All the fluctuations in the cryptocurrency world are causing everyone to look for ways to find price stability. At this point, the “Stablecoin” term is becoming more popular every day. Stablecoin is a new type of cryptocurrency whose value is usually pegged to another fiat currency or a valuable asset. These coins can be pinned to fiat currencies such as the US dollar, other cryptocurrencies, precious metals, or a combination of the three. There are always differences between cryptocurrency projects and what specific cryptocurrencies can offer. Still, Stablecoins offer a completely new advantage over traditional cryptocurrencies, that is, the stability of the currency you are holding. One of the most well-known stablecoins is Tether (USDT), created to predict that its value would be equivalent to the US dollar.
How does it work?
Stablecoins are designed and collateralized to counter the natural price fluctuation seen in cryptocurrency prices; that means the total number of fixed coins in circulation is backed by assets held in reserve. In other words, if you have 1000 dollars worth of Tether in your wallet, this means that 1000 dollars should be stored in a bank account by the firm of Tether to make the Tether value stable. Stablecoins have a value designed to be stable over any period. This feature makes stablecoins an ideal haven asset because, unlike cryptocurrencies such as Bitcoin, which can fluctuate dramatically every day, a person using stablecoins to store value does not see any risk of loss, especially since they have the full protection of their assets. These cryptocurrencies play a crucial role in reducing risks for investors and traders.
Advantages of Stablecoins
Safe
Stablecoins have a value designed to be stable over any period. This feature makes stablecoins an ideal haven asset because, unlike cryptocurrencies such as Bitcoin, which can fluctuate dramatically every day, a person using stablecoins to store value does not see any risk of loss, especially since they have the full protection of their assets. Other advantages of stable coins are that they are continually being used to value other cryptocurrencies such as Bitcoin. It is known that most of the transaction process is being made by the stablecoins in the exchanges.
Limitless
Cross-border payments and remittances are some of the most real problems overseas workers face when sending money home. Sending money internationally comes with high fees. For example, most migrant workers in Asia send home about $ 300 a month. However, they have to pay $ 18 as an international transfer fee. This equates to half the daily wage for most people. But stable coins are getting ahead of this. Stablecoins work 24/7 as they operate on the blockchain, not a central financial institution with business hours.
Transparent
Transactions on the blockchain can be viewed by anyone with internet access from a blockchain browser. Besides, stablecoins can offer full transparency as long as regular audits support them by Stably.
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