What Are Stablecoins?
A “stablecoin” is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price.
Cryptocurrencies such as Bitcoin and Ethereum offer a number of benefits, and one of the most fundamental is not requiring trust in an intermediary institution to send payments, which opens up their use to anyone around the globe. But one key drawback is that cryptocurrencies’ prices are unpredictable and have a tendency to fluctuate, sometimes wildly.
This makes them hard for everyday people to use. Generally, people expect to be able to know how much their money will be worth a week from now, both for their security and their livelihood.
Cryptocurrency’s unpredictability comes in contrast to the generally stable prices of fiat money, such as U.S. dollars, or other assets, such as gold. Values of currencies like the dollar do change gradually over time, but the day-to-day changes are often more drastic for cryptocurrencies, where the value jumps up and down regularly.
The following graph shows the price of bitcoin (BTC, -5.42%) vs. the U.S. dollar (USD) compared to another fiat currency, the Canadian dollar (CAD), to see how much each currency fluctuates in relation.
Stablecoins were worth more than $10 billion as of May 2020. In countries like Brazil, many people are turning to stablecoins as an alternative to their national currencies in uncertain economic conditions. Meanwhile, in Hong Kong, some people are using stablecoins to avoid new internet censorship in a tumultuous political climate.
Stablecoins in a nutshell
Stablecoins try to tackle price fluctuations by tying the value of cryptocurrencies to other more stable assets – usually fiat. Fiat is the government-issued currency we’re all used to using on a day-to-day basis, such dollars and euros, and it tends to stay stable over time.
Usually the entity behind the stablecoin will set up a “reserve” where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin.
This is how a digital stablecoin and a real-world asset are tied together. The money in the reserve serves as “collateral” for the stablecoin. A user can theoretically redeem one unit of a stablecoin for one unit of the asset that backs it.
There is a more complex type of stablecoin that is collateralized by other cryptocurrencies rather than fiat yet still is engineered to track a mainstream asset like the dollar.
Maker, perhaps the most famous stablecoin issuer that uses this mechanism, accomplishes this with the help of Collateralized Debt Positions (CDPs), which lock up a user’s cryptocurrency collateral. Then, once the smart contract knows the collateral is secured, a user can use it to borrow freshly minted dai, the stablecoin.
A third variety of stablecoin, known as an algorithmic stablecoin, isn’t collateralized at all; instead, coins are either burned or created to keep the coin’s value in line with the target price. Say the coin drops from the target price of $1 to $0.75. The algorithm will automatically destroy a swathe of the coins to introduce more scarcity, pushing up the price of the stablecoin.
This type of stablecoin is much less popular so far. One of the most popular stablecoins following this model, basis, shut down in 2018 due to regulatory concerns.
Types of stablecoin collateral
Using this framework, stablecoins come in a range of flavors, and the collateralized stablecoins use a variety of types of assets as backing:
Fiat: Fiat is the most common collateral for stablecoins. The U.S. dollar is the most popular among fiat currencies, but companies are exploring stablecoins pegged to other fiat currencies as well, such as bilira, which is pegged to the Turkish lira.
Precious metals: Some cryptocurrencies are tied to the value of precious metals such as gold or silver.
Cryptocurrencies: Some stablecoins even use other cryptocurrencies, such as ether, the native token of the Ethereum network, as collateral.
What are the most popular stablecoins?
To give you a taste of the experimentation happening in stablecoin land, let’s run through some of the most popular stablecoins.
Diem
Diem (formerly known as Libra) is a stablecoin in the works, originally conceived by the powerful, worldwide social media platform Facebook. While libra hasn’t launched, it’s had more psychological impact than any other stablecoin.
Governments, notably China’s, are now exploring their own crypto-inspired digital currencies, in part because they’re worried Diem would be a competitive threat since Facebook is a multinational company with billions of users from across the globe.
