No matter how many crypto coins and tokens you own, they all have one problem – volatility. This about it – you have bought a pack of alpaca socks with your Bitcoins, but then the price rose 30%. What will you end up with? That’s right, a loss. If you are a merchant, you can sell goods and services for crypto. However, it just may happen that the coin you are accepting drastically declined in price. Not good for business at all. Generally, crypto payments are a 50/50 chance – you either end up with a bigger sum of money you had, or you lose a bunch.
The profit got out of changing rates might seem like a great thing, but the process itself is so unpredictable that the crypto payment game seems like a flop.
This is sure an issue, and in the ever-developing world of cryptocurrencies, every issue gets solved. There was a need for something stable and here you go – people invented stable coins.
What are stable coins?
Stablecoins are types of cryptocurrency linked/pegged to the real-world assets – it can be fiat, gold or even oil. The connection makes the price of a taken currency stable, which is a definite benefit if stable coins.
Let’s discuss the technology a little bit. Stablecoins, just like other cryptocurrencies, exist on a blockchain. A crypto coin being stable and linked does not lead to the idea that they are supported by some kind of central authority. Stablecoins are decentralized, they just function in a slightly different way. The stability relies on the constant audits of the linked real-world asset.
Why are stable coins important?
First of all, stable cryptocurrencies give us a chance to pay for goods. As already mentioned above, both the customers and the merchants have hard times processing crypto payments due to the high volatility. Stablecoins solve this issue and give the businesses an opportunity to thrive and the customers a chance to pay without thinking about the possible drawbacks.
Also, stable coins are easy to liquidate in case of a market crash.
As you can see, everybody wins in the situation.
Types of stable coins
There is not just one type of stable crypto, too. We can divide stable coins into the following categories:
- Backed by fiat
- Backed by crypto
- Not backed
The idea of the three kinds is easily derived from their names.
Slight confusion may occur on the last part – how can a stable coin be not backed by an asset? Well, these cryptos rely on the supply, governed by smart contracts. The price is kept stable by constantly changing the volume accordingly.
There are some known stable crypto projects that we are doing to discuss in greater details.
Best stable coins
Tether is a stable coin cryptocurrency that works through the Omni Protocol – an open-source software, allowing issuing and managing crypto tokens. Tether USDT is backed by the fiat currency, stored in the company’s reserve account. Tether supports Us Dollars and Euros (Japanese Yen on the go). The currencies are denoted with a symbol corresponding to a currency.
TrueUSD is a US Dollar backed cryptocurrency. The token is ERC20 standard – all legally protected and verified. TUSD works with multiple trust companies and all the users of this token have to undergo the KYC procedure to purchase the tokens. TrueUSD is the first token to be built on the TrustToken platform.
MakerDAO is the company that created the DAI stable coin. DAI is equal to 1 US Dollar and is unmineable. This stable coin is usually utilized for payments and savings. Also, DAI stable is crypto-collateralized. This means, that to use DAI you will need to leverage some of your Ethereum and have it as a collateral.
PAX is a stable coin crypto equal to 1 US Dollar, just like some of the other coins mentioned above. As the official website of the currency states, the aim of Paxos is combining the stability of the Dollar and the efficiency of the blockchain technology. There are no fees for transactions and conversion in PAX, as well as no minimum for the purchases. The company Paxos is regulated by the New York State Department of Financial Services.
One more token on a dollar list, USDC is stable coin crypto launched by Circle. USDC is mostly known for being heavily supported by Coinbase, as the coin is available for buying, selling and trading on Coinbase.com as well as the company’s applications. Supporting a stable coin for the first time was quite a step for Coinbase generally, as they usually focus on more traditional currencies. Despite this, USDC is available and can be used for quick online purchases and DApps.
As you can see now, there are many stable cryptocurrency coins out there. In most cases, stability grants more security and protection to users. The experts of ChangeNOW, a leading non-custodial cryptocurrency exchange, see quite a potential in stable coin implementation and the future development of the notion.