Contest S4B Crypto Contest :- Season 16
Hi Steemians! It's another season to exchange ideas on the contest subject matter as hosted by the resilient @waqarahmadshah. This is more than a contest per se, but an avenue to inform and educate community members here on crypto related matters.
Steem is one of the tokens that is gaining massive adoption globally. By hosting this contest on regular basis, the community members have benefited in one way or the other which has further, improved our active participation and utilization of the steemit ecosystem.
As been highlighted on the contest hints, I would be making my inputs on stablecoins, how stablecoins maintain their value, the main uses of stablecoins and how stablecoins affect cryptocurrency market liquidity. I now move......!
A stablecoin is a cryptocurrency that has its value attached to that of financial instruments such as commodities like gold or Fiat currencies like the us dollar. This means that stablecoins exists along side the Fiat currencies and commodities.
Stablecoins come in different forms or types as many other coins are developed and are trying to find their way into the crypto space.
The various types of stablecoins are as follows:
- Fiat stablecoins
- Crypto stablecoins
- Algorithmic stablecoins
- Commodity stablecoins
The Fiat stablecoins are the tokens that functions alongside the traditional currency. The value of a stablecoin is secured by the real currency and matches each other in the same value in circulation. Examples of stablecoins are:
The USDT
The USDC
These are cryptocurrencies that their value is attached to other cryptocurrencies. These type of cryptocurrencies are on-chain and they make use of what is known as smart contracts. They can also tame down the price volatility of the parent or original cryptocurrency. An example of the crypto stablecoin is DIA.
An algorithmic stablecoins are quite different from the cryptocurrency and that of Fiat currencies but also make use of smart contracts and unique. If there is an increase or decrease in market prices, the quantity of algorithm stablecoins in circulation increases or decreases just as the price of the Fiat currency it is matched fluctuates.
These are coins that the values are matched are matched with assets such as gold, and oil. The commodity stablecoins can be used used to buy assets and their price can also fluctuate which can make one to also lose money.
Stablecoins serves as an item for transaction. What I mean here is that stablecoins are medium of exchange that are used in-between the Fiat currencies and the original crypto tokens. Now stablecoins maintain their value by reducing the volatility of prices associated with original crypto tokens, also that of commodities. This makes it attractive as a medium of exchange for daily transactions.
The main uses of stablecoins are:
They used as a medium of exchange
They can be used as a real store of value
It can be used as loan facility in the market
It can be used to bridge the gap between the the decentralized financing(Defi) and the main financial markets.
Stablecoins provides funds in the form of liquidity pools which are decentralized pool of funds for the purposes of generating liquidity for the cryptocurrencies that would be traded with the stablecoins.
A Stablecoin is a cryptocurrency that has its value matched or secured financial instruments like theus dollar, gold, and oil.
There are different types of stablecoins and they are: the commodity stablecoins, the Fiat stablecoins, the crypto Stablecoins, and the algorithmic stablecoins.
The stablecoins are useful in many ways including its state of being used as a real store of value.
The stablecoins are have been on the verge of providing liquidity in the cryptocurrency market through the decentralized means.
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