Steemit Crypto Academy Contest Season 8 Week 2 - What are Stablecoins?
Greetings Steemit Crypto Academy community! I am Exciting to join the Steemit Engagement Challenge Season 8 Week 2 with my 6th entry. Let's engage with each other's user , share our experiences, and strengthen our connection on Steemit . Looking forward to supporting and learning from all of you dears . Thank you for this opportunity, let's make Steemit a welcoming and supportive platform for all .
ABC of Stable coin |
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Stable Coins are a specific types of cryptocurrency designed to hold a stable value, which makes them a trustworthy option for traders and investors looking fo to minimize the risks associated with significant price up and down . However the other cryptocurrencies that can be more volatile, stablecoins are linked to the value of a real-world assets , such as a currency, commodity, or financial instrument, including gold or the US dollar .
Stable Coins can provide opportunity to investors and traders with a stable store of value and a reliable medium of exchange, making them a more practical option for everyday trading , such as paying for commodities and services. This type of cryptocurrency also allows investors to easily out funds across different platforms or exchanges, without cutting the high transaction fees and processing times associated with traditional banking systems. Overall, stablecoins offer a great solution for the challenges associated with traditional cryptocurrencies and can offer a more stability and secure investment option for both individuals and businesses.
![cryptocurrency-3435862__480.jpg](https://steemitimages.com/640x0/https://cdn.steemitimages.com/DQmQbduqQXJ1bAPTeXHJkTjCvbEwfFhfpfa4qP5wypuGopD/cryptocurrency-3435862__480.jpg)
How to menage stable coin |
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Tether (USDT): Tether is a centralized stable coin that manages its peg through a reserve of fiat currency (USD) keep in a bank account. Tether claims that for every USDT issued, there is an equivalent amount of USD held in stock .
True USD (TUSD): True US dollar is also a centralized stablecoin that uses a similar method to Tether, keep a reserve of USD in a bank account to back the value of the coin.
Gemini Dollar (GUSD): Gemini Dollar is a regulated stable coin that is pegged to the USD and managed by GT Company LLC. It is similar reserve method to Tether and True USD, keeping USD in a bank account to back the value of the coin.
Algorithm of Stable coin |
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In addition to the above mentioned methods, some stablecoins are managed algorithmically as well . For example:
Dai (DAI): Dai is a decentralized stable coin that is pegged to the USD but also managed algorithmically through a system of collateralized debt positions (CDPs). The value of Dai currency is maintained by a system of incentives and penalties designed to encourage holders to adjust their positions in response to market fluctuations.
TerraUSD (UST): Terra USD is a decentralized stablecoin that offer a similar method to Dai currency , managing its peggging through a system of algorithmic activities and penalties based on the supply and demand of the token.
Stablecoins can be managed through various ways, depending on their specific kinds . However, the ultimate objective is always to ensure price stabilization and provide a dependable alternative for investors and traders seeking to mitigate risks related to price volatility.
Why were stablecoins created and how are they useful? |
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Stablecoins were created as a way to address the volatility and stability of cryptocurrencies such as Bitcoin and Ethereum. Unless these cryptocurrencies, stablecoins are created to maintain a stable currency value, typically pegged to a fiat currency such as the USDor euro.
Stablecoins are beneficial in several ways. Firstly, they provide a way for users to keep hold cryptocurrency without being exposed to the volatility of the market. This makes stablecoins a more wonderful option for those who want to use cryptocurrency for day-to-day transactions or as a store of value.
Secondly, stablecoins can be used to transfer currency quickly and cheaply across borders. Unlike old payment methods that may take days to process plus involve high fees, stablecoins can be transferred fast and with low fees.
What are the most popular stablecoins? Which do you use more and why? |
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I have been using USDT currently , which is a stable coin, to withdraw my steem rewards from two different cryptocurrencies, and also TRX. I usually exchange these rewards for USDT in Binance, a cryptocurrency exchange application . When I receive rewards in Steem or TRX from steemit , I send them to my Binance account, where I can then exchange them for USDT on direct or indirect method . I prefer to use USDT as it allows me to easily convert my steem and TRX rewards into a stable asset that I can hold or use for other purposes.