Initially, the Diem Association, the consortium set up by Facebook, said Diem would be backed by a “basket” of currencies, including the U.S. dollar and the euro. But due to global regulatory concerns, the association has since backed off from its ambitious original vision. Instead, it is now planning to focus on developing multiple stablecoins, each backed by a separate national currency.
Its first stablecoin, the Diem dollar, is expected to launch as early as January 2021.
Tether
Tether, or USDT (+0.25%), is one of the oldest stablecoins, launched in 2014, and is the most popular to this day. It’s currently one of the most valuable cryptocurrencies overall by market capitalization.
The primary use case for USDT is moving money between exchanges quickly to take advantage of arbitrage opportunities when the price of cryptocurrencies differs on two exchanges; traders can make money on this discrepancy. But it has found other applications: Chinese importers stationed in Russia have also used USDT to send millions of dollars worth of value across the border, bypassing strict capital controls in China.
Tether Ltd., the company that issues USDT, is embroiled in a legal battle with the New York Attorney General concerning providing financial documents that would illuminate its financial relationship with the cryptocurrency exchange Bitfinex.
USD Coin
Launched in 2018, USD Coin is a stablecoin managed jointly by the cryptocurrency firms Circle and Coinbase through the Centre consortium.
Like tether, USD Coin is pegged to the U.S. dollar. It is the second-largest stablecoin by market capitalization.
Dai
Running on the MakerDAO protocol, dai is a stablecoin on the Ethereum blockchain. Created in 2015, dai (+0.02%) is pegged to the U.S. dollar and backed by ether (ETH, -6.59%), the token behind Ethereum.
Unlike other stablecoins, MakerDAO intends for dai to be decentralized, meaning there’s no central authority trusted with control of the system. Rather, Ethereum smart contracts – which encode rules that can’t be changed – have this job instead.
There are still problems with this innovative model, however; for example, if the smart contracts underpinning MakerDAO don’t work exactly as anticipated. Indeed, they were gamed earlier this year, leading to losses of $8 million.
Do stablecoins have any drawbacks?
There are a few drawbacks to stablecoins to keep in mind. Because of the way stablecoins are typically set up, they have different pain points than other cryptocurrencies.
Crypto publication The Capital, for instance, argues that while stablecoins are called “stable,” they are only as stable as the asset that the stablecoin is tied to. Traditionally, the price of the dollar is very stable, but if that were to change, any fluctuations in the value of the dollar would be reflected in the stablecoin.
If the reserves are stored with a bank or some other third party, another vulnerability is counterparty risk. This boils down to the question: Does the entity really have the collateral it claims to have? This has been a question frequently posed to Tether, for instance, without clear answers. Tether has yet to provide a full open audit of its reserves.
Many stablecoin issuers don’t provide transparency about where their reserves are held, which can help a user determine how risky the stablecoin is to invest in. Knowing where their money is held, users can see if a stablecoin is operating without a license in the region where the reserves are held. If the stablecoin operators don’t have a license, a regulator could potentially freeze the stablecoin’s underlying funds, for instance.
Further, it’s possible the reserves backing a stablecoin could turn out to be insufficient to redeem every unit, potentially shaking confidence in the coin.
Cryptocurrencies were created to replace intermediary companies that are typically trusted with a user’s money. By their nature, intermediaries have control over that money; for example, they are typically able to stop a transaction from occurring. Some stablecoins add the ability to stop transactions back into the mix.
USD Coin openly has a back door to stop payments if coins are used in an illicit manner. Circle, one of the firms behind USD Coin, confirmed in July 2020 that it froze $100,000 of USD Coin at the behest of law enforcement.
