What are stablecoins ?

What are stablecoins ?

Stablecoins are crypto coins that have a stable value. These coins are developed to reduce the price volatility, with respect to several stable considered assets. Stablecoins can be pegged to a crypto-asset, traditional currencies, or to exchange-traded commodities like gold, etc.

Recently the issue of stablecoins has been one of the most discussed topics in crypto world.

According to the latest news, at present there are 57 active stablecoins. They are created to work the same way as cryptocurrencies, at the same time with intention to solve the primary problem of cryptocurrencies, like instability and the absence of contact with real money.

Stablecoins offer an easy solution to the problems that cryptocurrency users often meet, which is the high volatility of crypto coin’s value. No individual or corporate investor can strongly be interested in investing in such volatile coins; however, with stablecoins price fluctuations get reduced, increasing the trustworthiness towards cryptocurrencies. To monitor Stablecoins, you can use a coin tracker.

Stablecoins have four main types and now let’s discuss each of them separately.

Fiat-Collateralized. This type of stable coin is the most common one, which is a 1:1 ratio crypto coin supported by USD, EUR or GBP. Fiat-collateralized stablecoins are the most simple system that stable coins can have and the simplicity is an advantage as for amateurs it makes simple to use the coins, increasing technology usage.

Commodity-Collateralized Stablecoins. This type of stable coin is supported by exchangeable assets. These types are mostly collateralized by commodities such as gold. At the same time, there are stablecoins supported by real estate, different other precious metals. Everyone around the world can invest in gold or real estate, as it is available for everyone.

Crypto-Collateralized Stablecoins. These types of stablecoins are supported by other crypto coins. Like the crypto coins, crypto-collateralized stablecoins are not centralized, they are fully transparent, secure, however, at the same time trustless because of the absence of a special body that controls your funds.  The most famous example of crypto-collateralized stable coin is Dai (DAI).

Non-Collateralized Stablecoins. Non-Collateralized Stablecoins are not supported by anything. Such coins apply to systematically controlled method to manage the stablecoin delivery. This is the most independent form of stablecoins. This means that even if the US dollar crashes, this type of stablecoin will stay stable. An example of a non-collateralized stable coin is Basis which regulates supply for keeping its prices stable.

As a conclusion, stablecoins are on top among crypto coins due to their stability. In order to manage stablecoins, you can use crypto tracking tools and for more helpful information regarding these tools visit this cryptocurrency portfolio management guide.