Definition – A stablecoin is a type of cryptocurrency that is pegged to a “stable” reserve asset, such as gold or the US dollar. In comparison to unpegged cryptocurrencies like Bitcoin, stablecoins are supposed to reduce volatility.
Due to the fact that the prices of stablecoins are tied to a reserve asset like the US dollar or gold, they serve as a bridge between the worlds of cryptocurrencies and conventional fiat money. In comparison to something like Bitcoin, this significantly lowers volatility and produces a type of digital currency that is more suited for everything from daily commerce to making payments between exchanges.
The idea of combining the permanence of traditional assets with the flexibility of digital assets has proven to be extremely attractive. Stablecoins like USDC, USDT, BUSD, which are some of the most widely used means of storing and exchanging value in the crypto ecosystem, have seen value flow into the billions of dollars.
Stablecoins inherit some of the most powerful characteristics of non-pegged cryptocurrencies but are free from their volatility.
- Anyone can access stablecoins on the internet, 24 hours a day, from anywhere in the world.
- They transmit quickly, inexpensively, and securely.
- They can be programmed and are digitally native to the Internet.
What are some uses for stablecoins?
- Minimize volatility. Cryptocurrencies like Bitcoin and Ether experience significant volatility, sometimes on a minute-by-minute basis. A more stable asset can provide buyers and sellers with the assurance that the value of their tokens won’t grow or fall sharply in the near future.
- Trade or save assets. Stablecoins are simple to retain and transfer, and they don’t require a bank account. The value of stablecoins can be simply transferred globally.
- Earn interest. On investment in stablecoins, there are simple ways to generate interest that is often higher than what a bank would offer.
- Transfer money cheaply. With transfer fees of under $1, users have transmitted as much as a million dollars worth of Stablecoin.
- Send internationally. It is a wonderful option for sending money anywhere in the world because of its quick processing times and minimal transaction costs.