Binance is a most popular cryptocurrency exchange that offers a wide range of trading pairs , including USDT/STEEM and USDT/TRX. By exchanging my rewards for USDT on Binance, I can fast and easily convert them into a stable coin that I can use for other trades or withdraw to my Easy paisa Account .
Can stablecoins lose their stability? If the answer is yes, then cite some cases with an explanation of the reasons of that. |
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Stablecoins are created to maintain a stable price, usually pegged to the US dollar or another valuable asset. However, stablecoins can lose their pegs in certain cases , as discussed below.
- An Algorithmic Failure: Algorithmic stablecoins use a computer algorithm to maintain the pegs and are not sponsor by any asset. Terra Luna (LUNA) currency and TerraUSD (UST) currency maintained each other's prices through a burn/mint balance. However, in May 2021, Anchor, a protocol that allowed users to deposit their UST for rewards, dropped its yield from 20 percent to 4 percent . Investors withdrew their UST and sold , leading to a huge drop in demand for UST currency . Terra Labs, the owners of LUNA and UST, couldn't do anything to menage the drop in demand, which sealed at movement the fate of both cryptocurrencies.
Lack of Over-Collateralization: Stablecoins often need over-collateralization to hold an mentain their pegs. MakerDAO is a borrowing and lending platform that uses the Dai stablecoin (pegged to the USd). MakerDAO has a collateralization ratio of 150 percent , meaning that for every dollar worth of DAI borrowed, $1.50 of another crypto must be deposited.
A Market Ripple Effect: Confidence and trust are both important for stablecoins, and lack of trust can lead to market crashes. When LUNA and UST crashed due to a massive drop in demand of , the rest of the crypto industry became nervous at time . This more or less affected every cryptocurrency in the game of crash , including Tether, the market's most popular stablecoin, which shake significantly.
![stock-market-6693060_1280.jpg](https://steemitimages.com/640x0/https://cdn.steemitimages.com/DQmdhE6n3RSnhS7tryGkRLGm1gVJt3Pq1k7HgWyShqG75YG/stock-market-6693060_1280.jpg)
What are the advantages and disadvantages of stablecoins compared to traditional cryptocurrencies? |
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Advantages Explained:
Borderless Payments: Stablecoins offer countless payments, allowing for direct and unchangable transactions that cannot be blocked or censored.
Low Fees: Stablecoins also offer low fees due to the lack of intermediaries and their P2P nature, making them a inexpensive option than traditional transactions of funds.
Quick Transactions: Stablecoins offer quick transactions due to the absence of intermediaries and waiting periods, making transactions faster compared to traditional ones.
Transparency: Stablecoin transactions are based on public blockchains, making it possible for users to monitor each transaction in transparent way , providing the much-needed transparency that traditional payments methods lack.
Disadvantages Explained:
Centralization: The maximum of stablecoins are owned by an individual organization, making them centralized and creating another form of ownership similar to what banks currently have.
Dependence On Traditional Financial Markets: Stablecoins are mainly pegged to fiat currencies, making their value dependent on the current condition of the global economy that subject to inflation, which FIAT currencies have.
Regulation: The irreregulation in the field is a disadvantage for all cryptocurrencies , including stablecoins, as there is a long way for them to groom into what they are intended to be and to function as a means of transacting.
