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What Are Stable Coins? Types | List | Importance

Stable coins cryptocurrencies that are increasingly gaining traction — are much more fixed than normal cryptocurrencies. This is because their values are pegged to other assets such as the US dollar or gold. Here, we have discussed the types, list and importance of stable coins.

If you are searching about stable coins and have desire to know more about same then this article will definitely help you. So, read this entire page and collect all crucial details.

Do You Know About Stable Coins?

If we say in simple words then a stable coin can be explained as it is a coin in cryptocurrency, is a token which has its value it’s pegged to the price of a national currency in order to combat its volatility. There are different types of stable coins available and many options along with different projects. With the help of these options, individual may get the same fundamental idea of a cryptocurrency coin which has more stability than Bitcoin or altcoins.

What Are the Types of Stable coins?

There are 3 types of stable coins, namely:

• Fiat-backed stable coins

• Cryptocurrency-backed stable coins

• Non-collateralized stable coins

Fiat-collateralized stable coins

Fiat-collateralized stable coins are the cryptocurrencies that are pegged to a national currency like tether which is pegged 1:1 to the US dollar. As the name implies, fiat currency needs to be deposited as collateral for a fiat-collateralized stable coin to exist. From there, the tokens are issued at the 1:1 ratio against the collateralized fiat currency. It is the simplest way to develop stable coin.

Well, it is a absolutely simple method but requires regular auditing and a financial custodian to oversee that the token remains fully collateralized – which presents a disadvantage of the token being centralized by a party.

Crypto-collateralized stable coins

Crypto-collateralized stable coin has cryptocurrency locked up as collateral like ethereum as fiat-collateralized stable has fiat tender as collateral. If you want to compensate for the volatility of the collateralized cryptocurrency then a security pledge is required by the stable coin. It clearly means that the coin will not have a ratio of 1:1 towards the collateral crypto. It will look more like a $2 USD pledge for every $1 USD stable coin issued.

Non-Collateralized Stable Coins

Seigniorage shares system is the stable coins which make use of these. It is the difference between the value of money and the cost of printing it. Non-collateralized stable coins works on mechanic algorithm that changes the supply volume as requires be in order to maintain their price.

If the price falls below then stable coin can be sold out through the smart contracts. They can supply more tokens to the market if value rises above the pegged currency.

List of Stable Coins:

Well, from above section, you have understood the type of stable coins. Now, you may search for the best stable coins that we have discussed below. So, go through the content given below and get the list of the best-known stable coins. There are numerous stable coins in circulation, so we’re narrowing this down to the top six related to popularity and trading volume.

Fiat-Backed Stable coins:

Tether – USDT

Tether is one of the most successful and well known stable coins in today’s cryptocurrency market to a ratio of 1:1 to the US Dollar. It is the most adoptable stable coin from cryptocurrency exchanges looking to use the token as the go-to currency when direct USD transactions are not possible. This could owe to factors such as country regulations.

But Tether from Coin direct

TrueUSD – TUSD

TrueUSD is a fiat-collateralized cryptocurrency that has gained more trust from critics while tether might have the badge of honor as the first stable coin to make its mark. Stable coins have the capability to manage to gain reputation for transparency through regular audits, fully backed collateral, and fulfilled legal requirements for the USD-peg.

Crypto-Backed Stable coins:

MakerDAO:

The main motive of makerDAO is to utilize the native Maker tokens and the Ethereum blockchain in order to minimize price volatility. In order to collateralize the stablecoin, MakerDAO leverages Ethereum using a smart contract and the Ether collateral gathers into something called a Pooled Ether (PETH), which allows the smart contract to generate MakerDAO’s DAI token and interest over time.

Non-collateralized:

Basis (Formerly Known As Basecoin):

The aim of basis is to project the token to an index-offering wherein the motive of basis is to ensure its stability by pegging its value to a multitude of assets.

Exchange-Backed Stablecoins

The Cryptocurrency exchange tokens are developed with the motive of existing to serve their supporting cryptocurrency exchange. There are exchange-driven stable coins such as the Gemini Dollar which offer Gemini users.

Buy Stable coins:

If a person wants to buy a stable coin then it completely depends on which stable coin they want to buy and where or in which area they are living. The New-York based exchange Gemini would be the best bet, of course, to buy Gemini tokens. The first step would be to decide whether you want a fiat-collateralized, crypto-collateralized, or non-collateralized stable coin and then choose which token is most tailored for your trading needs.

What is the Importance of Stable Coins?

The importance of stable coins cannot be measured. It is considered as very crucial and important element of the broader cryptocurrency industry for a number of reasons that range from more pressing needs in the current climate to impacting how the industry develops over time. Generally, the key is absolutely stable and there are two components that are essential to understand. They are short-term stability for transactions and long-term stability for holding as an investment.


Advantages of Stable Coins:

Stable coins have many advantages. We have discussed it below.

• With the help of these cryptocurrencies, owners may relatively quiet for their assets, taking advantage of all the positive aspects of crypto economy.

• Users can considered these stable coins as dollars, gold, oil and so on traded in crypto exchanges.

• Naturally, against the background of other coins that do not have such a powerful base, they are much more stable.

• The cryptocurrencies provided with actual values can be used in everyday life, in small and medium business almost without fears.

• Blockchain technology allows the holder to be sure that his currency is really provided with an asset.

Disadvantages of Stable Coins:

• There are many peoples who have argued that currencies such as the US Dollar are not good collateral owing to their own inflationary nature.

• This is the reason why the stable coins are not a sustainable solution to the very same problem at Bitcoin is trying to solve.

• Moreover, it could be said that because the fiat-pegged ratio is so blatantly derived from a national tender, the stable coins very well be governed by the nation’s legal financial laws.

Shailly Kashyap

I am a freelance blockchain writer. Having 4 years of experience in blockchain industry, I have written many articles and blogs on cryptocurrency. My goal is to work with dedication, deliver accurate and transparent information that helps to companies and users to grow.

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