What is a stablecoin?
Stablecoins are a type of cryptocurrency whose value is linked to a real-world asset, such as a fiat currency (like the US dollar) or a commodity (like gold), with the aim of maintaining a stable price.
This contrasts with other cryptocurrencies that can experience large price fluctuations.
How do stablecoins work?
Linking to an asset:
Most stablecoins are designed to maintain a 1:1 value with the asset to which they are linked.
Backing by assets or algorithms:
Some are backed by reserves of assets (like dollars in a bank account), while others use algorithms to maintain their stable value.
Less volatility:
By being linked to a stable asset, stablecoins offer greater stability than other cryptocurrencies, making them useful for transactions and payments.
Examples of stablecoins:
USDT (Tether): One of the most popular stablecoins, linked to the US dollar.
USDC (USD Coin): Another widely used stablecoin, also linked to the US dollar.
BUSD (Binance USD): A stablecoin from the Binance exchange, linked to the US dollar.
Why use stablecoins?
Reduce volatility:
They are useful for those looking for an alternative to the price fluctuations of traditional cryptocurrencies.
Facilitate transactions:
Their stability makes them more suitable for transactions and payments, as their value can be predicted.
Be in crypto without the volatility:
They are a way to participate in the world of cryptocurrencies without having to deal with the large price movements of other cryptocurrencies.