Bitcoin has been ruling in Profit Edge trading Bot for quite some time now. There were various altcoins created to solve various problems of bitcoin.
For example, Ethereum was created to solve the problem with the speed of bitcoin. On the other hand, stablecoins were introduced to fight the most difficult problem of bitcoin – volatility.
What is bitcoin?
Bitcoin is the first digital currency in the world. It is the decentralised currency that is going strong without any third party. Being the first of its kind, bitcoin launched with some problems. Although it has major potential, some of the factors are lagging behind.
What is stablecoin?
The entire concept of stablecoin is established upon the problem of cryptos, especially bitcoin, and the volatility of the market. The headlines were all taken by bitcoins until recently stablecoin is slowly replacing it. Now, we can see most of the news and buzz around stablecoin.
Stablecoins are pegged with any one or two fiat currencies.
Future of stablecoins
Many believe that the future is stablecoins as it is mostly pegged with the U.S. Dollar. As it stabilises the cryptos, it serves two purposes. On the other hand, zero to little volatility is associated with stablecoins.
Types of stablecoins
There are different categories of stablecoins:
- Fiat-collateralized stablecoins
- Commodity-collateralized stablecoins
- Non-collagenized stablecoins and
- Crypto-collateralized
Exploring the details of the different types of stablecoins:
Fiat-collateralized stablecoins
In this, the stablecoin is mostly associated with fiat currencies like United States Dollar, Japanese Yen, Euro, Pound etc.
The first name that emerges when mentioning stablecoin is Tether. It is the most widely used fiat-collateralized stablecoin. We all have heard about Tether. This crypto is pegged with the US dollar with a ratio of 1:1. It means the value of 1 tether is 1 $.
Gemini is another fine example of fiat-collateralized stablecoin. Gemini uses the blockchain of Ethereum and is connected in a 1:1 ratio with USD.
Non-collateralizedstablecoin
This type of stablecoin is a bit different from the others. These are not directly connected to any currency or services. Therefore, it has no direct backup. On the other hand, it uses a set of algorithms which is designed to adjust the supply of stablecoins.
Commodity-collateralized stablecoins
By commodity, here we refer to some of the most expensive commodities, such as gold or oil. Many other expensive metals can also be referred to here as commodities. And this kind of stablecoins is pegged with these expensive commodities apart from being pegged with fiat currency. It is another way of stabilizing the cryptos.
For example, a commodity-collateralized stablecoinis Tiberius Coin. This stablecoin is pegged with seven different hardware technology using expensive metals. So, more these metals are being used and rising in price, the price of the stablecoin will also rise.
Crypto-collateralized stablecoin
This is one that is not very hard to guess. The stablecoins that fall into this category have been pegged with other cryptocurrencies in a ratio of 1:1 mostly. This is another way of establishing some stability in cryptocurrencies or stablecoins.
What are the advantages of stablecoin?
Unlike bitcoin, stablecoin has a bit of a centralised factor connected with it. As any of the fiat currencies backs it, it means that it has government support to some extent. Therefore, stable coins can be used just as you use fiat currencies. Also, it can be used in any country, especially in countries where USD is functional. Moreover, using it for overseas payments is also very natural.
Migrant workers can make high use of stablecoin. Sometimes it becomes very difficult for them to send money overseas to their families as it needs conversion of fiat currencies and thus takes time and various processes. On the other hand, sending cryptos is much simpler than it.
Wrapping it up !!!
As we know, stablecoins have a lot of potential. It is slowly taking a good place in the list of popular cryptos for better usage, more convenience and stability. Moreover, you can explore the different cryptocurrency on the crypto exchange platform. You can also explore other crypto exchanges like Coinbase, Gemini and others, but before registration, you must check the terms and conditions of the crypto exchange. However, if national cryptocurrencies have grabbed your attention, and you are looking forward to invest in digital Yuan, then you can register.
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