What is a stablecoin?

If you do not want to put your capital at risk, you can invest in stablecoins. Learn what stablecoins are.

Today, even those people who do not invest in digital currencies actively monitor the market, and price falls and rises. Now investors are faced with an uncertain market situation, which is called crypto winter. Prices for many tokens are falling, so many traders prefer to sell them so as not to lose their savings.

Investments are not for everyone, because to be a trader you need to keep a cool head. Only then will you be able to make reasonable decisions and not give in to the hype. However, for those who wish to try investing in new assets, there is good news.

Now you can pay attention to stablecoins, which, according to buidlbee.com, are gaining popularity every day. We will tell you more about what it is.

Main points

• Stablecoins are digital currencies that have either a fixed or volatile exchange rate;
• They are convenient for trading, capital storage, as well as for protecting investment portfolios;
• Each of them has a different source. They are backed by various assets and also have various value retention mechanisms.

What are they needed for?

The first thing you should pay attention to is that you can find such coins on almost any platform and there are a huge number of them. They are easy to sell at a price close to the market, so more and more people prefer this investment option.

They are used as a universal unit of exchange and storage of capital by a huge number of investors and traders. If you want to trade them in tandem with another digital currency, then it is much easier to do this than with fiat currency. Unlike traditional currencies, each owner can quickly transfer them between bank accounts. Their main feature is that they are a kind of protection against volatility.

What are the most popular coins?

If you want to invest in stablecoins, then you will have no problem choosing, since in total you will find over a hundred types of such coins. However, the most popular among all are the following:

• USD Coin;
• Binance USD;
• Dai;
• Tether.

What are they tied to?

Most often, people prefer coins that are pegged to traditional currencies. The most popular option is Tether, which is pegged to the US dollar. One such coin is equal to one US dollar or has minor deviations. Apart from this, you can also find coins pegged to the Euro or the Singapore dollar.

Stablecoins can be tied to more than just a currency. You can find coins pegged to the price of precious metals and more. In addition, they can be tied to the price of fiat currency, but there is one thing. They are used to back digital currencies. The most popular of these coins is DAI.

What are their differences?

You can choose both centralized coins and decentralized ones. The centralized ones include USDT, USDC, as well as BUSD. Decentralized coins can be coins that back other digital currencies (DAI, USSD, MIM) as well as algorithmic coins (AMPL, FRAX, NUSD).

Centralized coins

The bottom line is that they are issued by centralized issuers. These coins are quite stable. They are in huge quantities, so they can be easily purchased on any available platform. In addition, they are convenient for mutual settlements and capital storage.

However, the disadvantage is that if the central issuer encounters any difficulties, coin holders may also face many problems.

Decentralized coins

The main advantage is that they are independent of financial institutions as well as the government. Coin holders will never face the blocking of funds. In addition, you can be sure of the transparency of all operations, reserves, and algorithms.

On the other hand, no one is immune from errors and protocol vulnerabilities. In addition, they depend on centralized coins.

What is the future of stablecoins?

Due to the disturbing news related to Terra, many investors have lost confidence in decentralized coins. However, DAI proves its stability. Now traders show the greatest confidence in centralized coins.

However, many states, such as the United States, as well as EU countries, want to begin more detailed control over the issuers of stable tokens in the near future. This can complicate a lot.

Conclusion

If you don't want to put your capital at risk, you can look into stablecoins. You have the option to choose both centralized and decentralized coins. They have both advantages and disadvantages. Before you make a choice, you should do your research to make sure you get the best deal for you.