In recent years, stablecoins have become popular; companies and investors are planning to invest in them. The major reason why stablecoins are immune to price fluctuations is that they are at par with Bitcoin, Ethereum, Bitcoin Cash, Dogecoin, and also with well-known tokens. Consequently, the stablecoin market has boomed. Its supply has gone up since May to $100 billion which was around $10 billion last year.
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What is a stablecoin?
Stablecoin is a kind of cryptocurrency where its value is attached to a separate asset like Euro, Dollars, commodities such as gold and oil. These coins are stabilized and they are pegged to assets where their values fluctuate little. Because of this, the price of stablecoins is steady when compared with other cryptocurrencies like Ethereum, Bitcoin, and other cryptocurrencies that are not backed by any assets and its value fluctuates frequently. Further people would not like to speculate and want to use cryptocurrencies as a store of value or use it as a substitute for traditional currencies that are not controlled by any financial authorities. This is one of the reasons why stablecoins offer the best of both traditional and digital worlds. It plays an important role in the cryptocurrency industry.
Where to buy stablecoins?
Stablecoins can be purchased in cryptocurrency exchanges like WazirX. The reason why people go to purchase them is that the stablecoins price has steadily gone up. stablecoins price India is becoming more stable; it is a safer bet and less volatile when compared to other tokens like Bitcoin and Ethereum. This stability makes them to be used for transactions and for institutional investors who like to invest in cryptocurrency.
Popular stablecoins
Tether is considered as one of the largest stablecoin accounting for more than half of the stablecoins circulated in the market by market cap. This token has encountered several scrutiny and it is backed by US currency. Tether is the third-largest crypto by market cap. The USD coin is also a stablecoin that is tied to the US dollar and comes as the second largest stablecoin and 7th largest token in circulation. USD stablecoin price inr is 91.70 Indian rupee as of today. It has a huge market share and it is adopted by several people for facilitating cryptocurrency transactions.
Types of Stablecoins
Stablecoins are programmed using code and they can be audited openly, which has generated trust in this type of currencies. They are decentralized and transparent in their operations. Here are the few types of stablecoins explained.
Fiat-collateralized
Fiat collateralized stablecoins are the common type of stablecoins and they are pegged to fiat currency such as Euro and US dollars. They are backed at a 1:1 ratio which implies that for each of them, there is a fiat currency in the bank account.
Crypto-collateralized
Crypto-collateralized stablecoins are pegged to cryptocurrencies. As the process occurs on the blockchain, these stablecoins are transparent and can be operated in a decentralized way, and have open source codes when compared with fiat currencies. Moreover, it is very difficult to understand and is not very popular. Cryptocurrency prices are prone to volatility; these stablecoins are collateralized by different reserves of cryptocurrencies that can sustain and remain stable.
Commodity-collateralized
Commodity-collateral stablecoins are backed by assets such as precious metals, real estate, oil, and gold. This indicates that they can increase in value with the increase in the value of their assets and provides an incentive to use and hold these coins.
Benefits of stablecoins
Maintaining Price Stability
Stablecoins are safe & non-volatile assets. They have a value that does not suffer from severe fluctuations like other cryptocurrencies. This makes it an ideal option to invest in. Further, being the crypto equivalent of an asset, based on the concept of the derivative, they reduce risks dramatically.
Heavy Security due to their model
Stablecoin prices and network models are all operated from a decentralized, public blockchain network. This not only ensures full transparency to all users but curbs the risk of cyber threats occurring. Further, since trusted sources back them, nobody really doubts them.
Time Efficient
Stablecoins make the whole transaction process quicker. They are implemented with smart contracts which work autonomously. Since a central authority doesn’t regulate them, financial transactions can be done at any time and faster too.
Closing Thoughts
In simple words, cryptocurrencies like Bitcoin can be used like electronic cash that uses P2P networks by eliminating the use of a financial institution. This implies that when compared to fiat currencies that are governed by regulations of banks. Cryptocurrencies are not controlled or issued by any regulatory authorities. Stablecoin are digital currencies that do not have any physical existence and they can be traded in cryptocurrency exchanges around the world.
