Everything You Need to Know About Stablecoin

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Everything you need to knowabout Stablecoin
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What Are Stablecoins and Their Types

• Stablecoin is a type of cryptocurrency which is
  equipped to maintain a stable market price. It is
  resistant to market volatility.
• Stablecoin maintains a fixed value proportional
  to an underlying asset.
• Centralized stablecoins (backed by US dollars or
  gold), and Crypto-collateralized stablecoins
  (backed by Bitcoin or Ethereum) are the ways to
  create it.
• Another type is Non-collateralized stablecoins
  that rely on smart contracts.

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The Different Kinds of Stablecoins

• Asset-backed stablecoins derive their value from
  an assets worth. A popular example would be
  Tether.
• Algorithm-based stablecoins work based on the
  equation between demand and supply. A relevant
  example would be Basis.
• Algorithm stablecoins balance expectations of
  bond-holders and shareholders.
• Generally, stablecoins are pegged at a 11 ratio
  to assets

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Advantages of Stablecoins

• Minimum fluctuations ensure price stability and
  no risk of loss as they are not affected by
  market conditions and inflation.
• Businesses save transaction fees which would have
  been paid to intermediaries like banks and
  payment processors.
• It operates 24x7 unlike financial institutions
  which have limited working hours.
• Can be used for lending at double-digit interest
  rates to debt investors which is higher than
  savings instruments.

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Importance of Stablecoins

• Help in banking the unbanked as only the internet
  is needed.
• Faster and cheaper cross-border payments which
  help migrant workers and businesses firms to
  reduce remittance expenses.
• It serves as a store of value during a market
  downturn and can be used to purchase items or
  exchange with other cryptocurrencies.
• Can create a decentralized economy as it can be
  used as collateral for term loans.

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Why Stablecoins Are Better Than Bitcoins

• It automatically stabilizes in case of
  overvaluation or undervaluation.
• Low volatility increases an investors confidence
  and lifts trading volume.
• Highly accepted among regulatory authorities.
• Can be used to park money while trading by using
  it as a base currency. Transfer of funds can be
  done to bank accounts using stablecoins.

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How to Create a Stablecoin

• Formation of a suitable crypto token
• Connecting them to a smart contract
• Deploy tokens on the blockchain platform
• Promote them to investors

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