Stablecoin is a type of cryptocurrency whose value is pegged to the price of another asset. This feature makes stablecoin suitable for functions such as trade / exchange, account unit and asset protection tool. These three are vital not only for stablecoin but for all currencies. For example, Bitcoin (BTC) is not a cryptocurrency that can be very effective as a means of asset protection due to the excessive fluctuation in its price.
This situation slows down the adaptation process of cryptocurrencies. The most important factor that causes this is that investors do not want to take risks due to fluctuations in prices while exchanging their assets to cryptocurrencies.
Considering the increasing number of consumers, fluctuations in prices cause major problems. Leaving these problems aside, stablecoin stands out on the market as a solution that provides stability in today’s dynamic and variable world.
How Stablecoin Works
Stablecoins are cryptocurrencies whose value is fixed to another currency. Coins such as USDT, PAX and USDC can be given as examples. Stablecoin is traded within the platform on which it is built. As they are built within the platform, they are included in the token group. The most well-known of these is the USDT launched by the Tether platform. USDT is built on Omni, Ethereum, and Tron blockchains.
For this reason, when sending funds, you should pay attention to the platform on which the relevant stock exchange or wallets are traded. As an example, the 50 USDT, which you bought from Exchange X, is built on the Tron platform. When transferring this 50 USDT to Exchange Y, it is required to send it to Tron address. If sent to Ethereum address by mistake, your fund will be lost.
Stablecoins are traded as 1 USD if fixed in USD and 1 EUR if fixed in EURO. Due to this equation, the value of USDT can never be 2 USD or 0.50 USD. Stablecoins are obliged to keep USD in the bank within the number they are built. Otherwise there will be no equivalent in terms of value.
The protection of stablecoins, being very easy to use, is carried out with a private key. Tokens that are not produced in the form of mining, masternode, stake etc. can only be written with smart contracts. The company that undertakes the production can destroy this stablecoin and build a new one.
Popular stablecoins that are actively traded in cryptocurrency markets
Binance USD (BUSD):
The stablecoin Binance USD (BUSD), released by the cryptocurrency exchange Binance, was built to run on the Ethereum Blockchain. It partners with Paxos Standard (PAX) in terms of fixed price cryptocurrency issuance.
Dai (DAI) is the stablecoin produced by the Maker platform and is fixed to the US dollar. 1 USD = 1 DAI. Dai’s stock market label is DAI.
In terms of production, DAI was produced to solve the fixed-value coin problem in Ethereum and other blockchain systems. One of the most important differences with other stablecoins is that it is decentralized. Tether (USDT) and Binance USD (BUSD) can be given as examples of centralized structures. DAI is a stablecoin that can also be produced by users other than the platform. The total supply value is variable.
Tether (USDT) is a stablecoin fixed to the US dollar. 1 Tether (USDT) = 1 USD. It is created by Tether Limited.
USD Coin (USDC):
USD Coin (USDC) is a stablecoin released by Circle, Coinbase and Center Consortium. USDC has a transparent and open source structure. USD Coin (USDC), built on ERC-20 (Ethereum), is integrated into the US dollar. In this way, this stablecoin will not be affected by the developments in the market.
Gemini Dollar (GUSD):
Launched by the Winklevoss brothers, the founder of the American-based cryptocurrency exchange Gemini, Gemini Dollar (GUSD) was developed to provide liquidity to users aiming to transfer USD over the Ethereum network.
1 GUSD equals to 1 USD.
Paxos (PAX), supervised by the New York Financial Services Unit (NYDFS), is a stablecoin that acts as a bridge between cryptocurrency and fiat currencies. Paxos Standard, which is pegged to 1 USD, is widely traded on the market.
Paxos (PAX) is defined as a stablecoin isolated from payment and transaction fees. Paxos (PAX) is being built on the Ethereum Blockchain.
Paxos Standard protects its users from the possibility of volatility, while providing and easy and inexpensive transaction.