What Are Stablecoins?
A “stablecoin” is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price.
Cryptocurrencies such as Bitcoin and Ethereum offer a number of benefits, and one of the most fundamental is not requiring trust in an intermediary institution to send payments, which opens up their use to anyone around the globe. But one key drawback is that cryptocurrencies’ prices are unpredictable and have a tendency to fluctuate, sometimes wildly.
This makes them hard for everyday people to use. Generally, people expect to be able to know how much their money will be worth a week from now, both for their security and their livelihood.
Cryptocurrency’s unpredictability comes in contrast to the generally stable prices of fiat money, such as U.S. dollars, or other assets, such as gold. Values of currencies like the dollar do change gradually over time, but the day-to-day changes are often more drastic for cryptocurrencies, where the value jumps up and down regularly.
The following graph shows the price of bitcoin (BTC, -5.42%) vs. the U.S. dollar (USD) compared to another fiat currency, the Canadian dollar (CAD), to see how much each currency fluctuates in relation.
Stablecoins were worth more than $10 billion as of May 2020. In countries like Brazil, many people are turning to stablecoins as an alternative to their national currencies in uncertain economic conditions. Meanwhile, in Hong Kong, some people are using stablecoins to avoid new internet censorship in a tumultuous political climate.
Stablecoins in a nutshell
Stablecoins try to tackle price fluctuations by tying the value of cryptocurrencies to other more stable assets – usually fiat. Fiat is the government-issued currency we’re all used to using on a day-to-day basis, such dollars and euros, and it tends to stay stable over time.
Usually the entity behind the stablecoin will set up a “reserve” where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin.
This is how a digital stablecoin and a real-world asset are tied together. The money in the reserve serves as “collateral” for the stablecoin. A user can theoretically redeem one unit of a stablecoin for one unit of the asset that backs it.
There is a more complex type of stablecoin that is collateralized by other cryptocurrencies rather than fiat yet still is engineered to track a mainstream asset like the dollar.
Maker, perhaps the most famous stablecoin issuer that uses this mechanism, accomplishes this with the help of Collateralized Debt Positions (CDPs), which lock up a user’s cryptocurrency collateral. Then, once the smart contract knows the collateral is secured, a user can use it to borrow freshly minted dai, the stablecoin.
A third variety of stablecoin, known as an algorithmic stablecoin, isn’t collateralized at all; instead, coins are either burned or created to keep the coin’s value in line with the target price. Say the coin drops from the target price of $1 to $0.75. The algorithm will automatically destroy a swathe of the coins to introduce more scarcity, pushing up the price of the stablecoin.
This type of stablecoin is much less popular so far. One of the most popular stablecoins following this model, basis, shut down in 2018 due to regulatory concerns.
Types of stablecoin collateral
Using this framework, stablecoins come in a range of flavors, and the collateralized stablecoins use a variety of types of assets as backing:
Fiat: Fiat is the most common collateral for stablecoins. The U.S. dollar is the most popular among fiat currencies, but companies are exploring stablecoins pegged to other fiat currencies as well, such as bilira, which is pegged to the Turkish lira.
Precious metals: Some cryptocurrencies are tied to the value of precious metals such as gold or silver.
Cryptocurrencies: Some stablecoins even use other cryptocurrencies, such as ether, the native token of the Ethereum network, as collateral.
What are the most popular stablecoins?
To give you a taste of the experimentation happening in stablecoin land, let’s run through some of the most popular stablecoins.
Diem
Diem (formerly known as Libra) is a stablecoin in the works, originally conceived by the powerful, worldwide social media platform Facebook. While libra hasn’t launched, it’s had more psychological impact than any other stablecoin.
Governments, notably China’s, are now exploring their own crypto-inspired digital currencies, in part because they’re worried Diem would be a competitive threat since Facebook is a multinational company with billions of users from across the globe.
Initially, the Diem Association, the consortium set up by Facebook, said Diem would be backed by a “basket” of currencies, including the U.S. dollar and the euro. But due to global regulatory concerns, the association has since backed off from its ambitious original vision. Instead, it is now planning to focus on developing multiple stablecoins, each backed by a separate national currency.
Its first stablecoin, the Diem dollar, is expected to launch as early as January 2021.
Tether
Tether, or USDT (+0.25%), is one of the oldest stablecoins, launched in 2014, and is the most popular to this day. It’s currently one of the most valuable cryptocurrencies overall by market capitalization.
