Steemit Crypto Academy S8W2 || WHAT ARE STABLECOINS?
Well wishes to all of you I wish you all will be great by the mercy and compassion of Almighty Allah. Welcome all of you in my this publications.Today I am here for the participations in the Engagement Challenge Season 8 week 2 in the CryptoAcademy and the topic that is covered this time is all about The stable coins So let's discuss about my understanding about the topic and learn more.
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Cryptocurrencey is really volatile in nature different tokens of the currency keep changing their prices rapidly nothing can be predicted in the volatility at any time the prices rise or any time it falls .In this volatility there are also some coins that maintain the stability in the prices even in the high bearish conditions of the market there prices are not much effected.These coins are known as the stable coins. We will discuss in the details now.
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The Stable coins meaning are referred by its name,these are the coins that have the stable nature and does not change their prices rapidly like the other volatile cryptocurrencey.The change of the prices is just noticeable even when the whole market of the cryptocurrencey is in the Bearish Trend.These coins maintain their price for the long period of time.
If the sudden change in the prices of the market occurs it does not effect the value of the stable coins too much.These maintain a stable value for the long period of time.
There are many stable coins that are present in the market .These coins are uses as the trusted coins for the good trading,in business or finance world or in the enterprises due to their stability some of the examples are following.
- Tether
- DAI
- BUSD
- USDC
Types of stable coins🪙 |
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There are many kinds of stable coins in the market. Stable coins ensure the maintenance of their values by using the method of pegging there are also some other methods I will discuss about the pegging here.There are three types of Pegging of the coins in the market.
Some are pegged by the real world assets.Some by the cryptocurrencies and some by the precious assets of the gold and platinum etc.I will catagarized them in three types on the basis of their pegging.
- Fait Callotrized Stablecoins:
These are the stable coins that are pegged by the real world or the fait currency for its maintenance.Such as some stable coins are pegged or backed by the U.S dollars to maintain the stability in the market.
- Crypto Callotrized Stable Coins
These are the coins that are backed by the cryptocurrencey specially the most trending crypto tokens such as the Bitcoins and Ethereum.
- Commdity Backed Stable coins
These are the coins that are backed by the precious real world assets such as the gold and platinum for the maintainance of their prices.
How they maintain their stability❓ |
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There are some methods to ensure the stable price in the market I will discuss some of the procedures of maintaining this stability below.
Algorithms Method. |
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Some coins stabilize their prices in the market by the algorithm's technique.These assets are not backed by any assets for the stability.But different computer programs and techniques are used to ensure the prices.
This work is done by management of the circulations supply in the market.Supply managment helps to reduce the number of released tokens in the market in this way the prices of the tokens are stabilize by the circulations and supply demand difference.
Method of Pegging |
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This method of pegging by different assets is used for the stabilization of the coins price in the market.There pegging technique is considered as the most high demanded technique for the stability as the assets are backed by the crypto,real world assets or the precious Commdity assets of the gold and platinum that helps to maintain the stable prices.
Token Burning |
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Token burning is another technique to stabilize the price in this way some tokens of the stable coins are burned that reducing the supply of the coin in the market due to which the circulation supply of the specific coin increases that maintain the price of the coin .This method is really helpful for the stabilization of the market price.
As we know that the cryptocurrency is really volatile in nature there is need of some coins that stable their prices for trading and we can perform the safe and secure transactions with out loss. In the case of cryptocurrency like bitcoins and Ethereum there are chances of the rapid decrease in the price due to the volatility and in the case some of the assets may loss.Despite of them there are some currencies that stabilize the price while the transaction.
To maintain the prices there will be the specific quantity of backed assets is necessary if this will not enough the coins may loss their stability.
To ensure the price the backed value of the crypto,fait or the commodity is maintained to prevent from any kind of stability lose.
Some major factors for the creation of the stable coins are following.
These coins are created to reduce the volatility or make the transactions more easy and secure without any lose of assets while the transaction.
There stable nature helps the traders to hold the assets for the long period without any loss in their assets because the value of the stable coins not changes a lot.
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Stable coins are useful in many ways.Due to the less voliatility and less decrease in the prices they prove very beneficial for the trading or for the finance system.So I will discuss some useful effects of the stable coins.
Trading |
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Stable coins are used in the trading on the wide range in the business or in the financial enterprise for the earnings of the good profit.These coins are proved very useful because as they are pegged by different assets so there is not too much volatility in the market .When the large bearish crypto trends occurs there is a little change in their prices occurs.
On the other hand they also have the less fee for the transaction as compared to the other cryptocurrencies in the market.
| So the main reasons for their use in the trading is the less voliatility or the stability of the tokens and the less fees. |
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Secured Assets |
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They are considered as the safe assets for the holding because there are less price fluctuations in the prices of the stable coins.If we want to hold the coins stable coins will be good option we can hold the coins without worry of loss in the assets.
| So these are some points that describes the usefullness of the stable coins in our tradings or while making the fast and rapid transactions. |
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Now I will discuss about the most famous or popular stable coins that maintain there price value in the market and also I will discuss that how they stabilise their value.
