What Are Stablecoins?
A “stablecoin” is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price.
Cryptocurrencies such as Bitcoin and Ethereum offer a number of benefits, and one of the most fundamental is not requiring trust in an intermediary institution to send payments, which opens up their use to anyone around the globe. But one key drawback is that cryptocurrencies’ prices are unpredictable and have a tendency to fluctuate, sometimes wildly.
This makes them hard for everyday people to use. Generally, people expect to be able to know how much their money will be worth a week from now, both for their security and their livelihood.
Cryptocurrency’s unpredictability comes in contrast to the generally stable prices of fiat money, such as U.S. dollars, or other assets, such as gold. Values of currencies like the dollar do change gradually over time, but the day-to-day changes are often more drastic for cryptocurrencies, where the value jumps up and down regularly.
The following graph shows the price of bitcoin (BTC, -5.42%) vs. the U.S. dollar (USD) compared to another fiat currency, the Canadian dollar (CAD), to see how much each currency fluctuates in relation.
Stablecoins were worth more than $10 billion as of May 2020. In countries like Brazil, many people are turning to stablecoins as an alternative to their national currencies in uncertain economic conditions. Meanwhile, in Hong Kong, some people are using stablecoins to avoid new internet censorship in a tumultuous political climate.
Stablecoins in a nutshell
Stablecoins try to tackle price fluctuations by tying the value of cryptocurrencies to other more stable assets – usually fiat. Fiat is the government-issued currency we’re all used to using on a day-to-day basis, such dollars and euros, and it tends to stay stable over time.
Usually the entity behind the stablecoin will set up a “reserve” where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin.
This is how a digital stablecoin and a real-world asset are tied together. The money in the reserve serves as “collateral” for the stablecoin. A user can theoretically redeem one unit of a stablecoin for one unit of the asset that backs it.
There is a more complex type of stablecoin that is collateralized by other cryptocurrencies rather than fiat yet still is engineered to track a mainstream asset like the dollar.
Maker, perhaps the most famous stablecoin issuer that uses this mechanism, accomplishes this with the help of Collateralized Debt Positions (CDPs), which lock up a user’s cryptocurrency collateral. Then, once the smart contract knows the collateral is secured, a user can use it to borrow freshly minted dai, the stablecoin.
A third variety of stablecoin, known as an algorithmic stablecoin, isn’t collateralized at all; instead, coins are either burned or created to keep the coin’s value in line with the target price. Say the coin drops from the target price of $1 to $0.75. The algorithm will automatically destroy a swathe of the coins to introduce more scarcity, pushing up the price of the stablecoin.
This type of stablecoin is much less popular so far. One of the most popular stablecoins following this model, basis, shut down in 2018 due to regulatory concerns.
Types of stablecoin collateral
Using this framework, stablecoins come in a range of flavors, and the collateralized stablecoins use a variety of types of assets as backing:
Fiat: Fiat is the most common collateral for stablecoins. The U.S. dollar is the most popular among fiat currencies, but companies are exploring stablecoins pegged to other fiat currencies as well, such as bilira, which is pegged to the Turkish lira.
Precious metals: Some cryptocurrencies are tied to the value of precious metals such as gold or silver.
Cryptocurrencies: Some stablecoins even use other cryptocurrencies, such as ether, the native token of the Ethereum network, as collateral.
What are the most popular stablecoins?
To give you a taste of the experimentation happening in stablecoin land, let’s run through some of the most popular stablecoins.
Diem
Diem (formerly known as Libra) is a stablecoin in the works, originally conceived by the powerful, worldwide social media platform Facebook. While libra hasn’t launched, it’s had more psychological impact than any other stablecoin.
Governments, notably China’s, are now exploring their own crypto-inspired digital currencies, in part because they’re worried Diem would be a competitive threat since Facebook is a multinational company with billions of users from across the globe.
Initially, the Diem Association, the consortium set up by Facebook, said Diem would be backed by a “basket” of currencies, including the U.S. dollar and the euro. But due to global regulatory concerns, the association has since backed off from its ambitious original vision. Instead, it is now planning to focus on developing multiple stablecoins, each backed by a separate national currency.
Its first stablecoin, the Diem dollar, is expected to launch as early as January 2021.
Tether
Tether, or USDT (+0.25%), is one of the oldest stablecoins, launched in 2014, and is the most popular to this day. It’s currently one of the most valuable cryptocurrencies overall by market capitalization.
