A stablecoin is a cryptocurrency whose value is tied to fiat / digital money or physical products. Unlike conventional digital coins, such assets are characterized by low volatility in the market and keep their price in the face of strong fluctuations in other cryptocurrencies.
What does the term “stablecoin” mean? Its purpose
The term “stablecoin” comes from the English phrase “stable coin”, which means “stable coin”. In simple words, such a cryptocurrency was created to reduce the impact of volatility. Sharp price fluctuations are often one of the explanations why many companies stay away from digital money and prefer the classic fiat option.
The emergence of a stablecoin-type cryptocurrency made it possible to solve the problem and avoid financial losses due to high volatility. In addition, such coins are used for the following tasks:
- Tool of exchange. Due to small price fluctuations, digital money is increasingly used in daily settlements and is more attractive for businesses.
- The measure of the price. Stablecoin is convenient to use to determine the value of a specific product without reference to the current rate and fiat money. Given the current inflation rate, such cryptocurrencies may become the main price measure in the future.
- Decentralized programs. The emergence and use of stablecoins makes it possible to optimize the transition from speculation with cryptocurrency to their use in dApp applications. This feature makes the coins more popular.
- Saving money. Many investors are afraid to invest in Bitcoin or other popular cryptocurrency, considering it too volatile. Stablecoin is increasingly being used as a tool to protect capital during price spikes. This step allows you to save investments from depreciation in the event of abrupt changes in the market.
Pros and cons
The goal of creating a list of stablecoins is to popularize cryptocurrencies and increase trust in them from ordinary users and companies. At the moment, many are scared off by the high volatility and unpredictability of digital money, but the emergence of stablecoins neutralizes the risks and allows you to look at this market from a different angle.
- Minimum volatility to preserve capital in the event of strong market fluctuations.
- Backing with real assets: precious metals, oil, fiat money, etc. This feature gives confidence in the cryptocurrency and its stability.
- Increasing popularity of digital coins, including for use in the familiar sector.
- Minimal dependence on government agencies.
- Retention of value over a long period of time.
- Lack of support on all exchanges.
- Issued by stock exchanges or companies that decide on the number of stablecoins in circulation.
- The presence of rules that restrict operations with cryptocurrency in banking institutions.
- A negative story, for example, with Tether, has a bad effect on the level of trust and exchange rate.
- The risk of robbery of a banking institution where the money that underpins the virtual currency is stored.
Where can you buy stable blocks?
In conclusion, we note that you can buy stablecoins on many exchanges – Binance, OKEx, Huobi Global and others. To complete a transaction, you must register and provide personal data. In the future, it remains to choose digital money and the cryptocurrency that you plan to sell. If you wish, you can buy coins directly (without an exchange), but in this case, there is a high risk of falling for scammers and being left without funds at all.