Stablecoin, what is it?

Over the past few years, the cryptocurrency industry has been developing quite rapidly. One of those is the stablecoin. This is a special type of digital coins, a kind of cryptocurrency, the function of which is to integrate as quickly as possible into the everyday life of every person.

Initially, the authors of the cryptocurrency conceived the creation of an anonymous means of payment that does not depend on the exchange rate of fiat money, capable of simplifying payments as much as possible, and also so that it would not be tied to the valuable assets familiar to us. Based on this, we get one special feature of the cryptocurrency - high volatility of the exchange rate.

Some use this for their own good, but there is some kind of hindrance when using cryptocurrencies as a full-fledged means of calculation, the probability that the rate may both rise sharply and fall sharply. After that, it was decided to support the exchange rate of this cryptocurrency with an asset that has long been firmly entrenched in the economy. Namely, binding to precious metals, energy resources and fiat money.

What is the work of a stablecoin?

The work of a stablecoin is almost the same as that of fiat money, they can also be used for conversion, purchases, calculation and storage of capital. The ratio of assets and this currency have the same value - 1:1. Stablecoin is directly dependent on the situation with the asset that serves as its reinforcement. It means that if the currency becomes more expensive, it will cause the price of the coin to rise to the stablecoin.

Also, stablecoins can be divided into such main groups that depend on the method of stabilizing this rate:

• linking the price to other crypto coins;
• exchange rate support linked to fiat money;
• price adjustment by issuing coins, while there is no support for non-crypto money and ordinary currency.

Today, the most famous varieties of stablecoin:

Tether - was created to give the population of the planet a new financial resource that will combine the rapidly developing crypto market and unchanged fiat currencies. In the Tether cryptocurrency, all accounts are controlled by one company.

TrueUSD is a crypto that is known for its stability and reliability. Its rate is pegged to the US dollar. TrueUSD differs from Tether in that the deposit method is used here, namely, the involvement of trust companies in cooperation.

BitCNY is a coin that is pegged to the Chinese Yuan. This is an asset that represents the total amount of BTS needed to value the single Chinese Yuan. In addition to BitCNY, developers have released such similar cryptocurrencies backed by the US dollar (BitUSD) and the euro (BitEUR). They all have the same functionality, the difference is in the provision of different fiat currencies.

At this stage, the stablecoin has every chance of mass adoption in the future, but now it is in its infancy. Much depends on the development and acceptance of them by users. It is also worth remembering that the popularity of stablecoins also depends on the established cryptocurrency, if for one reason or another interest in this area disappears, then even the most durable projects will go down in history.