What are Stablecoins used for?
The cryptocurrency industry is actively developing and in recent years a lot of innovative products have appeared in it. One of these is stableblokoin - a special type of digital coins, which should accelerate their implementation in everyday life.
What is stablecoin?Cryptocurrencies were originally conceived as a decentralized means of payment, independent of the rate of fiat money and not tied to traditional valuable assets. This feature adds a characteristic feature to cryptocurrencies - high volatility of the exchange rate. Many people wrap this feature to their advantage, but the likelihood that the course can fall sharply or jump, makes it difficult to use cryptocurrencies as a full-fledged calculation tool.
To regulate the course, it was decided to tie cryptocurrencies to stable assets that have long been established in the economy. So the value of cryptocurrency began to be tied to fiat money, gold, oil. Theoretically, digital currencies can be tied to any valuable asset or product that can make their value more stable.
Cryptocurrencies tied to physical assets have less exchange rate volatility and have become known as stable or stable blocks.
What are Stablecoins used for?The principle of operation of stablecoins is almost the same as that of fiat currencies. They can be a means of exchange, calculation or storage of capital. Their value is tied to traditional assets in a ratio of 1: 1.
Stable blocks are divided into three main groups according to the method of cost stabilization:
- the rate is regulated by the issue of coins, but is not provided for by anything;
- the rate is supported by fiat money or valuable assets;
- the course is stabilized by pegging to other cryptocurrencies.
Stablecoins secured by fiat money