Steemit Crypto Academy Contest / S8W2 - What are Stablecoins?
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Hello friends in this community, I trust you're good. Trust me I feel happy to be here once again. The topic before us is quite interesting and engaging, I couldn't but prepare my entry on seeing the contest topic.
Stable coin is an interesting topic in the crypto world. If you're not new to this space, then the word stable coin shouldn't be new to you. But come to think of it, what would the crypto space look like without stable coin? How many people would have been huge casualty in this space? Anyways let me delve into the topic proper using the guideline given... Shall we?
I am still very young in the crypto world but then within the short time I've spent I can say something about stable coin. Stable coin are actually crypto currencies whose price are stable and fixed in all circumstances unless there is an unforseen breach somewhere.
Their value are actually pegged to an external asset, commodity or fiat such as U.S Dollar and algorithm.
In other words, it is design to remain fixed in value or price in the face of hard or adverse condition in the market. Adverse market condition such as volatility has been one of the major problem traders or investors face in the market prior to the advent of this stable coin.
So many have suffered loss in the face of adverse and unfavourable market condition that is why the introduction of this coin brought hope to many as it has contributed immensely in the minimization of loss.
Stable coin are created for quite a number of good reasons. I mentioned above that it has helped to reduce investors loss in recent times. It is also important to note that Volatility is one major problem faced in the crypto market.
The best of trader cannot predict the market 100%. The best of the best can push his or her accuracy up to 90% or more. What am trying to say is that volatility happens unannounced. By volatility I mean sharp increase or decrease in the price of asset.
This is why we need stable coin whose value is tied to an underlying asset in the ratio 1:1 meaning no matter what hit the market including volatility, they can still maintain a fixed and stable price in the face of the shaking.
The underlying asset can be commodity like gold, silver, oil and the like. It can also be a crypto asset which could be Ethereum or Bitcoin, it can also be fiat such as U.S Dollar. The goal is that you don't get caught up in price fluctuation such that we run into loss.
We have quite a number of Stable coin out there and this include the following;
- BUSD
BUSD simple means Binance USD which is actually tied to the U.S Dollar. This is the very one created by binance exchange which aims to stabilize price. It has become a coin that is now widely accepted by many, especially those who use the exchange as there are some benefit you get for transacting with BUSD on the binance CEX.
- USDT
USDT which is also known as tether . It is tied to the U.S dollar (Fiat). Personally I used this stable coin more than every other. I decided to join the millions of people who use it out there. No doubt, it ranks among the top and most used stable coin out there.
- USDC
This is another generally accepted stable coin out there. Although I have not used it before. It is also tied to the U.S dollar and also rank among the top stable coin we have in the market today.
In summary we have BUSD, USDT, USDC, TUSD and the likes. I have only used just two of the aforementioned stable coin which are BUSD and USDT and my experience with the two has been awesome so far.
Well I am about to break your heart with my response to this question. The question is actually YES. My answer is not without proofs, it's no more a new that TerraUSD actually flopped months ago which threw many into a big pool of loss so many have not recovered from today.
TerraUSD is a stable coin that was designed to function algorithmically coupled with the underlying Luna asset it is pegged with but it actually failed at a point. It was recorded that the loss after the fall was up to 80% leaving the value of the said stable coin at 0.225 as at 11th of may according to coinmarketcap.
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The truth is stable coin are backed by underlying asset. For example if the underlying asset is Gold, you need to have more than enough gold in reserve to continually pegged the stable coin such that it doesn't lost it value in the face of unforseen circumstances.
In some cases underlying asset might need to undergo burn in a case where it value rises above the stable coin because both is suppose to be in ratio 1:1. We shouldn't be suprise when we see these things fail because human are the ones behind them.
That's why we need to check the credibility of those behind a project sometimes, they might tell you they have enough reserve to keep the coin stable and then on the long run,it fails because it all lies. Even algorithm fails.
- Advantages.
It seems universal in nature, meaning it widely accepted for transaction as it help bridge the gap of diversity that would have occurred if you were to transact using all manner of crypto.
