Investors/traders would really want to save money even if the price of their crypto is dropping,well Stablecoins can really help you to save money whether the price drops or
Not......
First of all,what are Stablecoins??
Stablecoins can simply be defined and can be actually referred to as a kind of cryptocurrency that gets a guaranteed value via the actual value of another asset...
The Fiat currency,or many other type of cryptocurrencies, or also the precious metals can also be considered to actually be the pegged asset (which includes Gold, Silver). But obviously The one which is the simplest of all the three is the fiat money,and so that means that one stablecoin will actually be equal to one dollar....
Well the fact is that the Stablecoins were kind of coins that were been created to be able to actually fight/combat the instability which do usually occur on the cryptocurrency market....
The Stablecoins are actually a kind of an effective and centralized cryptocurrency which comes with a fixed price which is valued at $1 if the coin is actually been backed by the United States dollars (USD).....
Stablecoins are kind of coins which are been collateralized, and that will really ensure that the circulation of the coins is actually been equal to the asset which is reserved,So what that means is that if For instance, we have more than 100,000 coins which are confirmed to actually be in circulation, then it means that the issuer company of the stablecoin must ensure they keep $100,000 in their bank reserve....
There are now so many Stablecoins which do exist on the cryptocurrency market which includes the Tether (USDT) and also the trueUSD (TUS) and both of them tend to be the most popular Stablecoins...
How Stablecoins works....
Stablecoins have a definite purpose,and that purpose is to actually make it price to remain constant over time.....well There are different ways to make that happen...
It is a fact that the Stablecoins are actually been backed by the fiat currencies,the precious metals too, or any kind of digital assets.
It is actually a fact that the cheapest or most affordable and also the simplest way to be able to really ensure a kind of steady price is via using the fiat currencies to actually use as a way to back up the stablecoin.......
A type of central custodian,e.g a bank will have to make sure that they reserve $1 for each of the stablecoin which was actually issued by the company, the truth of the matter is that if the reserve of the fiat is less than the cryptocurrency circulation, that could make the price of the stablecoin to actually plummet....
A stablecoin issuer company should ensure that it maintains the fiat currency reserve and also it's circulation supply......
There are Many stablecoins which exist on the market but they have not really be able to actually sustain a 1:1 ratio, and that has made their ventures to fail....
The Precious metals which is gold, silver,etc are another effective way to actually support stablecoins, but this cannot be considered as an effective and sufficient way to back the cryptocurrencies...
Well due to the usual fluctuation in price of the gold and the silver,it makes it so difficult to be able to sustain the price of the stablecoin...
The fact is that another cryptocurrency could actually be used in supporting Stablecoins because the fact is that there are often uncertainties which occur on the crypto market....
The price of the stablecoin will actually be able to get sustained via an exchange of 2$ in crypto for each of the $1 in stablecoin...
However, there are some kind of circumstances and situations which could make the process to actually fail....
Smart contracts are kind of tools which can be actually used to make a stable price for the stablecoins...
well the basic demand and supply which surrounds the Stablecoins are been usually monitored by an effective smart contract which ensures that it buy the coins when the basic price is actually too low and it then ensures that it actually issues new coins when the price have actually become too high, and thus that will make it possible to actually maintain the price of the stablecoin.....
Any type of effective strategy would really be implemented but the main goal was to actually ensure that the price remains stable...
Why Stablecoins are necessary....
Stablecoins are really necessary because they are effective and also required to be able to ensure that users fund are been actually protected from the instability of the crypto market and also the national fiat currency inflation....
There are confirmation that there are so many countries which are really unable to be able to control inflation which exist in their national currencies, and because of that the actual value of all their currencies keep falling,some of these countries with high inflation includes Zimbabwe,Venezuela and also Argentina too....
Stablecoins can actually be used to combat inflation,the Stablecoins are easy to get transformed or changed into other cryptos and the transactions can easily be done Since there are actually no kind of bank or any kind of settlement fees,the transactions tend to happen fast and they are also inexpensive too...
In various cryptocurrency exchanges you can trade Different type of stablecoin pairs,the Users will actually be able to really convert all their major assets into the stablecoins incase if a market downturn occurs...
Can Stablecoins achieve decentralisation which is complete??
Well I would say NO......here is it,it is a fact that most of the Stablecoins are often pegged to the US dollar, and there are many professional.analysts who believes that the cryptos value is actually been really determined by the US banking system,
The banks' do have supply and the reserve which are actually been handled by a kind of centralized entity, which is a kind of the polar opposite of the Satoshi Nakamoto's vision which he really had from a decade ago....
The Problems with the Stablecoins....
Stablecoins tend to be a kind of contentious subject which exist in the world of cryptocurrencies....
Tether which is a popular stablecoin, has actually been in the news recently, According to some researches made by some financial/crypto experts they believe that the coin is actually been used to be able to control the Bitcoin price.....
Many people do ask the question of whether the actual reserve which exists in the banks and also if the circulating supply do occur in a 1:1 ratio....
Well According to an estimate which was actually done recently,it was confirmed that it was really only 74% of the Tether coins that are actually been backed by the US ddollar......