There is no doubt that crypto-based online businesses, when used wisely, can help the individual with a number of pressing issues. When cryptocurrency came along, a lot of over-business people and investors referred to it as a business transaction remedy. Clearly, it is quite naive to think that cryptocurrency could profoundly change how all things work, however, some crypto-based business might really benefit from it.
But in the latest business market, today cryptocurrencies are synonymous with price variation. So startups to business individuals searching for the alternatives. However, this idea is quickly changing with the launch of Stablecoins.
What is Stablecoin?
Stablecoins are crypto coins that are pegged by real-world assets like fiat currency, gold, shares and more... This gives the coin a “stable” value while also allowing them to harness the underlying benefits of cryptocurrencies.
A perfectly developed stablecoin is the key to achieve all three essential properties of currency.
- The medium of exchange (potentiality to trade goods and services without bartering)
- Store of value (means of manage value over time)
- Unit of account (measurement unit to explain and compare market values)
How does it work?
There are 4 different types of stablecoins currently available in the market:
- Fiat currency-backed stablecoins
- Asset-backed stablecoins
- Cryptocurrency-collateralized stablecoins
- non-collateralized stablecoins
Fiat currency-backed stablecoins
The most common type of stable coin is US dollar-pegged coins like Tether (USDT), USD Coin (USDC), True USD (TUSD), and the Gemini Dollar (GUSD).
The stable coins are backed by US dollar holdings held by the issuer. As new coins are issued, more dollars are being held by the issuer to assure that the stablecoin’s value remains one-to-one to the dollar.
Asset-backed stablecoins
Asset-backed stablecoins are cryptocurrencies whose values are pegged against the price of real assets, like a commodity.
An instance of an asset-backed stablecoin is the gold-pegged digital currency or stable coin is Digix Gold Token (DGX), which allows holders to invest in gold in a tokenized format. The price of one DGX token on the Ethereum blockchain is pegged to one gram of gold, which is held in a vault in Singapore.
Cryptocurrency-collateralized stablecoins
Cryptocurrency-collateralized stablecoins use crypto assets as collateral to price volatility to allow that the price of the coin remains stable.
The most preeminent crypto-collateralized stablecoin is Maker’s Dai (DAI). DAI is a decentralized, crypto-backed stablecoin that controls its value through the use of smart contracts that act in response to changes in the market act by buying and selling combine digital assets such as ETH and MKR.
non-collateralized stablecoins
non-collateralized stablecoins, also known as algorithmic stablecoins, are cryptocurrencies that increase and reduce their coin supply naturally through the use of algorithms to assure that their value rest stable.
Two examples of non-collateralized stablecoin projects include Ampleforth and Kowala.
What’s Next for Stablecoins?
Currently, stablecoins play a major role in the crypto industry. In other words, almost 10 percent of the largest crypto coins are stablecoins. This is proof of the demand for and the future potential of blockchain-powered stablecoins.
Do you want to create your Own Stable Coin?
With the being of several cryptocurrency development companies, developing a stablecoin today is not hard anymore. Developcoins is a top company that offers end-to-end stablecoin development services and solutions that are highly customizable. We have years of experience in cryptocurrency and blockchain development and have a team of blockchain developers who can help you create your own stablecoin using cutting-edge technologies.