What is stablecoin?
In one line, a stablecoin is a cryptocurrency that provides price stability.
Bitcoin or other cryptocurrencies suffer from high volatility. Which means, the price of a Bitcoin or other cryptocurrencies can rise or drop very quickly. This makes Bitcoin unsuitable for everyday usage and paying for day to day commodities. Bitcoin price increased by 35% from March 2020 to April 2020 only.
Stablecoins on the other hand, keeps the inflation rate to the minimum. Most stablecoins keep the price equal to FIAT currencies. For example, Tether (USDT) and USD Coin (USDC) prices are always equal to 1 USD. They allow small inflation or deflation, but we are talking about less than 1% difference in 24 hours.
Stablecoin allows the “best of both worlds”.
- Fast transaction speeds anywhere in the world and
- Price stability.
This makes them great for everyday use and are safe when massive swings happens in the markets. Stablecoin can be pegged not only to FIAT currencies but also to other cryptocurrencies or exchange-traded commodities like gold, silver, etc.
Where can I get a stablecoin?
Stablecoins can be bought from various exchanges. I am not mention any names here but if you google you can find a lot. Most of the crypto wallets these days offer internal exchanges aswell.
How do stablecoins work?
Each stablecoin is backed by either a FIAT currency, cryptocurrency, or exchange-traded commodities like gold or silver.
We will use USDT as an example. Tether is pegged to USD fiat currency. This means that the USDT is backed by USD by a 1:1 ratio. However it will be wrong to say that they always remain 1:1
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