#BinanceAlphaAlert $What are stablecoins?

Stablecoins are assets that are linked in value to another physical asset such as traditional fiat currencies or a type of precious metal, designed to maintain the relative stability of cryptocurrency prices to mitigate the associated risks.

When did stablecoins emerge?

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

During this time, many digital dollars were created, resulting in the establishment of the first stablecoin, BitUSD. Since then, many types of stablecoins have appeared.

What is the mechanism of stablecoins?

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

Although there are some methods that have proven successful, there is still nothing like a guaranteed peg.

For example, tokens pegged to the US dollar, euro, yen, or linked to a precious asset like gold and oil can be purchased, as stablecoins allow their holders to stabilize both profits and losses, as well as transfer value.