What are Stable Coins and how do they work?

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This Article was Reviewed by The Chief Editor, Godfrey

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It was in 2008 that the first digital currency was introduced on the market in the form of Bitcoin. Following this, we have seen the introduction of lots of cryptocurrencies which are used by individuals for making transactions, purchasing assets, or buying one’s preferred snacks. Nevertheless, we still don’t make use of digital currencies for purchasing stuff on a wide scale at present. This is because these cryptocurrencies tend to be extremely volatile and their price can fluctuate significantly from time to time. In case you want to trade in Bitcoin successfully, then make sure to use the fully automated Immediate Connect App.

On the other hand, stablecoins happen to be affordable and safe and the good thing is that these are not volatile as well. These have become popular at present since they are used for representing real cash such as pounds and dollars. Let us find out more about stablecoins in the following paragraphs.

What do you mean by stablecoins?

With over 200 stablecoins in existence, 30% of them are currently active while 10% have been discontinued. These digital currencies have gained significant popularity recently due to their numerous benefits.  

How do stablecoins work?

1. Compared to other digital currencies, stablecoins happen to be non-volatile in nature. Being decentralized, these are likewise quite stable and provide accessibility as well as mobility. Stablecoins are not regulated by any central authority which makes them autonomous in the long run.

2. The most notable thing about stablecoins is that they are quite stable when it comes to value.  This implies that the value of stablecoins will not either rise or fall from time to time. You will be able to comprehend this fact by comparing Bitcoin to the USD. The value of the USD coin has remained almost constant since it was introduced and it has stayed at more or less $1 all the time. However, the value of Bitcoin has risen from $4,000 in the year 2019 to as much as $60,000 in 2021. 

3. Stablecoins have gained popularity for several reasons, including the ability to maintain financial privacy and conduct fast transactions. Additionally, stablecoin users can avoid financial service charges when using these digital currencies. The most entertaining fact about the most popular stablecoins is that, they do not come with the vital risks of market volatility. If you are getting confused upon the factors right now then worry not as the following points will help you understand everything in the best way possible.

4. It can be quite perilous to use digital currencies in case you like to invest your savings. It will be a good idea to explore the area while approaching stablecoins candidly. Stablecoins can likewise be used as the preliminary step while investing in digital currencies. 

5. The stablecoins play a pivotal role in the trade market as its price is generally pledged to one fiat currency or the other. In simple words, they are often considered as digital cash in the trade market. Nevertheless, it still happens to be a digital currency despite the fact that it is stable. As a result, one can consider stablecoins to be a new entity with a few risks that have not been revealed yet.

You will come across lots of positive reviews of this particular app on the Internet that speak volumes of its popularity. 

The most well-known stablecoins

Here, we have mentioned some well-known stablecoins such as the following:

•          Tether – Being the first stablecoin on the planet, the market cap of Tether happens to be below $72.5 billion (as of June in the year 2022). 

•          Binance Dollar – This is a stablecoin created on the Ethereum blockchain supported by the US dollar. Collaboration between Paxos and Binance resulted in the development of this stablecoin mentioned here. 

•          USD Coin – We make use of this stablecoin for representing tokenized US dollars. A consortium known as Center created by Coinbase and Circle is accountable for managing USD Coin.

•          Pax Dollar – This stablecoin was earlier called PAX (Paxos Standard). It has been created on the Ethereum blockchain and it happens to be the native digital currency of Paxos which is controlled by the NYDFS. 

•          TrueUSD – Lastly, we will talk about TrueUSD which is yet another stablecoin backed by the US dollar.

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About the Chief Editor

Godfrey Ogbo, the Chief Editor and CEO of AtlanticRide, merges his environmental management expertise with extensive business experience, including in real estate. With a master's degree and a knack for engaging writing, he adeptly covers complex growth and business topics. His analytical approach and business insights enrich the blog, making it a go-to source for readers seeking thoughtful and informed content.

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