What status are stablecoins dealing with now? How will the future develop?

Cryptocurrencies are notoriously volatile, so this factor reduces mainstream user participation and limits their use as a usable exchange platform for goods and services. Stablecoins are low-volatility versions of cryptocurrencies. In fact, reducing volatility can be achieved in a variety of ways, including backing the token with stable assets.

Stablecoins are an effective avenue for investors looking to keep their assets in the crypto space. Switching from cryptocurrencies to fiat currencies is costly and time-consuming, yet stablecoins offer investors the best of both worlds – stable assets within the crypto space with favorable transaction speeds.

Due to their relative stability, stablecoins are also easier to align with regulators. The Gemini Dollar (GUSD) and Paxos Standard (PAX) are two currencies that have regulatory approval from the New York State Department of Financial Services.

Stablecoins are cryptocurrencies designed to limit volatility for investors when using cryptocurrencies. Stablecoins are usually pegged to another asset with a stable value, but they may also be algorithmically backed.

The average drop of algorithmic stablecoins today is 3.13%: According to Jinse Finance, the average drop of algorithmic stablecoins is 3.13% today. Among the 8 currencies, 3 rose and 5 fell, among which the leading currencies were: BAC (+16.26%) and ONS (+4.27%). The leading currencies are: BAGS (-12.62%), LUNA (-12.40%), RSR (-11.77%). [2021/9/7 23:06:51]

When consumers buy or sell non-monetary goods and services, they may experience large price changes during or after the transaction. Stablecoins level the playing field without requiring either party to exchange currency back.

Stablecoins have become popular after the frenzy of 2017. After Bitcoin rallied to nearly $20,000 and then fell more than 50%, investors looked for a less volatile crypto-based store of value. The success of cryptocurrencies has prompted the Federal Reserve and other governments and central banks to announce investigations into their own digital coins.

Types of Stablecoins

There are many kinds of stablecoins, which are mainly distinguished by the assets that support the stablecoins. Following are the main types:

Statement from G7 Finance Ministers: No global stablecoin project should start without standards: Statement from G7 Finance Ministers: No global stablecoin project should start without standards. (Golden Ten) [2020/10/13]

Commodity-backed stablecoins

Commodity-backed stablecoins are stabilized with hard assets such as gold or real estate. The asset most commonly used as collateral for stablecoins is gold, although many use a diversified basket of precious metals.

Fiat backed stablecoins

Stablecoins backed by fiat currencies such as the Chinese yuan hold reserve currencies as collateral. Other forms of money include precious metals, such as platinum or silver, and commodities, such as corn or oil.

Most fiat-backed stablecoins are backed by U.S. dollar reserves. The currency's reserve is managed through an independent custodian that is regularly audited to ensure compliance.

Cryptocurrency-backed stablecoins

Cryptocoins can also support other cryptocurrencies. This is the case with cryptocurrency-backed stablecoins. To offset the higher relative volatility of crypto-backed stablecoins, the coin will maintain an overcollateralized position.

Five European finance ministers call on European Commission to regulate stablecoins: Finance ministers from Germany, France, Italy, Spain and the Netherlands told the European Commission in a joint statement at the Bundesbank meeting on Friday that stablecoins need to be regulated to protect consumers and preserve currencies sovereignty. The finance ministers called on the European Commission to issue stablecoin regulations and impose sanctions on providers who break the rules. According to the joint statement, private stablecoin providers need to comply with European regulations and should not be allowed to operate within the EU if they fall below a certain standard. Although no name was mentioned, the ministers were likely referring to Libra, the Facebook-backed stablecoin. The governments of France and Germany have said they oppose currencies issued by private companies that could challenge the euro. (CoinDesk)[2020/9/12]

In other words, the circulating supply and reserves of stablecoins will be much lower compared to fiat-backed currencies. For example, a crypto-backed stablecoin might only issue $500 worth of coins for every $2,000 of crypto reserves, rather than maintaining a 1-to-1 ratio.

Siegniorage-style stablecoins

Siegniorage is managed and supported by algorithms or programs rather than other assets or currencies. The idea of siegniorage as an endorsement comes from a white paper by the famous cryptographer Robert Sams, who proposed the idea of a Fedcoin, which can serve as such a function. Smart contracts deployed on decentralized platforms can act as autonomous "endorsers" of such coins.

Dynamics | The supply of most stablecoins is gradually decreasing: According to Diar data, since the beginning of this month, except for the mainstream stablecoin USDT and the stablecoin Dai, which is a pledge of meaning, the supply of other stablecoins has appeared in February this year Significant decline, about $100 million, or 10% decline. [2019/2/20]

Not all stablecoins are created equal. As the number of stablecoins grows, it is good to know the most useful and reliable options. Here are the best stablecoins out there right now:

Tether(USDT)

So named because it "ties" itself to the value of the U.S. dollar, Tether is the most well-known stablecoin in the crypto world. It is backed by gold, traditional currencies and cash equivalents. Tether is also known for its security and smooth integration with crypto-to-currency platforms.

True USD (TUSD)

True USD (aka "TrueUSD") is 100% backed by the U.S. dollar and is the 1 most liquid stablecoin on the market. The coin has lower transaction fees than fiat wire transfers and higher interest rates on stored balances. TrustToken, the company behind True USD, also has stablecoins pegged to other major currencies — TrueAUD, TrueGBP, and TrueHKD, to name a few.

3. Paxos Standard Coin (PAX)

The goal of Paxos Standard is to maintain a 1:1 parity with the US dollar. It was created in response to the money-printing controversy of Tether, which has come under fire for unsubstantiated claims that it holds $1.8 billion with Deltec Bank & Trust Ltd to back its stablecoin.

USD Coin (USDC)

USD Coin is a stablecoin backed by Coinbase, the world's largest bitcoin broker and largest bitcoin exchange holder.

Binance USD (BUSD)

It is worth mentioning that the crypto exchange Binance also released Binance USD, which is pegged 1:1 to the U.S. dollar.

Like any form of cryptocurrency, stablecoins have their own strengths and weaknesses.

no border. Stablecoins retain all the power of cryptocurrencies and can move regardless of physical boundaries.

transaction speed. Financial transactions on the blockchain are objectively faster than traditional processes. Stablecoin transactions do not need to wait for a third party to verify the transfer, which means that no one pays fees to any third party.

transparency. Unlike fiat currencies, transactions using stablecoins are recorded on a public ledger, which can be monitored by anyone.

centralized. Unlike some cryptocurrencies, stablecoins are mostly created by centralized organizations that own the currency. Even DAI, a highly regarded stablecoin that markets itself as decentralized, has faced scrutiny for its centralized organization.

Third party audit required. Stablecoins must pass third-party audits, which can create a conflict of interest for a decentralized, trustless or pseudonymous experience.

less growth. Stablecoins do not offer investors the potential for high ROI like unpegged cryptocurrencies.

Most crypto investors would probably agree that having a stablecoin or two in your portfolio is a great way to diversify and protect your investments. If you are actively trading volatile altcoins, you can also use stablecoins to quickly get out of dipping assets and buy them back at better prices.

Will stablecoins revolutionize the crypto space? In fact, the possibility of a complete takeover is unlikely, because the ultimate goals of stable currencies and unpegged cryptocurrencies are completely different.

A more likely scenario is that stablecoins become just another financial tool in the digital transformation of money. Exchanges can provide liquidity to trading markets, provide a medium of exchange for risk-averse investors, and protect physical assets in the digital realm.

Chris Davis Author

Olivia Translate

Olivia Edit

Tags：

XLM