Bitcoin
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Ethereum
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Tether
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Stablecoin

A stablecoin is a type of cryptocurrency designed to have a stable value, as opposed to the highly volatile nature of most cryptocurrencies. It achieves this stability by being pegged to a reserve or a basket of goods, such as fiat currencies, commodities, or other assets.

Key Points:

  1. Pegging Mechanisms: Stablecoins maintain their stability through various mechanisms:
    • Fiat-collateralized: Backed one-to-one by fiat currencies like the US dollar, euro, or yen. Examples include USDC, Tether (USDT), and TrueUSD (TUSD).
    • Crypto-collateralized: Backed by other cryptocurrencies, usually held in a smart contract. Examples include DAI and sUSD.
    • Algorithmic: Not backed by any collateral but use algorithms to automatically adjust the supply based on demand. Examples include Ampleforth (AMPL) and Terra (LUNA).
  2. Use Cases: Stablecoins are used for various purposes, including:
    • As a hedge against the volatility of other cryptocurrencies.
    • To facilitate trade on cryptocurrency exchanges without using fiat.
    • For remittances and cross-border transactions.
    • In decentralized finance (DeFi) platforms for lending, borrowing, and earning interest.
  3. Transparency and Trust: Trust in the stablecoin is essential. For fiat-collateralized stablecoins, regular audits are crucial to ensure that the issuer holds the necessary reserves.
  4. Regulatory Attention: Due to their intersection with traditional finance, stablecoins have attracted regulatory scrutiny. Authorities are concerned about potential systemic risks, money laundering, and the integrity of the backing assets.

Examples:

  • Tether (USDT): One of the earliest and most well-known stablecoins, initially claimed to be backed one-to-one by US dollars.
  • USDC: Issued by Circle and Coinbase, it’s backed one-to-one by US dollars and provides regular audits.
  • DAI: A decentralized stablecoin by MakerDAO, which is over-collateralized by other cryptocurrencies.

Benefits:

  • Stability: Offers a stable store of value in the otherwise volatile crypto market.
  • Liquidity: Acts as a bridge between fiat and cryptocurrencies, facilitating easier trading.
  • Decentralized Finance (DeFi): Enables various financial activities without traditional intermediaries.

Risks:

  • Collateral Risks: If the backing collateral diminishes in value rapidly, it could destabilize the coin.
  • Regulatory Risks: Governments might impose regulations that could affect the operation or acceptance of stablecoins.
  • Smart Contract Vulnerabilities: For crypto-collateralized stablecoins, vulnerabilities in the underlying smart contract could be exploited.
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CryptoCurrencyUSDChange 1hChange 24hChange 7d
Bitcoin61,691 2.66 % 0.55 % 12.70 %
Litecoin79.05 3.41 % 1.78 % 19.53 %
XRP0.4843 3.25 % 2.72 % 20.53 %
Ethereum2,197.2 0.23 % 0.67 % 2.46 %
Dogecoin0.1457 3.96 % 2.59 % 25.73 %
USDC1.000 0.10 % 0.02 % 0.08 %
Cardano0.2543 0.15 % 1.68 % 3.38 %
Tether0.9990 0.10 % 0.04 % 0.02 %
Binance Coin (Wormhole)222.47 0.38 % 4.71 % 3.08 %