Why are stablecoins so famous?
In any system, when you are storing important and confidential data, it must be safe and secure, especially, when it is related to money and payment. The volatility can mostly be seen in bitcoins. In fact, with bitcoin, we see most of the problems as it were the first one invented in terms of cryptocurrencies. On the other hand, the flaws that were seen in bitcoin were fixed in the altcoin.
In fact, it was the same reason behind altcoin’s invention – to correct the problems. The problems people face in case of bitcoin are speed, volatility, scarcity and many more.
You may not know the fact that half of the worth of our world is controlled by one percent people of the world.. In terms of cryptos, the situation is not really different. 448 people possess almost twenty percent of the bitcoins which is more than 4 million bitcoins. So, one can easily do the math of how the situation is not in the favour of common people. Also, the added problem is with the volatility; this makes people sceptic. Have you ever thought what would happen if all of them ever want to convert or cash out all their crypto tokens into fiat currency? The market will face a sudden fall.
So, we can say that the power is in the hands of these people which makes it highly unstable and dangerous. On the other hand, the value of stablecoinsisconnected with some of the fiat currencies. no need to say we can rely more on the government led fiat currencies than the 448 people who own the massive number of bitcoins. This is reason that provides stability to the stablecoins.
Another problem that is becoming huge day by day is the fraud exchanges. Because of them, many people are losing more money and becoming more sceptic. So, it is advisable to pay little bit of attention where you are going to invest.
In this regard, The Crypto Genius could be a good option for you.
How does the stablecoin function?
Ideally, the stablecoins are connected to the fiat currencies so that the fluctuation in the value remains within the limit. In fact, as they are almost equivalent to the fiat currency, it is possible to buy many commodities such as goods or products using the stablecoins. The most popular example of fiat currencies with which they are connected are:
- USD
- Chinese Yuan
- Japanese Yen
- Euro
- Pound, etc.
Apart from the fiat currencies, stablecoins can be pegged with commodity, other cryptos and algorithm of stablecoins as well.
Crypto backed stablecoins are usually pegged with other cryptos. So, when the price of that crypto shifts, the stablecoin also shifts in the value. It also provides a certain amount of stability to the stable coins.
In fact, there are assumptions in the market of stablecoin that more stablecoins are coming to the market which will be pegged with assets like gold, or petrol or anything as such. If it happens, you will be able to invest in stablecoins with more stability because of these assets. Stablecoins will become even more useful.
Some Popular Stablecoins
Here are the most commonly used stablecoins that comes up first whenever you check the list of popular stablecoins. In fact, investing in these stablecoins could be a great idea as well.
- Tether
Tether is currently on number one with a market cap of 82.44 billion USD. It’s value goes up and comes down with the fiat currency value of US Dollar in the ratio 1:1.
- USD Coin
This stablecoin has a market cap of 51.35 billion USD. It is also tied with USD in 1:1 manner.
Conclusion!
In case of stablecoins, as there is at least one third party involved such as the fiat currency, other companies, or other cryptos, stablecoins find a great amount of stability in the market. Also, unlike the bitcoins, there is neither any usage of blockchain technology, nor any miners. The centralized system (the third party in this case) is the reason of the stability. However, you should have one concept clear that when you fill your digital account with stablecoins, its value might not increase real soon; in fact, the increment might take years to enact.
