In the world of cryptocurrencies, price fluctuations can be extremely volatile. To maintain asset stability amidst such volatility, stablecoins have emerged. They act like the 'digital dollar' of the crypto world, helping users resist the risks of market fluctuations. 'Follow for updates'

🎯 What are stablecoins?

Stablecoins are a type of digital currency pegged to fiat currency (usually the US dollar). Its price typically stays close to 1 dollar, achieved through various mechanisms.

For a vivid example:

You can think of stablecoins as a kind of 'digital version of a dollar deposit certificate'. Although they exist on the blockchain, their goal is to always be pegged to 1 dollar. 🏦 Three models of stablecoins

1️⃣ Fiat reserve stablecoins (centralized)

  • Backed by real dollars or equivalent assets as collateral.

  • For example: USDT, USDC.

  • Principle: It's like a bank taking your 1 dollar deposit and giving you a 'tokenized dollar' certificate that can be redeemed at any time.

2️⃣ Crypto asset collateralized stablecoins (decentralized)

  • Collateralized by cryptocurrencies, such as ETH and stETH.

  • For example: DAI, USD1.

  • Principle: It's like putting a large amount of ETH in a 'vault' and exchanging it for a certain amount of dollar stablecoins based on its value.

3️⃣ Algorithmic stablecoins

  • Purely adjusting supply and demand through algorithms to maintain a price of 1 dollar.

  • For example: UST (which has collapsed) is a past example.

  • High risk: Completely relies on market confidence for maintenance; once confidence collapses, it may fall like a house of cards.

✅ USDT (Tether)

  • The world's earliest and most widely circulated stablecoin.

  • Issued by Tether, claiming that each USDT is backed by 1 dollar in reserves (or equivalent other assets).

  • Advantages: High liquidity, widely supported by global exchanges.

  • Controversies: Past transparency issues, collateral assets were once questioned.

  • Data: Currently valued at about 110 billion dollars, accounting for over 60% of the stablecoin market.

✅ USDC

  • Issued by Circle, with stronger regulatory compliance.

  • Asset reserves are subject to audits, making them more favored by regulatory institutions.

  • Mainly used in exchanges and the DeFi ecosystem.

  • Data: Valued at about 32 billion dollars, securely in second place.

✅ USD1

  • Emerging crypto-collateralized stablecoins supported by protocols like Ethena.

  • Not backed by dollars, but generated through on-chain collateralization of ETH and stETH.

  • Due to the volatility of collateral assets, the risk is slightly higher than USDT and USDC, but the transparency is stronger.

  • Suitable for users in DeFi scenarios looking to earn more returns.

🔍 Why are stablecoins important for beginners?

1️⃣ Hedge against market fluctuations

During market surges or crashes, converting assets to stablecoins can lock in value and avoid being affected by market emotions.

2️⃣ Bridging function

Stablecoins often serve as a 'bridge' for deposits or withdrawals. For example, exchanging fiat for USDT, then buying other crypto assets; or selling cryptocurrencies to convert back to USDC, then withdrawing to a bank.

3️⃣ The cornerstone of the DeFi world

Most decentralized finance protocols are built around stablecoins for lending, trading, or liquidity mining.

⚠️ What should newcomers pay attention to?

  • USDT and USDC have high security, but are controlled by centralized institutions, meaning they may be frozen or scrutinized.

  • On-chain collateralized stablecoins like USD1 are more decentralized, but the collateral assets can be highly volatile; if the market crashes sharply, there may be a risk of decoupling.

  • Usage suggestions:

    • Daily trading or deposits → USDT/USDC

    • DeFi investments or more decentralized → DAI/RAI/USD1

    • Avoid heavily investing in algorithmic stablecoins (there are many historical lessons!).

Stablecoins are the best starting point for newcomers to the crypto world. They maintain relative asset stability while allowing flexible participation in various on-chain activities. Whether it's USDT, USDC, or the emerging USD1, they are like 'cash in the digital world', each with its own pros and cons based on different underlying models. When choosing, first consider your risk tolerance, diversify your allocation, and don't put all your eggs in one basket!#加密市场反弹 $WCT