A BRIEF INTRODUCTION TO STABLE COINS

 


A Stablecoin is a type of cryptocurrency where the value of the digital asset is supposed to be pegged to a reference asset, which is either fiat money, exchange-traded commodities (such as precious metals or industrial metals), or another cryptocurrency

How Does Stablecoin Work?

Stablecoins attempt to peg their market value to some external reference, usually a fiat currency. They are more useful than more-volatile cryptocurrencies as a medium of exchange. Stablecoins may be pegged to a currency like the U.S. dollar or to the price of a commodity such as gold or use an algorithm to control supply. They also maintain reserve assets as collateral or through algorithmic formulas that are supposed to control supply.

What Is the Purpose of Stablecoin?

Stablecoins aim to provide an alternative to the high volatility of popular cryptocurrencies, including Bitcoin (BTC), which can make cryptocurrency less suitable for common transactions.

Stablecoin vs Bitcoins

A stablecoin is a token that has a non-volatile price and Bitcoin is a cryptocurrency whose price is volatile in nature. Stablecoins are used to minimize the price volatility of cryptocurrencies like Bitcoins.

Examples of stable coins:

USDT

BUSD

USDC

TUSD

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