That’s the end of my 'What is Blockchain' guide! I hope you have understood everything I have explained, and I hope that you found it interesting!Very secure
bitcoin pdf
ethereum calc bitcoin mmm приложения bitcoin apple bitcoin equihash bitcoin bitcoin course asic ethereum заработок ethereum описание bitcoin bitcoin core otc bitcoin monero free bitcoin растет bitcoin linux bitcoin com bitcoin virus
io tether удвоить bitcoin bitcoin maps monero сложность
ethereum fork bitcoin nvidia bitcoin calc monero minergate
bitcoin расшифровка ethereum os microsoft ethereum bitcoin dogecoin bitcoin fpga Bitcoins don't solve any problems that fiat currency and/or gold doesn't solvesimple bitcoin txid ethereum matrix bitcoin laundering bitcoin bitcoin world equihash bitcoin криптовалют ethereum криптовалют ethereum testnet ethereum javascript bitcoin ethereum twitter bitcoin coin bitcoin daemon time bitcoin bitcoin список
ava bitcoin
краны ethereum
bitcoin цены bitcoin token Gas and paymentbitcoin сша ethereum coin maining bitcoin bitcoin телефон bitcoin wmx bitcoin de
bitcoin delphi ethereum russia mercado bitcoin bitcoin сеть bitcoin calc all cryptocurrency bitcoin государство bitcoin maps график ethereum tokens ethereum bitcoin currency
подтверждение bitcoin системе bitcoin film bitcoin monero transaction bestexchange bitcoin frontier ethereum doubler bitcoin stock bitcoin куплю ethereum рулетка bitcoin all cryptocurrency q bitcoin пополнить bitcoin safe bitcoin global bitcoin today bitcoin habrahabr bitcoin bitcoin plugin bitcoin arbitrage
bitcoin core bitcoin зарабатывать bitfenix bitcoin bitcoin sec cryptocurrency charts пул bitcoin monero пул bitcoin проблемы loans bitcoin bitcoin crash grayscale bitcoin daemon monero bitcoin escrow курсы ethereum stock bitcoin
bitcoin 100 cryptocurrency charts bitcoin ledger куплю ethereum To help you understand some of the other advantages that blockchain offers to businesses, here are some examples of industries that are currently using blockchain technology. This will surely get blockchain explained!bitcoin online 3d bitcoin фонд ethereum заработок bitcoin
bitcoin pizza windows bitcoin фермы bitcoin demo bitcoin bitcoin plus bitcoin keywords bitcoin фарминг qtminer ethereum автокран bitcoin bitcoin fun
bitcoin зарегистрироваться bitcoin phoenix euro bitcoin
dorks bitcoin kinolix bitcoin bitcoin q bitcoin ethereum cryptocurrency market bye bitcoin usdt tether bitcoin reddit bitcoin падение количество bitcoin bitcoin биржи
The traditional move would be to hedge against stock volatility with gold. This has proven an effective method in the past, but a newer alternative is challenging the old-school safe-haven. Launched in 2009, bitcoin ushered in a new era of digital currencies. As the leading cryptocurrency, bitcoin has many of properties of a currency, but with some unique features that could make it a viable haven. Ultimately, though, it remains up to the individual investor to determine if bitcoin is a suitable safe space in times of market trouble.баланс bitcoin bitcoin trader ethereum gas акции bitcoin обвал bitcoin cold bitcoin mine ethereum ethereum faucet bitcoin создать polkadot stingray bitcoin пожертвование cryptocurrency calendar bitcoin xpub капитализация bitcoin bitcoin msigna
bitcoin hyip bitcoin pools bitcoin development bitcoin school android tether mixer bitcoin история ethereum okpay bitcoin my bitcoin
bitcoin pattern bitcoin бизнес обменять monero обменять monero bitcoin xapo надежность bitcoin bitcoin python продажа bitcoin
500000 bitcoin difficulty monero bitcoin explorer bitcoin xpub bitcoin майнинг tether apk
bitcoin 4096 хардфорк bitcoin satoshi bitcoin
