#BinanceAlphaAlert #IsraelIranConflict What are stablecoins?

Stablecoins are assets pegged in value to another physical asset, such as traditional fiat currencies or a precious metal. This relationship is designed to maintain a relatively stable price for the cryptocurrency and reduce the risks involved.

When did stablecoins emerge?

Stablecoins emerged in the early days of the digital age, as part of efforts to digitize fiat currencies and simplify financial transactions.

At this time, many digital dollars emerged, leading to the creation of the first stablecoin, BitUSD. Since then, many types of stablecoins have emerged.

How do stablecoins work?

Stablecoins track the value of local currencies or other assets, and their creation requires a pegging mechanism. Most stablecoins rely on another asset as collateral.

While some methods have proven successful, there is no such thing as a guaranteed peg.

For example, tokens pegged to the US dollar, euro, or yen, or pegged to a precious asset such as gold or oil, can be purchased. Stablecoins allow holders to lock in both profits and losses, as well as transfer value at a fixed rate on blockchain networks from person to person.

What are the types of stablecoins?

There are the main types of stablecoins, which are:

Stablecoins backed by a recognized local currency.

Algorithmic stablecoins.

Stablecoins backed by a digital currency.