Hello Steemians you're all welcome to my homework task 6 by Prof @yohan2on.

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Task
Write about any one of the following stable coins;

• Tether(USDT)
• Steem backed dollar(SBD)
• DAI

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INTRODUCTION

1

Prices of major cryptocurrencies, for instance bitcoin,ethereum, e.t.c are too volatile, making cryptocurrency not to be generally accepted by the universe, because it's volatility can cause risk or loss to a proposed cryptocurrency trader. Taking bitcoin as a good example of this. The BTC cryptocurrency, showcased a huge rise as at November 2018 from the level of around $5,950 to around $19,700 in December that same year, then later on by February of the next year, 2019, it decreased to about $6,900. Which stands to be a big loss to those that purchased when it was high.

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In other to encourage cryptocurrencies in the universe, this fears of loss needs to be taken out from the mind of the traders, by finding a remedy to the problem. This solution should be a digital currency like the cryptocurrencies but with no constant volatility of value, for this reason stablecoins are formed.

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Stablecoins are cryptocurrencies that tend to mimic or attach their market value to an external less volatile assets so as to remain stable.

The stablecoins has won the attention of many Industries and business sectors into cryptocurrencies marketing by offering the basic features of both cryptocurrencies and Fiat currencies, some of these features include;

• fast transaction rate of the cryptocurrency blockchain system,
• high security standard of the cryptocurrency blockchain system,
• and the price stability of the Fiat currencies.

The valuation steadiness of the stablecoin is obtained through a term called collateralization or through algorithm system of purchasing and selling the host asset or its produce.

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This then gives way for the types of stablecoins, which would just be listed below, they are;

(a.) Fiat - collateralization - according to it's name, it's backed up fiat currencies. This type is an off-blockchain collateralization

(b.) Crypto - collateralization : backed by cryptocurrencies. Unlike the fiat collateralization, the crypto is a Blockchain process.

(c.) Commodity - collateralization : backed by stable commodities like gold.

(d.) Non-collateralization or algorithm : it's a centralized form, which may have the bank as it's reference. So it's not operated under collateralization.

Examples of the stablecoins are;

- Tether (USDT)
- True USD (TUSD)
- USD Coin (USDC)
- Binance USD (BUSD)
- Steem backed dollar (SBD), e.t.c

But I'll be treating on the Steem Backed Dollar.

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STEEM BACKED DOLLAR (SBD)

2

This is a good example of the fiat-collateralized stablecoin. Before we look at the steam dollar, let's have a little idea of the word, steem.

Steam is actually a blockchain - social platform, cryptocurrency. This cryptocurrency can be awarded to members through writing and publishing of good contents in the steemit platform.

A member of the steemit can achieve three different cryptocurrencies in the steemit platform. They are;

• steem coin
• steem power
• steem dollar (SBD)
• Tronx

At this Junction we now know how the steam dollars are achieved.

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Now the steam dollars are assets in the steemit platform which seems to be more stable than the other two cryptos (steem power and steem coin). The steam dollar is designed in such a way that it is equivalent to the amount of steem $1 (USD) can purchase. It is in the ratio of 1:1 against the US dollar.

The steam dollars once disobeyed the rule of proportionality with $1 as at November - December 2017 when it rised to $13. But since then the steam dollars has returned back to its normal level.

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Because of the steem dollar stability, up to 50% of the reward gotten by the content creaters and curators in the steemit platform are paid in steam dollar (SBD), so as to avoid the volatility problem of steem cryptocurrency. The Steem Backed Dollar (SBD) can't be converted to fiat currency in its form, it must first be converted to any of the cryptocurrencies, like Steem, Bitcoin e.t.c before it can then be converted to Fiat currency.

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CONCLUSION

The Steem Backed Dollar (SBD) are assets of stable currency designed or label to be pegged to $1 (USD).

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This Junction marks the end of my homework task 6 by Prof @yohan2on.

Best regards to:

Cc:
@steemitblog
@steemcurator01
@steemcurator02
@steemcurator04
@stephenkendal
@yohan2on