It has does a very good job pegging the value of asset. As an investor you can save yourself from volatility when you keep your asset in stable coin. Just as it names implies, it will stabilize the value.
It also helps in the area of liquidity, since it is widely accepted, it has the ability to be transacted with any time any day.
- Disadvantage
It can fail, just as seen in the case of TerraUSD. It was design to be stable but then the unexpected can happen.
Stable coin that are crypto backed can also face severe compromise in the sense that volatility can make the underlying crypto asset affect the stable coin it is pegged with.
For long term spot traders who likes to hold, keeping asset in stable coin would not make your portfolio grow or appreciate even when the market is bullish. Stable coin is design such that the value of the asset remain fixed in the face of different market conditions. You can only see little increase in some rare bullish condition which happens once in a blue moon.
Stable coin has helped minimize the risk of losing ones asset but then we also have to do a thoroughly assignment on which to subscribe to. This is because these stable coin can be compromised.
I will like to wrap it up here. I hope you got value from my little knowledge about stable coin. Like I said earlier, am still a babe when it comes to this crypto space. Feel free to share with me your thought in the comment section.
Just before I go, I would love to invest my very good friends @josepha @ruthjoe @enamul17 @harun to this contest. I hope they find it interesting. Gracias!
Regards
@lhorgic♥️
Before I give comments on your post, permit me to appreciate your graphic design.
The cover image of your post is catching, it attracted me to your blog and I was not disappointed by what I saw.
You have fulfilled all necessary criteria for this challenge.
In the last part of this contest, you gave a very easy to understand advantage and disadvantage of a stable coin.
Not to comment on your question 1, you explained what stablecoin means In your own words.
The professor should read your post with joy, I wish you the very best in this contest @lhorgic 😊😊
On seeing your comment I could not be express my shock. You took your time to make this quality comment.
I really appreciate the fact that you went through the post as well... your comment on my post is much appreciated.
I feel motivated because you my boss just commended my little piece. Thanks for dropping by boss. I wish you the very best.
Lol 😂,
We keep trying our best on the platform, keep up the good work bro 🤍
your presentation about stablecoins is very good thanks for sharing
Thank you so much. I appreciate your comment.
would you like to vote our witness @stmpak.wit
I don't have any problem with voting witnesses, I know how important they are in the steem ecosystem. Kindly permit me to read about you and get back to you. Thanks.
Hello DEAR @lhorgic,
Thanks for reaching out... I will go through you proposal and contribution via the link. Kudos.
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I would like to give a shoutout to @lhorgic for writing such an informative post on stablecoins for the Steemit Crypto Academy Contest S8W2. Your post was very well-written and presented in a clear and concise manner.
I found your explanation of stablecoins and their benefits to be very helpful. Your examples of stablecoins, such as Tether, USD Coin, and Dai, helped me to understand how they work in real life. Additionally, your detailed analysis of the advantages and disadvantages of stablecoins was insightful and informative.
I appreciate that you delved deeper into the working mechanism of stablecoins, explaining how they maintain their stability through various methods like collateralization, algorithmic adjustments, and reserve backing. Your post was an excellent resource for anyone who wants to learn about stablecoins.
Thank you so much dear friend, I really appreciate you valuable comment on my post.
Am glad you took out time to carefully analyse in your comment what you benefited from my little write up.
Thanks for dropping by. I wish you the very best. #steem-on
Ciertamente, las monedas estables ofrecen la particular ventaja de disminuir los riesgos y mitigar las perdidas; pero también pueden estar sujetas a perder su estabilidad; nada es infalible desde el punto de vista humano. Excelente participación!Exitos.
Thanks dear friend... Am glad you can perfectly relate with my submission on the subject matter. I appreciate your comment. #steem-on
You have taken time to analyses on stable coin. Thanks for sharing this valuable insight.
Yea I totally agree with you on the reasons why Stablecoins was created which was to ensure stability from a rather volatile or unstable market where we can't predict the future price of an asset with certainty.
So in all I think Stablecoins offers us stability in our funds that traditional crypto asset may not.
Thanks for your post
Thanks for your valuable comment on my post. It's much appreciated
You have done well @Ihorgic
You have done well👍, have read all your acticle