Enough for today and best of luck
![HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9VYqLbi6Za3tNFePwdCjmb5kxBGWRJQk8bn7KiQogL2ABA8F9sV27iSh8rmXQ6ceGrLntQbumv7bvEr.png](https://steemitimages.com/640x0/https://cdn.steemitimages.com/DQmZsCs3hxbFYfB1naY8BRycxss8bpjyDARDk4U3xuf5Dry/HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9VYqLbi6Za3tNFePwdCjmb5kxBGWRJQk8bn7KiQogL2ABA8F9sV27iSh8rmXQ6ceGrLntQbumv7bvEr.png)
References :
- ABC of Stable coin :Reference 1
- How to menage and algorithm of stable coin Reference 2
- Why were stablecoins created and how are they useful? Reference 3
- Stable coin loose their stability Reference 4
- Advantages and Disadvantages of Stablecoins Reference 5
![HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9VYqLbi6Za3tNFePwdCjmb5kxBGWRJQk8bn7KiQogL2ABA8F9sV27iSh8rmXQ6ceGrLntQbumv7bvEr.png](https://steemitimages.com/640x0/https://cdn.steemitimages.com/DQmZsCs3hxbFYfB1naY8BRycxss8bpjyDARDk4U3xuf5Dry/HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9VYqLbi6Za3tNFePwdCjmb5kxBGWRJQk8bn7KiQogL2ABA8F9sV27iSh8rmXQ6ceGrLntQbumv7bvEr.png)
#club100
Total power up : 1174 steem
Transfer : 00 steem
![HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9VYqLbi6Za3tNFePwdCjmb5kxBGWRJQk8bn7KiQogL2ABA8F9sV27iSh8rmXQ6ceGrLntQbumv7bvEr.png](https://steemitimages.com/640x0/https://cdn.steemitimages.com/DQmZsCs3hxbFYfB1naY8BRycxss8bpjyDARDk4U3xuf5Dry/HNWT6DgoBc14riaEeLCzGYopkqYBKxpGKqfNWfgr368M9VYqLbi6Za3tNFePwdCjmb5kxBGWRJQk8bn7KiQogL2ABA8F9sV27iSh8rmXQ6ceGrLntQbumv7bvEr.png)
Thank you very much
Goodbye, friends. It's been a pleasure getting to know you all and participating in this community. I will miss interacting with all of you, but it's time for me to move on. Take care and I hope to see you all again very soon.
Your gorgeous friend Hamad khan
As the sun sets on the day
And the night falls softly in
We close this chapter, dear reader
But the story's not yet done
Tomorrow's pages wait, unwritten
INTRODUCTION
As the sun sets on the day
And the night falls softly in
We close this chapter, dear reader
But the story's not yet done
Tomorrow's pages wait, unwritten
INTRODUCTION
TEAM 5 CURATORS
This post has been upvoted through steemcurator08. We support quality posts anywhere and with any tags.
This is a great post, I am glad to learn from it. I still ask myself if it is possible that cryptocurrency ever become fully decentralized seeing that centralization can be a problem for stablecoins and many other coins. Decentralization can reduce regulations which is one of the disadvantages of having a stablecoin.
Las monedas estables infieren rápidas transacciones y una oportuna transparencia, sin embargo, no se puede negar la cierta dependencia del mercado tradicional como una de sus desventajas. Saludo cordiales, muy buena entrada
Thank you dear for your comment! It's true that stablecoins can offer quick transactions and also transparency, but they do have a certain dependence on the traditional market as one of their drawbacks i mention . Best regards!
It is nice to have read your article.
You explained the Advantages and disadvantages of stablecoin so well.
Over all you have a good work, I wish you the very best 😊
Thank you dear @jueco for taking the time to read my post and for your positive feedback. It's always great to know that the information provided is helpful and readers gets something .
Delivering excellence and interesting article as always dear friend.
You have shown and illustrated the importance and usefulness of stablecoins to the financial sector of the blockchain space.
Given the fact that stablecoins are backed by real world assets, traders from every part of the globe can relate and transactions with it, without the fear of a fluctuating market.
Excellent job from your part to share this piece with us, I wish you goodluck in this contest boss.
Thank you @preye2 for your kind words and for appreciating the post on stablecoins. It's great to found that the importance of stablecoins in the blockchain space is being recognized.
Hey friend, you have really done well to break down this topic into simpler terms, now even a newbie would perfectly understand the term stable coins.
Stable coins are faster when running transactions, when compared to traditional money because they have inherited the traits of a Blockchain
Thank you dear , i hope newbie will get a lot from this post .