Steemit Crypto Academy Contest / S8W2 - What are Stablecoins? .
Cryptocurrency have varieties of coin which are all designed to serve specific purposes in the world and crypto market at large, of which stablecoin which I have talked about is one of the cryptocurrency that is designed to serve the world.
Use your own understanding to explain what are stablecoins? And how did you manage to ensure a stable price?
Stablecoins are those Cryptocurrency that are pegged to dollar or another currency, Community or any valuable item. When we are talking about stablecoin coins like USDT, BUSD, USDC and many others. The main purpose of stablecoins is to provide an alternative to international business transactions and is a means of providing crypto traders the opportunity to save their money and avoid volatility after making trade.
Stablecoins are mostly pegged to currency like U.S. dollar to the price of any commodity like gold which is the reason why it has a stable price since it is maintaining a reserve asset as a collateral to it through a Decentralized blockchain network that is built with algorithmic formulas. To this, in ensuring a stable price, I do check Coinmarketcap and the cryptocurrency exchange Binance that I am using. The price of stablecoins are moving the same and if there are to be price difference it just within a cent dollar or $1 difference.
Why were stablecoins created, and how are they useful?
The main reason why stablecoins were created is to serve global payment and remittance. In the world, there is no general money that can be accepted all over the world, which is the main reason why stablecoins were created for the purpose of settling international payment. I.e. for the uses of cross border transactions.
Another ready stablecoins were created is to protect cryptocurrency traders from making losses due to the volatility of cryptocurrency. With stablecoins, trade can decide to save their money in stablecoins when whenever the crypto Market is experiencing a bear Market.
The usefulness of stablecoins is the store of values which give everyone irrespective of the person country to store his or her money in form of dollars other than store in his or her own currency like Naira that can devalue. It is also useful for making international payment and remittance.
What are the most popular stablecoins? Which do you use more and why?
The most popular stablecoins are listed below with their year of creation.
| Name of Stablecoins | Year Created | Purposes |
|---|---|---|
| Tether (USDT) | 2014 | To allow crypto trader to make transfer quickly and more efficiently from one exchange to another without using cryptocurrency that is volatile. |
| USD Coin (USDC) | 2018 | It is used for different decentralized finance protocols as long as blockchain is concern. |
| Binance USD (BUSD) | 2017 | It was created to be used in performing transaction in Binance smart chain. |
Other stablecoins are:
- Dai (DAI)
- Magic Internet Money (MIM)
- Decentralized USD (USDD)
Among the aforementioned stablecoins, the one that I use the most is USD Coin (USDC). The reason why I use this stable the most is because I have it on my Roqqu wallet, also my elder brother have sent me money via the stablecoins. However, I still have Binance USD (BUSD) in my Roqqu Wallet also.
Can stablecoins lose their stability? If the answer is yes, then cite some cases with an explanation of the reasons of that.
Yes, stablecoins can lose their stability despite the fact that it is pegged to US. Dollar there can still lose their stability which we all saw what happened between UST and Luna last year. At the time UST fell below $1 holders started burning the coin to main it values which the stablecoin still lose it stability even up till this moment.
Stablecoins have reserve which are backed by dollar which without been backed the issuer of stablecoins cannot be able to guarantee the value the stability of stablecoins. In a case where stablecoin is not sufficiently backed by strong assets like fiat currency, which is US. Dollar pegged, such a stablecoin would definitely lose it stability.
What are the advantages and disadvantages of stablecoins compared to traditional cryptocurrencies?
| Advantages | Disadvantages |
|---|---|
| Stablecoins are digital currency use for international settlement. | It brings about centralization of digital assets. |
| It has no volatility, since it is pegged to a fiat currency, as against Traditional cryptocurrencies. | It can lose it price stability if it is anything should happen to the pegged. |
| It allows trader to liquids their cryptocurrencies and easily enter the market back when price is getting bullish. | Lack of transparency. Some people are saying that stablecoins don't have accurate reserves. |
I must commend your lovely time and effort to share your knowledge and thoughts with us on this topic dear friend.
Volatility as we have been made to understand, is by far one of the most interesting and attractive feature of cryptocurrencies. It can be great when it comes to making profits, but it can also be quite risky.
That's why the existence of stablecoins are important to investors, providing an attractive solution to the issue of devaluation and price fluctuations.
This makes them much less risky than traditional cryptocurrencies and more appealing to both investors and merchants.
You have done excellently well friend, and I wish you goodluck in this contest.
Thank you sir for your feedback.
Hello friend,
I was particularly attracted to the third section of your contest post.
Where you were asked the most popular stablecoin, you did not only list them, you also explained why they were created.
This is an information that requires extra research work from you, you have done well.
I wish you all the best in this contest
I applaud your support sir. The more we write and research is the more we learn.
Coincido contigo en las mondas mas populares que señalas mi estimado amigo, a mi criterio, son las tres mas resaltantes. Un certero cuadro comparativo de sus ventajas vs desventajas. Excelente participación!
Thank you for reading my post ma.
Your post has been supported by @simonnwigwe from Team 2 of the Community Curation Program, at 30%. We invite you to continue sharing quality content on the platform, and continue to enjoy support, and also a likely spot in our weekly top 7.
Superb post! Stablecoins have been thoroughly explained, including what they are, how they work, and why they were developed. It's intriguing to learn that stablecoins work by having their value fixed to a reserve asset like the US dollar or a precious metal like gold. The fact that you listed the most widely used stablecoins on the market as well as your favourite stablecoin, USD Coin (USDC), which you use for cross-border transactions, is also beneficial.
Also, you discussed the risks of stablecoins losing their stability as well as the various causes of this. Anyone thinking about buying stablecoins should consider this information. Ultimately, you have outlined the benefits and drawbacks of stablecoins against other cryptocurrencies. It's amazing what stablecoins can do. Wish you success for the contest