (USDT) are Stablecoins issued on the Bitcoin blockchain with the value of the coin pegged to the U.S. dollar exchange rate. The scheme is as follows: when the bank account of Tether Limited is funded by $1, it issues 1 USDT token. If dollars are withdrawn from the company's account, the USDT tokens are redeemed. Currently, there are approximately 2.3 billion USDT tokens in circulation.

Digix (DGX) or "digital gold

Digix (DGX) is a stablecoin issued on the Ethereum blockchain. One DGX token corresponds to 1 gram of gold, and it is possible to divide the coin to the equivalent of 0.001 grams.

The scheme for securing gold for Stablecoin is quite complex. The use of smart contracts has made it possible to ensure that each Digix token corresponds to a specific real numbered gold bar with the appropriate documentation.

El Petro or "digital oil"

El Petro is Venezuela's national cryptocurrency, issued on the NEM blockchain. Its price is linked to oil - 100 million El Petro coins correspond to 5.3 billion barrels of crude oil. The development and introduction of the cryptocurrency was a forced step for Venezuela, unsuccessfully fighting hyperinflation.

At the state level, all major oil companies are required to make at least some payments in El Petro. Venezuelan citizens can use the coin to make payments to government entities.

Essentially, stablecoin is a kind of compromise, as a result of which the asset is deprived of some of the features of classic cryptocurrency, while at the same time receiving the characteristics of a traditional means of payment.

It is difficult to say in what direction stabelcoins will develop and whether they can become widespread enough. The only thing we can predict for sure is that Subscribe to the Fortrader channel on Telegram will not let you miss important financial news of the cryptocurrency world.