bitcoin автоматически bitcoin брокеры easy bitcoin серфинг bitcoin bitcoin 2017 site bitcoin альпари bitcoin bitcoin suisse bitcoin earn mixer bitcoin bitcoin fields майнить monero cryptocurrency arbitrage bitcoin cryptocurrency clicks bitcoin bubble bitcoin bitcoin example kong bitcoin cryptocurrency dash seed bitcoin bitcoin обналичивание bitcoin 2020 carding bitcoin A method of value transfer is any object or concept used to transmit property in the form of assets from one party to another. Bitcoin’s volatility at the present makes it a somewhat unclear store of value, but it promises nearly frictionless value transfer. As a result, we see that bitcoin's value can swing based on news events much as we observe with fiat currencies.bitcoin рубли ico bitcoin ethereum farm ethereum dag bitcoin scanner bitcoin fund bitcoin сигналы the ethereum bitcoin cap bitcoin блог rx580 monero bitcoin casinos обвал bitcoin сети ethereum bitcoin knots fx bitcoin кошелька bitcoin bitcoin investing заработка bitcoin 20 bitcoin банк bitcoin отзывы ethereum cryptonator ethereum ethereum видеокарты bitcoin курс ethereum com обмена bitcoin monero пулы ethereum contracts bitcoin song bitcoin info bitcoin puzzle bitcoin аккаунт bitcoin 2020 monero pools bitcoin hack INTERESTING FACTbest bitcoin bitcoin аналитика bitcoin make bitcoin farm collector bitcoin конвертер monero ethereum перевод widget bitcoin создатель bitcoin ethereum stats bitcoin 100 bitcoin earn usb tether ethereum ubuntu attack bitcoin hit bitcoin bitcoin bloomberg bitcoin взлом bitcoin fire bitcoin депозит хардфорк monero So, that answers part of 'how does Bitcoin work?', but it doesn’t answer all of it. To really learn how Bitcoin works, we should move on to how the Bitcoin transactions work…Investing in Cryptocurrencybitcoin free ethereum алгоритм bitcoin buy bitcoin png bitcoin map bitcoin poloniex bitcoin cgminer bitcoin avalon что bitcoin bitcoin tools avalon bitcoin bitcoin пополнить ethereum курсы bitcoin sha256
bitcoin neteller monero rub bitcoin plus
bitcoin demo tether limited bitcoin ann fee bitcoin tether iphone 6000 bitcoin bitcoin multisig bitcoin биржи bitcoin master tokens ethereum bitcoin motherboard future bitcoin блокчейн ethereum фото ethereum bitcoin миксеры ethereum coins бот bitcoin rx470 monero
monero blockchain bitcoin passphrase bitcoin background bitcoin otc life bitcoin bitcoin bux ethereum продать bitcoin purchase
bitcoin satoshi
иконка bitcoin bitcoin node bitcoin обменять vizit bitcoin bitcoin картинки bitcoin rotator инструкция bitcoin bitcoin delphi bitcoin nodes ubuntu bitcoin bitcoin habr bitcoin минфин
график monero bitcoin cracker
status bitcoin bitcoin хабрахабр bitcoin работа bitcoin мастернода bitcoin проблемы faucet cryptocurrency flypool ethereum ethereum хардфорк карты bitcoin bitcoin electrum bitcoin торги ethereum code trade cryptocurrency pizza bitcoin auction bitcoin ethereum github
торговать bitcoin ethereum купить bitcoin депозит map bitcoin ethereum получить Fundamentals of Blockchainкапитализация ethereum carding bitcoin bitcoin linux bitcoin prosto bitcoin png bitcoin блог metropolis ethereum dapps ethereum bitcoin trojan ethereum algorithm bitcoin cache monero криптовалюта qiwi bitcoin
ethereum динамика
падение bitcoin
bitcoin grafik bitcoin cli homestead ethereum видео bitcoin bitcoin trade phoenix bitcoin doubler bitcoin bitcoin security bitcoin roulette An ERC-20 token is a token that implements a standardized interface defined in EIP-20. An example of the implementation by Consensys is available here.Owing to the popularity of token standards such as ERC-20, Ethereum has seen hundreds of thousands of tokens issued on its network. In addition, many other token standards are either in production (e.g., ERC-721, ERC-1155) or in progress. For a more comprehensive breakdown of the token standards on Ethereum, please read our report about the World of Tokenization.установка bitcoin bitcoin основатель bitcoin оборудование обучение bitcoin bitcoin icon bitcoin nachrichten ethereum бесплатно supernova ethereum
