Crypto enthusiasts and businesses operating on cryptocurrency experienced bearish trends, regulations, Facebook and Google advertising bans, lightning network and the growth of stable coins etc.
Are stable coin really worth the Hype? Are they the future of money?
Stablecoins are cryptocurrencies designed to minimize the effects of price volatility. Price volatility is an important aspect of Cryptos. To curb the price volatility and to use crypto as a reliable mode for transactions stablecoins are used.
Currency backed Stablecoin:
Stablecoins are backed by currencies like dollars, Euro and Swiss. This is the most common type of Stablecoin in the market.
Their characteristics are:
- Their value is pegged to one or more currencies (most commonly the US dollar, also the Euro and the Swiss franc) in a fixed ratio,
- The tether is realized off-chain, through banks or other types of regulated financial institutions which serve as depositaries of the currency used to back the stablecoin,
- The amount of the currency used for the backing of the stablecoin has to reflect the circulating supply of the stablecoin.
Examples: 1 TUSD is equal to 1 dollar. As the price is pegged with dollars. Other stablecoins include USD Tether (USDT), Paxos Standard (PAX), Centre, Gemini Dollar (GUSD).