What is stablecoin?
In one line, a stablecoin is a cryptocurrency that provides price stability.
Bitcoin or other cryptocurrencies suffer from high volatility. Which means, the price of a Bitcoin or other cryptocurrencies can rise or drop very quickly. This makes Bitcoin unsuitable for everyday usage and paying for day to day commodities. Bitcoin price increased by 35% from March 2020 to April 2020 only.
Stablecoins on the other hand,** keeps the inflation rate to the minimum**. Most stablecoins keep the price equal to FIAT currencies. For example, Tether (USDT) and USD Coin (USDC) prices are always equal to 1 USD. They allow small inflation or deflation, but we are talking about less than 1% difference in 24 hours.
Stablecoin allows the “best of both worlds”.
- Fast transaction speeds anywhere in the world and
- Price stability.
This makes them great for everyday use and are **safe **when massive swings happens in the markets. Stablecoin can be pegged not only to FIAT currencies but also to other cryptocurrencies or exchange-traded commodities like gold, silver, etc.
Where can I get a stablecoin?
Stablecoins can be bought from various exchanges. I am not mention any names here but if you google you can find a lot. Most of the crypto wallets these days offer internal exchanges aswell.
How do stablecoins work?
Each stablecoin is backed by either a FIAT currency, cryptocurrency, or exchange-traded commodities like gold or silver.
We will use USDT as an example. Tether is pegged to USD fiat currency. This means that the USDT is backed by USD by a 1:1 ratio. However it will be wrong to say that they always remain 1:1
