What Is A Stablecoin? Why Are Stablecoins Important?

What Is A Stablecoin? Why Are Stablecoins Important?

Many processes of stabilizing the amount have been undergone by cryptocurrency in recent years of revolution inside the crypto world, whether it is bitcoin or Ethereum.

But today’s topic will be stablecoins. This post will be extremely interesting because it will allow you to discover the features and scalability of stablecoins, so let’s get started with the stablecoin valuation in today’s article.

What is a Stablecoin?

A stablecoin is a term used to describe a cryptocurrency that has pegged its value to a specific number using an external monetary value as a reference. Stablecoins come into a category of crypto trading that aims to provide price stability and instant processing.

The reference used to determine the value of any stable currency is derived directly from physical money like US dollars and the value of commodities such as gold, which provide greater market liquidity.

Why Are Stablecoins Important?

The USDC stablecoin, for example, is backed by dollar-denominated assets in circulation with US-authorized financial institutions that are at least equal in fair value to the USDC. Such accounts are attested to by an independent accounting firm.

USDC, like many other stablecoins, is based on the Ethereum blockchain. Stablecoins avoid the volatility of non-pegged cryptocurrencies while retaining some of their most valuable features:

  • Stablecoins are open, global, and available to everyone on the internet, 24/7.
  • They’re easy to transfer, cheap, and secure.
  • They’re programmable and digitally native to the Internet.

What can you do with stablecoins?

1. Minimize volatility

Cryptocurrencies like Bitcoin and Ether have a lot of volatility, sometimes even by the minute. Buyers and sellers can have confidence that the value of their tokens will not rise or drop unpredictably in the near future if the asset is linked to a more stable currency. 

2. Trade or save assets

Stablecoins don’t require a bank account to hold, and they’re simple to move. The value of stablecoins may be easily sent around the world, particularly to regions where the US dollar is difficult to come by or where the local currency is unstable.

3. Earn interest

There are several simple ways to earn interest on a stablecoin investment (which is often higher than what a bank would offer).

4. Transfer money cheaply

With transfer fees of less than a dollar, people have sent as much as a million dollars in USDC.

5. Send internationally

Stablecoins like USDC are a wonderful alternative for sending money around the world because of their quick processing and cheap transaction fees.

Final Words

As a result, stablecoins are an excellent way to achieve a steady price value and an instant processing system with trustworthy collateral as a backing option, which not only eliminates weaker purchasing power but also reduces the risk of short-term volatility.

 

Author: entplusgh.com
Entplusgh provides you with tech-related articles like how-to guides, gaming tips, apps, and more. Subscribe to our newsletter for more tech-related articles.   

Leave a Reply

Your email address will not be published. Required fields are marked *