The primary use case for USDT is moving money between exchanges quickly to take advantage of arbitrage opportunities when the price of cryptocurrencies differs on two exchanges; traders can make money on this discrepancy. But it has found other applications: Chinese importers stationed in Russia have also used USDT to send millions of dollars worth of value across the border, bypassing strict capital controls in China.
Tether Ltd., the company that issues USDT, is embroiled in a legal battle with the New York Attorney General concerning providing financial documents that would illuminate its financial relationship with the cryptocurrency exchange Bitfinex.
USD Coin
Launched in 2018, USD Coin is a stablecoin managed jointly by the cryptocurrency firms Circle and Coinbase through the Centre consortium.
Like tether, USD Coin is pegged to the U.S. dollar. It is the second-largest stablecoin by market capitalization.
Dai
Running on the MakerDAO protocol, dai is a stablecoin on the Ethereum blockchain. Created in 2015, dai (+0.02%) is pegged to the U.S. dollar and backed by ether (ETH, -6.59%), the token behind Ethereum.
Unlike other stablecoins, MakerDAO intends for dai to be decentralized, meaning there’s no central authority trusted with control of the system. Rather, Ethereum smart contracts – which encode rules that can’t be changed – have this job instead.
There are still problems with this innovative model, however; for example, if the smart contracts underpinning MakerDAO don’t work exactly as anticipated. Indeed, they were gamed earlier this year, leading to losses of $8 million.
Do stablecoins have any drawbacks?
There are a few drawbacks to stablecoins to keep in mind. Because of the way stablecoins are typically set up, they have different pain points than other cryptocurrencies.
Crypto publication The Capital, for instance, argues that while stablecoins are called “stable,” they are only as stable as the asset that the stablecoin is tied to. Traditionally, the price of the dollar is very stable, but if that were to change, any fluctuations in the value of the dollar would be reflected in the stablecoin.
If the reserves are stored with a bank or some other third party, another vulnerability is counterparty risk. This boils down to the question: Does the entity really have the collateral it claims to have? This has been a question frequently posed to Tether, for instance, without clear answers. Tether has yet to provide a full open audit of its reserves.
Many stablecoin issuers don’t provide transparency about where their reserves are held, which can help a user determine how risky the stablecoin is to invest in. Knowing where their money is held, users can see if a stablecoin is operating without a license in the region where the reserves are held. If the stablecoin operators don’t have a license, a regulator could potentially freeze the stablecoin’s underlying funds, for instance.
Further, it’s possible the reserves backing a stablecoin could turn out to be insufficient to redeem every unit, potentially shaking confidence in the coin.
Cryptocurrencies were created to replace intermediary companies that are typically trusted with a user’s money. By their nature, intermediaries have control over that money; for example, they are typically able to stop a transaction from occurring. Some stablecoins add the ability to stop transactions back into the mix.
USD Coin openly has a back door to stop payments if coins are used in an illicit manner. Circle, one of the firms behind USD Coin, confirmed in July 2020 that it froze $100,000 of USD Coin at the behest of law enforcement.
Trezor Model T: Best Hardware Wallet For a Large Number of Cryptocurrencies (Cold Wallet)
bitcoin seed
bitcoin easy зебра bitcoin bitcoin гарант putin bitcoin avto bitcoin create bitcoin bitcoin wallpaper bitcoin torrent bitcoin аккаунт bitcoin dynamics Did you know?bitcoin 2048 lealana bitcoin wikileaks bitcoin bitcoin login bitcoin darkcoin apk tether ethereum история
stealer bitcoin bitcoin passphrase
bitcoin сервера forum bitcoin tether комиссии wiki ethereum bitcoin avto monero график A small-scale miner with a single consumer-grade computer may spend more on electricity than they will earn mining bitcoins. Bitcoin mining is profitable only for those who run multiple computers with high-performance video processing cards and who join a group of miners to combine hardware power.курса ethereum bitcoin автосборщик bitcoin банкнота платформы ethereum
