To understand cryptocurrencies, stablecoins are an indispensable key player.
In simple terms, a stablecoin is a 'value anchor' in the crypto world. Mainstream cryptocurrencies like Bitcoin and Ethereum can fluctuate by over ten percent in a single day, making ordinary people worried about depreciation and merchants fearful of value loss— receiving 100,000 Bitcoin today might only have 80,000 in purchasing power tomorrow, making widespread adoption difficult.
More practically, when two highly volatile cryptocurrencies are traded, it is difficult for both parties to quickly agree on a price. At this point, stablecoins become a 'universal intermediary', allowing both parties to quickly reach a consensus, saving time and reducing friction costs. The emergence of stablecoins is meant to fill the demand for 'value-stable carriers' in the crypto market.
So how does it achieve 'stability'?
Currently, it is mainly divided into two categories:
Fiat-backed stablecoins: directly pegged to fiat currencies, for example, 1 stablecoin = 1 dollar (or pound, euro, etc.). This way, the risk of drastic fluctuations in cryptocurrencies is eliminated, leaving only the exchange rate fluctuations of the corresponding fiat currency, significantly lowering the barrier.
Commodity-backed stablecoins: mainly pegged to physical assets like gold, with a fixed exchange ratio, somewhat like a 'digital gold certificate', for instance, 1 stablecoin corresponds to 1 gram of gold, backed by the value of the physical asset.
Of course, it's not enough to just talk about it. The issuer must put up real money— for example, if they issue a 1 dollar stablecoin, they need to deposit 1 dollar in the bank as reserves, which can be redeemed at a 1:1 ratio at any time, backed by collateral.
The entire stablecoin market has now reached a scale of 250 billion dollars, with USDT and USDC accounting for over 80% of this. Some conservative estimates suggest that in 10 years, this scale may reach 4 trillion dollars, which is 16 times the current size.
Understanding stablecoins not only helps grasp the underlying logic of crypto transactions but may also help seize the next market opportunity—after all, they are the key link connecting reality and virtuality in the crypto world.
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