- Tether
- Busd
- Usdc
- Usdd
- Dai
| These are some famous stable coins currently |
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Tether |
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Tether is among the most famous and top ranked stable coin in the market. It is ranked third in the market .It is pegged by the fiat currency of U.S Dollar for the stabilization of its price.Stable market cap circulation supply you can see in the below Screenshots.
BUSD |
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It is also another top ranked stable coins.We are well known of the token that it is used for the trading in the wide range.For the stability of its prices it is also backed with the U.S dollars.There current rank and price you can see in the below Screenshots.
USDC |
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USDC is the famous and trusted and stable coins that is also counted in the top ranked tokens.This stable coins is also backed with the us dollar and their prices did not fluctuate on the great scale but the minor change of points occurs. Their current marketcap you can see in the below Screenshots.
USDD |
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Another stable coin that has the price in the same range and also pegged by the us dollar is USDD and these are also considered as the good coins for the trading and holding.
So these are some famous stable coins that are widely used in the trading ,swapping,lending etc.
The Coin I used the most❓ |
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Although there are so many coins in the market that are very useful for the trading ,swapping or lending purposes. The most famous coin that i used the most is the USDT.
This coin is also pegged by the u.s dollar and good backed value of fait currencey is kept to stabilize its prices.It is my favourite and I uses the most due to its less volatile nature and stability.
The value of the market cap and rank of it is following.
| Coin | USDT |
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| Ranked | 3 |
| Exchanges | 567 |
| Market Cap | $932,264,209,090 |
| 24h Vol | $94,642,036,525 |
Yes there are many cases in which the stable coins lose their stability due to many reasons .Here I will discuss some cases in which the stable coins lose their stability and their prices eventually decrease.
In the case of Luna crash there where the sudden change in the price of UST that was linked there was the sudden down trend in prices of the stable coins.
Another case is the down trend in the prices of the Tether that is pegged by the fait currencies of the U.S dollar.Its stability was lost beacuse there was not the the proper amount of pegged token present for the backup to maintain the stability of the token.
- DAI is also the well known stable coin and it is pegged with real world assets and we also obserev the suddent decrease in its value sometimes ago.
So these are some cases in which the stable coins lose their stability and their prices goes down due to which the loss of assets also occurs.
| The loss of stability can be caused by the loss in the management or when the issuers are not able to backed up the proper amount of assets that is required to stabilize the price of the token. |
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Now I will discuss about the advantages and dis advantages.Although there are many advantages of the stable coins in regards to our crypto experience it also have some drawbacks both of them I will discuss here .
Advantages✔ |
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- Stability
The stability in the market price is the major advantages òf the stable coin. Stable coins did not fluctuate its prices too much even when the whole Crypto market is in large bearish trend .So their stability is the main advantage as compared to other crypto Currencies.
- Less Voliatility
Another advantage of stable coins is their less volatility due to which their is no price fluctuations while performing the transactions like other cryptocurrencies.
- Liquidity
They have the less voliatility as compared to other traditional currencies.They can be exchanged very easily at any place or at any time we want which is the goof advantage of the stable coins.
Disdvantages❌ |
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- Centralization
The stable coins are centralised there is the involvement of third part in making the transaction and transfer.That some time causes the trust or transparency issues or sometimes the transactions also occurred late.
- Lose of Stability
The stable coins are backed up by the different assets such the crypto assets,fait currencies or the commodities.Sometimes times if there is no sufficient assets for backing up there stability this causes the lose of stability and sudden decrease in the prices.
Some times the lose of stability in more then one token causes the stability lose in all or the collapse in the assets prices.
Stable coins are well-known cryptocurrencies due to its stable or less voliatility they did not changes their prices. these are used in the high demand in trading or for holding or swapping the assets.There were some cases in which the stable coins lose their prices.It is considered as the good tokens for the trading,holding or swapping.
So that was all from my side about the topic.I tried my best to cover all the points.I hope that you all will like to read the post.*
I would like to invite @steemdoctor1,@chant,@yeakspeace,@nadiaturrina to participate in the contest.
Regards:@mateenfatima |
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I would commend that you have done justice to this task dear friend.
Stablecoins as we have been made to understand are backed by real world assets such as fiat currencies or commodities, helping them maintain a consistent value.
They also provide users with greater control over their funds, as they can be held in wallets outside of traditional banking institutions.
Just like you, I too prefer and love using USDT as my stablecoin for storing value and maintaining stability.
I equally heard about some of these crashes in stability of stablecoins you mentioned, ranging from DAI, USDT and UST.
I find this article very informative and intresting to read. Goodluck in this contest friend.
Thanks for your valuable comment.
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LUNA and UST crash left a big mark in the crypto space, and in years to come I doubt if people will get over the crash. I believe the LUNA crash was basically a result of a lack of transparency and lack of management. Thanks for sharing this post.
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