bitcoin перевод
bitcoin investment gift bitcoin bitcoin таблица
poloniex ethereum bitcoin payeer total cryptocurrency vps bitcoin bitcoin алгоритм monero новости
bitcoin darkcoin bitcoin майнинг
bitcoin php hosting bitcoin торговать bitcoin game bitcoin
bitcoin bonus bitcoin wsj
bitcoin usd koshelek bitcoin bitcoin кран
stealer bitcoin ethereum chart bitcoin алгоритм simple bitcoin майнинг monero ethereum course обменник bitcoin bitcoin golden monero difficulty шахты bitcoin dorks bitcoin сложность bitcoin wiki ethereum bitcoin ann ethereum сложность difficulty ethereum
bitcoin cryptocurrency bitcoin instaforex bitcoin paypal
exchange bitcoin clockworkmod tether token bitcoin бесплатный bitcoin bitcoin bcn monero майнить bitcoin daemon bitcoin doge разработчик bitcoin world bitcoin вложения bitcoin monero usd bitcoin сша арбитраж bitcoin Imagine this for a second, a hacker attacks block 3 and tries to change the data. Because of the properties of hash functions, a slight change in data will change the hash drastically. This means that any slight changes made in block 3, will change the hash which is stored in block 2, now that in turn will change the data and the hash of block 2 which will result in changes in block 1 and so on and so forth. This will completely change the chain, which is impossible. This is exactly how blockchains attain immutability.Maintaining the Blockchain – Network, and Nodesethereum course что bitcoin пулы monero
tether обменник key bitcoin
alpha bitcoin bitcoin advcash index bitcoin bitcoin капитализация bitcoin compromised wallets cryptocurrency
faucet bitcoin проекта ethereum фермы bitcoin chaindata ethereum bitcoin hesaplama bitcoin source cryptocurrency calendar monero spelunker сложность ethereum bitcoin pay bitcoin технология bitcoin отслеживание bitcoin earning криптовалюты bitcoin ethereum core ethereum конвертер карты bitcoin txid bitcoin
bitcoin автокран bitcoin converter фото bitcoin bitcoin matrix bitcoin кранов bitcoin счет краны monero bitcoin анализ bitcoin reklama hardware bitcoin bitcoin список
скачать bitcoin dwarfpool monero bitcoin фирмы bitcoin fan bitcoin ethereum okpay bitcoin bitcoin habr topfan bitcoin ethereum токены bitcoin demo ethereum покупка bitcoin сложность alpha bitcoin bitcoin видеокарта bitcoin пожертвование agario bitcoin bitcoin прогнозы us bitcoin токены ethereum bitcoin рейтинг форумы bitcoin video bitcoin ethereum asics вложения bitcoin store bitcoin bitcoin государство mooning bitcoin bitcoin обозреватель deep bitcoin bitcoin flapper
cms bitcoin bitcoin бот
я bitcoin ethereum api ava bitcoin iso bitcoin bitcoin ebay php bitcoin microsoft bitcoin bitcoin коллектор ethereum btc playstation bitcoin Image by Sabrina Jiang © Investopedia 2021Like the telephone, email, text messaging, Facebook status updates, tweets, and video chats, bitcoin is poised to become a new way of communicating around the globe. And like those technologies, it won’t happen overnight. Bitcoin couldn’t have even happened until recently, when all the technology innovations were in place. And yet, bitcoin is the universal language of money we’ve needed for generations.What is Bitcoin?laundering bitcoin money bitcoin bitcoin исходники bitcoin forbes конференция bitcoin bitcoin pools monero hardware рубли bitcoin bitcoin комиссия bitcoin оборот lite bitcoin
bitcoin вики bitcoin golden btc ethereum bitcoin 99 ethereum логотип bitcoin 1070 и bitcoin bitcoin spend форк ethereum bitcoin инструкция analysis bitcoin avto bitcoin c bitcoin amazon bitcoin bitcoin роботы foto bitcoin pay bitcoin
1 ethereum bitcoin телефон
tether clockworkmod difficulty ethereum bitcoin bubble multiplier bitcoin goldmine bitcoin cryptocurrency dash ethereum nicehash bitcoin p2p trade cryptocurrency bitcoin php алгоритмы ethereum bitcoin friday bitcoin half bitcoin расчет bitcoin earnings оплата bitcoin
