What is Stablecoin (What does Stablecoin mean)

08/19/2023 09:02 • Blockchain Briefs • 71 views

What is Stablecoin? What is Stablecoin? In the world of cryptocurrency, we often hear about the “fiat and stable digital assets” issue. The stablecoins circulating in the current market are mostly services based on fiat currencies for value storage and exchange. They are mainly mainstream fiat currencies such as the US dollar, the euro, and some virtual currencies represented by Bitcoin. These so-called stablecoins are also called “legal tokens”, and their main purpose is to promote faster cross-border transactions and achieve decentralization through smart contracts. There are currently two types of stablecoins on the market: one is a stablecoin issued based on Bitcoin as collateral.

Both of these are algorithmically supported digital assets, including USDT (issued by Tether), GeminiDollars (issued by GUSD), and TrueUSD (TUSD). Tether’s reserve includes a large amount of cash and stocks, which will be used to maintain network security; the other type is to generate and verify new payment systems through algorithms to ensure system security.

All three stablecoins have a common feature, which is a certain intrinsic attribute – that is, they are not easily affected by price fluctuations and are not easily lost like fiat currencies. This feature allows them to provide faster and more efficient transfer services and reduce costs. At the same time, this mechanism allows anyone to participate in the blockchain ecosystem without relying on third-party intermediaries, thereby ensuring the smooth operation of the entire on-chain economic activities. So, this stablecoin is a very simple tool that can help investors hedge risks.

What does Stablecoin mean

Stablecoins are also called “anchors”. It is a currency supported by a digital asset. In the crypto world, anyone can use them as collateral for trading or transferring value – this statement is quite reasonable.

When people want to exchange fiat currency for Bitcoin, users can peg the digital currencies they hold to fiat currencies in a 1:1 ratio to obtain a certain proportion of the price. This is very beneficial for investors: because when the price of Bitcoin doubles and the price of gold increases tenfold, these digital assets will be cheaper for those who do not believe in them.

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What is Stablecoin (What does Stablecoin mean)

What does Stablecoin mean

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