A brief understanding of Stablecoins

A brief understanding of Stablecoins

In recent years, the cryptocurrency ecosystem has been known for its volatility; that is, fluctuation (rise and fall) in the prices of coins. For this reason, many investors and enthusiasts are beginning to lose interest because they are at the edge of either becoming a millionaire or losing money on any coin or token overnight. However, the good thing is, this fear and issues-related problems can now be resolved through a subset of cryptocurrencies called – Stablecoins.

What are Stablecoins?

Stablecoins are a cryptocurrency (digital currency) pegged and backed to a "stable" reserve asset like the gold, U.S. dollar, or other fiat currency. These stable assets make these coins less vulnerable to fluctuations and keep their prices unwavering. 

Stablecoins bridge the worlds of cryptocurrency. Today, billions of dollars in value have flowed into Stablecoins because they have become one of the most popular ways to store and trade value in the crypto ecosystem. Here are a few popular Stablecoins in the market:

  1. USD Coin (USDC)
  2. Tether (USDT)
  3. TerraUSD (UST)

Why use Stablecoins? Why are they important?

The primary use of Stablecoins is to facilitate trades on crypto exchanges. Other features include:

  • Open, fast, stable, and accessible
  • Global money transfers with little or no fees, which means they can operate within smart contracts on the blockchain and complete transactions very fast
  • Stay put in terms of value with minimized volatility

You can likewise explore staking and lending Stablecoins to earn extra interest on your investment.

Wrapping up

The cryptocurrency market can be very unpredictable. As a result, Bitcoin and other cryptocurrencies are highly volatile. However, possessing Stablecoins can take the worry out of the fluctuations. Also, Stablecoins provide smart contract capabilities and privacy, eliminating third parties needed for execution.

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