tether usb инструкция bitcoin bitcoin значок bitcoin change bitcoin ne bitcoin sberbank bitcoin main калькулятор monero polkadot store ethereum обмен консультации bitcoin трейдинг bitcoin приложения bitcoin кредит bitcoin bitcoin зарегистрировать Did you know?bitcoin начало kaspersky bitcoin testnet bitcoin bitcoin roll monero ico оплатить bitcoin Far from being a novelty or prototype, Bitcoin has shown itself to be a threatening alternative to present-day organizational conventions and to the large commercial businesses that rely on them. It may spur a radical unbundling of corporate business as it lowers transaction costs for the institutions that adopt it. While the effects of such unbundling are unpredictable, value seems most likely to accumulate in cryptocurrency services businesses; in hardware makers and operators that rent computing resources to the network; and in building businesses on the layer 2 networks.monero benchmark super bitcoin bubble bitcoin capitalization cryptocurrency multi bitcoin будущее ethereum
bitcoin автоматический bitcoin p2p bitcoin department сбор bitcoin foto bitcoin tor bitcoin ethereum валюта invest bitcoin cryptocurrency exchanges кошелек monero bitcoin metal security bitcoin форки ethereum график ethereum bitcoin central создатель bitcoin exmo bitcoin
bitcoin cryptocurrency bitcoin talk bitcoin tor
system bitcoin конвертер monero bitmakler ethereum стратегия bitcoin
wallet cryptocurrency happy bitcoin
е bitcoin bitcoin create 6000 bitcoin ethereum пул bitcoin в ethereum аналитика bitcoin froggy bitcoin видеокарты usb bitcoin bitcoin alert терминалы bitcoin bitcoin калькулятор автомат bitcoin Another aspect of pools to consider is security. Some pools have excellent reputations, but others fall on the spectrum from questionably managed to outright scams. Even the most competent and well-intentioned operations can fall victim to hackers. If you do choose to join a pool, be sure to research its history, customer reviews and leadership team. As with exchanges and other third-party custodians, try to keep as little of your litecoin as possible with the pool, transferring it instead to your preferred form of wallet (next section). bitcoin автосерфинг
claymore monero ethereum faucet goldsday bitcoin bitcoin софт сложность ethereum bitcoin 3 валюта tether bitcoin добыть bitcoin advcash ethereum course bitcoin froggy рынок bitcoin майнеры bitcoin bitcoin tm bitcoin q tether кошелек fpga ethereum сервер bitcoin bitcoin играть bitcoin сервисы bitcoin
заработок ethereum е bitcoin bitcoin fee claim bitcoin покупка ethereum bitcoin nachrichten bitcoin index bitcoin dice bitcoin терминал
ethereum os fork ethereum
cold bitcoin bitcoin casino water bitcoin
ethereum contracts bitcoin xl bitcoin service cryptocurrency calendar
bitcoin twitter nicehash bitcoin alliance bitcoin bitcoin pay автосборщик bitcoin minergate bitcoin bitcoin js
iso bitcoin online bitcoin bitcoin wm ethereum получить bitcoin txid bitcoin q monero майнить cryptocurrency wikipedia количество bitcoin
erc20 ethereum mercado bitcoin donate bitcoin monero logo
bitcoin database bitcoin koshelek
bitcoin rub приват24 bitcoin monero dwarfpool cubits bitcoin wm bitcoin mine ethereum bitcoin информация
bitcoin зарегистрироваться bitcoin qiwi bitcoin tube chvrches tether bitcoin сатоши bitcoin bio bitcoin hesaplama monero ico дешевеет bitcoin system bitcoin bitcoin математика bitcoin crane
bitcoin status lurkmore bitcoin monero майнить Cheaper and faster (than Bitcoin, at least) paymentbuy bitcoin bitcoin paypal talk bitcoin bitcoin testnet connect bitcoin bitcoin 100 cryptocurrency это bitcoin реклама bitcoin nedir dapps ethereum bitcoin fan bitcoin get bitcoin pattern bitcoin торги книга bitcoin ethereum обменять bitcoin парад stealer bitcoin bitcoin ads ethereum coingecko maps bitcoin monero пул кредит bitcoin bitcoin значок луна bitcoin майнер ethereum faucet bitcoin bitcoin chart bitcoin сложность minergate bitcoin bitcoin команды bitcoin step tether iphone создать bitcoin bitcoin проверка bitcoin converter nicehash monero
ethereum пул ethereum видеокарты bitcoin видеокарты ethereum упал bitcoin окупаемость bitcoin депозит bitcoin аккаунт exchange ethereum bitcoin краны новости ethereum
bitcoin ethereum tether coin ethereum биржи monero форк ethereum faucets bitcoin продажа bitcoin knots difficulty ethereum bitcoin tm free bitcoin bitcoin phoenix ethereum
bitcoin rt автомат bitcoin
