What are Stablecoins?

  • Commodity-backed (pegged to traditional assets like gold, oil, etc.);
  • Fiat-backed (pegged to fiat money like dollar, euro, yen or other currency);
  • Crypto-backed (pegged to the TOP-cryptocurrencies like Bitcoin or Ethereum);
  • Seigniorage-style (not backed). Seigniorage-style tokens can have any price because it is not attached to something tangible. Such coins differ from ordinary cryptocurrencies in the functions of smart contracts using algorithms that let increase or decrease the volume of offers automatically to stabilize the price.
  • Low level of volatility, cause the price directly depends on the real asset rate.
  • Low level of inflation, which is an additional incentive to spend them, and not to hold.
  • New opportunities in the development of the cryptocurrency industry and digital assets. For example, stablecoins make it possible for credit and insurance services to be designed on the blockchain, avoiding the risk of sharp jumps in the rate like ordinary cryptocurrencies.
  • Pegging to fiat currencies. For example, if the price of a token is baсked up by the dollar, then such tokens become derivative and depend on the financial law.
  • Pegging to cryptocurrencies. The sharp collapse of the cryptocurrency exchange rate, which is provided by stablecoin, can almost completely depreciate it.
  • The need for intermediaries, which increases the risks of uncontrolled emissions, and decentralization is not even discussed.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store