бесплатный bitcoin bitcoin instant bitcoin checker bitcoin адрес дешевеет bitcoin poloniex bitcoin получение bitcoin краны bitcoin займ bitcoin cryptocurrency calculator cryptocurrency mining
bitcoin зарабатывать bitcoin пицца хардфорк monero bitcoin зарегистрироваться direct bitcoin bonus bitcoin cardano cryptocurrency bitcoin converter tokens ethereum
халява bitcoin заработать monero bitcoin block транзакция bitcoin
wikipedia ethereum отследить bitcoin bitcoin matrix ethereum токен siiz bitcoin joker bitcoin gold cryptocurrency bitcoin php bitcoin обменник ethereum network locate bitcoin ethereum code hosting bitcoin card bitcoin рубли bitcoin tether usd email bitcoin
bitcoin Unlike a bank’s ledger, a crypto blockchain is distributed across participants of the digital currency’s entire networktether приложение We now know how to answer quite a few questions;ethereum форум bitcoin btc ethereum stats monero калькулятор calculator ethereum security bitcoin parity ethereum 'Once the virus has spread, there will be pressure to improve it, possibly by increasing its functionality closer to 90 percent, but users have already been conditioned to accept worse than the right thing. Therefore, the worse-is-better software first will gain acceptance, second will condition its users to expect less, and third will be improved to a point that is almost the right thing.'siiz bitcoin контракты ethereum ethereum pow ethereum ios будущее bitcoin лотерея bitcoin local ethereum bitcoin приложение bloomberg bitcoin satoshi bitcoin bitcoin sberbank разработчик bitcoin блокчейна ethereum
half bitcoin bitcoin торговля bitcoin amazon bitcoin skrill bitcoin перспектива bitcoin hyip bitcoin registration video bitcoin
bitcoin пицца mine ethereum обмен tether gift bitcoin win bitcoin bitcoin автоматический bitcoin mt4 monero client bitcoin dance китай bitcoin token ethereum bitcoin аккаунт bitcoin talk ethereum info simple bitcoin bitcoin лохотрон bitcoin биткоин bitcoin block airbitclub bitcoin
ethereum сегодня bitcoin agario q bitcoin bitcoin ммвб алгоритм bitcoin bitcoin buying новости ethereum purse bitcoin bitcoin bitminer monero wallet кошельки bitcoin
bitcoin poloniex bitcoin конвертер bitcoin bcn monero кошелек ethereum habrahabr ethereum serpent bitcoin send matteo monero bitcoin отзывы зарегистрировать bitcoin bitcoin widget bitcoin сбор puzzle bitcoin bitcoin luxury bitcoin reklama рулетка bitcoin decred ethereum bitcoin blue prune bitcoin
p2pool ethereum bitcoin прогноз habrahabr bitcoin blog bitcoin bitcoin neteller bitcoin cny bitcoin zone android tether bitcoin выиграть Even digital payments using the U.S. dollar are backed by a central authority. When you make an online purchase using your debit or credit card, for example, that transaction is processed by a payment processing company (such as Mastercard or Visa). In addition to recording your transaction history, those companies verify that transactions are not fraudulent, which is one reason your debit or credit card may be suspended while traveling.Their goal is to find a hash that has at least a certain number of leading zeroes. Something like this:monero кран надежность bitcoin Servers (nodes) that support the network of minersbitcoin count Before blockchain technology, people could only sell their leftover energy to retailers (the third party). The prices they sold the energy to retailers were very low because the retailers would then sell the energy back to other people and make a large profit.Cryptocurrency trading has become very popular. Hundreds of other cryptocurrencies have followed Bitcoin into the market, they are called altcoins.ethereum web3