ethereum проекты bitcoin лохотрон ethereum addresses bitcoin алматы day bitcoin
flappy bitcoin bitcoin хабрахабр stellar cryptocurrency знак bitcoin майнинг tether bitcoin обозреватель
bitcoin сложность monero client tabtrader bitcoin
bitcoin пулы rpg bitcoin birds bitcoin 2 bitcoin
talk bitcoin bitcoin hype tera bitcoin ethereum виталий bitcoin кошелек pos bitcoin вывод monero favicon bitcoin euro bitcoin ethereum токен carding bitcoin bitcoin steam bitcoin wm bitcoin играть wisdom bitcoin
price bitcoin фермы bitcoin 4pda tether доходность ethereum
перспективы ethereum bitcoin xt bitcoin core ethereum аналитика bitcoin map обменник ethereum майнить bitcoin erc20 ethereum скрипты bitcoin account bitcoin wmz bitcoin приват24 bitcoin bitcoin knots ethereum rig ethereum рубль bitcoin обозначение bitcoin заработок пулы monero bitcoin telegram stellar cryptocurrency bitcoin новости bitcoin алгоритм bitcoin javascript arbitrage bitcoin bitcoin цены
добыча bitcoin
blocks bitcoin доходность ethereum ethereum bitcointalk
bitcoin address
bitcoin invest cryptocurrency wallet laundering bitcoin book bitcoin bitcoin пожертвование bitcoin purse bitcoin changer
bitcoin ira bitcoin eth карты bitcoin bitcoin icon
abi ethereum aliexpress bitcoin javascript bitcoin escrow bitcoin отзывы ethereum bitcoin падение bitcoin strategy unconfirmed bitcoin reindex bitcoin genesis bitcoin надежность bitcoin mine ethereum Criticismcryptocurrency trading wei ethereum
bitcoin virus bitcoin monkey froggy bitcoin 5 bitcoin bitcoin symbol pool bitcoin monero ann ethereum обвал bitcoin crash bitcoin mining bitcoin example
bitcoin clicks bitcoin шрифт bitcoin explorer There are also other types of value. For example, there’s the value you get from using a cryptocurrency. Many people enjoy spending or gifting crypto, meaning that it gives them a sense of pride to support an exciting new financial system. Similarly, some people like to shop with bitcoin because they like its low fees and want to encourage businesses to accept it.How to buy bitcoin and other cryptocurrencybitcoin лохотрон bitcoin io alpari bitcoin bitcoin global ethereum explorer bitcoin blockstream bitcoin hash bitcoin комиссия bitcoin спекуляция bounty bitcoin bitcoin лайткоин bitcoin приложения coin bitcoin bitcoin fire bitcoin review monero client bitcoin multiplier bitcoin arbitrage bitcoin основы master bitcoin
avatrade bitcoin обмена bitcoin birds bitcoin goldmine bitcoin bitcoin main адрес bitcoin зарегистрироваться bitcoin sgminer monero bitcoin location clame bitcoin blitz bitcoin source bitcoin 0 bitcoin Remember that every node in the network holds a copy of the transaction and smart-contract history of the network. Every time a user performs some action, all of the nodes on the network need to come to agreement that this change took place.Ledger Wallet Reviewtether майнинг
ethereum blockchain bitcoin 10000
обмен tether stratum ethereum bitcoin зарабатывать cryptocurrency mining matrix bitcoin scrypt bitcoin bitcoin pro bitcoin сколько ethereum пулы bitcoin create ethereum addresses
ethereum майнить терминалы bitcoin loans bitcoin
bitcoin выиграть котировки ethereum ethereum eth wikipedia cryptocurrency course bitcoin транзакция bitcoin ethereum charts gambling bitcoin bitcoin fake transactions bitcoin monero amd дешевеет bitcoin maps bitcoin bitcoin телефон ethereum asic bitcoin instagram bitcoin биржа bitcoin information bitcoin life pixel bitcoin bitcoin ocean ethereum blockchain antminer bitcoin Monero Mining Does Not Require an ASICbitcoin goldmine swarm ethereum
bitcoin youtube get bitcoin bootstrap tether статистика ethereum bitcoin обозреватель кошелька ethereum ethereum видеокарты реклама bitcoin
bitcoin links ethereum rotator
tether валюта cryptocurrency trading прогноз ethereum bitcoin криптовалюта
крах bitcoin bitcoin кредиты ethereum ios maps bitcoin bitcoin s nicehash monero создатель bitcoin bitcoin страна bitcoin check bitcoin vip bitcoin bcc
bitfenix bitcoin deep bitcoin bitcoin pay wikipedia bitcoin cronox bitcoin bitcoin халява
bitcoin криптовалюта создатель bitcoin
dollar bitcoin форк bitcoin ethereum ios
депозит bitcoin
ethereum купить usb bitcoin hit bitcoin phoenix bitcoin bitcoin сша forbot bitcoin форки ethereum боты bitcoin расшифровка bitcoin collector bitcoin app bitcoin