The KNOWLEDGE of 'stable' currencies and their importance on an expansive level about cryptocurrencies and how algorithms guarantee the stability of value in "stable" currencies

in Steem Alliance3 months ago (edited)

I will express the KNOWLEDGE of 'stable' coins and their importance at an expansive level on cryptocurrencies.

Greetings fellow steemist writers, I will express the KNOWLEDGE of 'stable' coins and their importance at an expansive level on cryptocurrencies.

"Crypto Stability: An Unbreakable Bond in the Digital Universe."

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Definition of 'Stable' Coins?

  • "Stable" coins are defined by those cryptocurrencies designed to maintain a fixed or equal price in relation to other assets.

  • The price is affiliated with different digital currencies or assets and is commonly backed by the US dollar.

Importance of 'Stable' Coins?

  • They help to calm the volatility associated with different cryptocurrencies such as Bitcoin.

  • They facilitate faster and more economical transactions between exchanges and to gather more liquidity.

Operation and Stability Mechanisms?

Here we will explore how 'stable' coins work and the mechanisms that guarantee their price stability.

Price Determinants in Cryptocurrencies?

  • A cryptocurrency like Bitcoin, its price or value depends on supply and demand in the market.

  • Volatility is common due to its monetization and adoption process.

Mechanisms to Maintain Stability?

  • 'Stable' coins can be backed by assets such as the US dollar or by smart contracts.

  • Smart contracts adjust supply based on demand to maintain value parity.

Practical Example: Working with Algorithms?

A practical example is illustrated of how algorithms guarantee the stability of value in 'stable' coins.
Algorithms and Stability

  • Smart contracts act as automatic regulators of supply according to changes in demand.

Algorithm in PHP language code

<?php

class StableCoin {
private $currentPrice;
private $referencePrice;
private $supply;

 public function __construct($referenceprice, $initialsupply) {
     $this->referencePrice = $referencePrice;
     $this->currentPrice = $referencePrice;
     $this->supply = $initialsupply;
 }

 public function adjustSupply() {
     if ($this->currentPrice > $this->ReferencePrice) {
         $this->supply *= 0.95; // Reduce supply if price is higher than reference
     } elseif ($this->currentprice < $this->referenceprice) {
         $this->supply *= 1.05; // Increase supply if price is lower than reference
     }
 }

 public function setCurrentPrice($price) {
     $this->currentprice = $price;
 }

 public function getSupply() {
     return $this->supply;
 }

}

// Example of use
$stablecoin = new StableCoin(1.00, 1000000); // Reference price $1.00, initial supply 1,000,000
$stablecoin->setCurrentPrice(0.95); // Current price $0.95
$stablecoin->adjustSupply(); // Adjust supply based on current price
echo "New supply: " . $stablecoin->getSupply(); // Show the new adjusted supply

?>

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Stable Coins and How They Work?

'Stable' coins are explored, focusing on some of the most relevant on the market and detailing how they work.
Centralized Stablecoins

  • USDT (Tether) is like one of the largest and most used stablecoins in the digital crypto world and backed by the US dollar.

  • USDT stands out for its increased daily transaction volume, which makes it a very popular currency preferred by financial institutions and traders.

Controversies and Expansion ?

  • Despite its popularity, USDT has faced controversies in the past related to the veracity of its reserves.

  • Other stablecoins such as USDC have expanded their presence to various major blockchain networks, facilitating transfers of value.

Significant Competitors?

  • The GUSD stablecoin has seen significant growth since its launch in 2018, backed by a regularly audited fiat reserve.

  • Another relevant competitor is BUSD, backed by dollars and highly regulated, being the second stablecoin with the highest daily volume after USDT.

Decentralized Alternatives to Stable Coins?

Decentralized alternatives to centralized 'stable' coins are presented here to offer a greater degree of decentralization.
Dai: A Decentralized Alternative

  • Dai is differentiated by not being issued by a central authority and using smart contracts and collateralized positions to support new issuances.

  • Decentralization is a key advantage of Dai by not depending on external entities, being popular on DeFi platforms due to its open and automated protocol.

Cava: Another Decentralized Alternative?

  • Cava is another decentralized option built on Cosmos that allows you to lock cryptocurrencies as collateral for loans in a stablecoin.

Advantages of Decentralized Currencies?

The advantages of decentralized currencies such as die or sticks compared to centralized currencies backed by fiat currencies are discussed.

Advantages of Decentralized Currencies?

  • Decentralized currencies are more reliable as they are backed by open source protocols that can be inspected on blockchains.

  • Users or clients will not need to blindly trust a company through a third party since they can verify the code at any circumstance and at any time.

Popularity of Decentralized Currencies?

The popularity of decentralized currencies is becoming more and more popular and they are difficult to censor, ban or regulate.
Popularity Reasons

  • Decentralized currencies are difficult to control due to their distributed nature, making them difficult to ban or regulate.

  • Decentralization prevents attacks targeting individual companies behind these coins.

Project Built with Cosmos: Cava ?

The Cava project is presented, a decentralized financial platform built with the help of the cosmos.
Key Features

  • Cava is a multi-asset lending platform inspired by MakerDAO but with greater diversity and operable assets.

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This article is written by @OscarDavid79 free of copyright

Weekly Count Publication #4 Wednesday 03 / April 2024 / Time 03:01 am.


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