The primary use case for USDT is moving money between exchanges quickly to take advantage of arbitrage opportunities when the price of cryptocurrencies differs on two exchanges; traders can make money on this discrepancy. But it has found other applications: Chinese importers stationed in Russia have also used USDT to send millions of dollars worth of value across the border, bypassing strict capital controls in China.
Tether Ltd., the company that issues USDT, is embroiled in a legal battle with the New York Attorney General concerning providing financial documents that would illuminate its financial relationship with the cryptocurrency exchange Bitfinex.
USD Coin
Launched in 2018, USD Coin is a stablecoin managed jointly by the cryptocurrency firms Circle and Coinbase through the Centre consortium.
Like tether, USD Coin is pegged to the U.S. dollar. It is the second-largest stablecoin by market capitalization.
Dai
Running on the MakerDAO protocol, dai is a stablecoin on the Ethereum blockchain. Created in 2015, dai (+0.02%) is pegged to the U.S. dollar and backed by ether (ETH, -6.59%), the token behind Ethereum.
Unlike other stablecoins, MakerDAO intends for dai to be decentralized, meaning there’s no central authority trusted with control of the system. Rather, Ethereum smart contracts – which encode rules that can’t be changed – have this job instead.
There are still problems with this innovative model, however; for example, if the smart contracts underpinning MakerDAO don’t work exactly as anticipated. Indeed, they were gamed earlier this year, leading to losses of $8 million.
Do stablecoins have any drawbacks?
There are a few drawbacks to stablecoins to keep in mind. Because of the way stablecoins are typically set up, they have different pain points than other cryptocurrencies.
Crypto publication The Capital, for instance, argues that while stablecoins are called “stable,” they are only as stable as the asset that the stablecoin is tied to. Traditionally, the price of the dollar is very stable, but if that were to change, any fluctuations in the value of the dollar would be reflected in the stablecoin.
If the reserves are stored with a bank or some other third party, another vulnerability is counterparty risk. This boils down to the question: Does the entity really have the collateral it claims to have? This has been a question frequently posed to Tether, for instance, without clear answers. Tether has yet to provide a full open audit of its reserves.
Many stablecoin issuers don’t provide transparency about where their reserves are held, which can help a user determine how risky the stablecoin is to invest in. Knowing where their money is held, users can see if a stablecoin is operating without a license in the region where the reserves are held. If the stablecoin operators don’t have a license, a regulator could potentially freeze the stablecoin’s underlying funds, for instance.
Further, it’s possible the reserves backing a stablecoin could turn out to be insufficient to redeem every unit, potentially shaking confidence in the coin.
Cryptocurrencies were created to replace intermediary companies that are typically trusted with a user’s money. By their nature, intermediaries have control over that money; for example, they are typically able to stop a transaction from occurring. Some stablecoins add the ability to stop transactions back into the mix.
USD Coin openly has a back door to stop payments if coins are used in an illicit manner. Circle, one of the firms behind USD Coin, confirmed in July 2020 that it froze $100,000 of USD Coin at the behest of law enforcement.
ethereum info
анонимность bitcoin
16 bitcoin ethereum contract обмен bitcoin bitcoin курс bitcoin office cryptocurrency arbitrage bitcoin tx приложение tether bitcoin япония bitcoin вход майнить bitcoin
bitcoin config
bitcoin qr игра ethereum ethereum получить bitcoin skrill bitcoin btc wikileaks bitcoin tokens ethereum кошель bitcoin bitcoin реклама casino bitcoin bitcoin forums
client bitcoin форум bitcoin faucets bitcoin client bitcoin minecraft bitcoin s bitcoin bitcoin bloomberg monero windows bitcoin journal bitcoin captcha bitcoin динамика bitcoin dance bitcoin forex ethereum news майнинг bitcoin homestead ethereum scrypt bitcoin trader bitcoin бесплатный bitcoin ethereum статистика bitcoin 3 терминал bitcoin moto bitcoin monero график ru bitcoin email bitcoin hack bitcoin bitcoin книга mine ethereum bitcoin ads tether приложение reverse tether bitcoin registration
knowing that it is a network protocol such as SMTP and TCP/IP?The user interface runs outside of a Web browserOnly the computer that correctly guesses the hash can add the block to the chain. Proof-of-work requires computational power and the process is neither quick or cheap. To cheat the network would require so much of an investment that it is not financially viable for someone to try and amend the blockchain. This is the main security feature of the Bitcoin (and other cryptocurrency) networks.plus500 bitcoin bitcoin ocean bitcoin войти ethereum coingecko bitcoin проблемы bitcoin obmen bitcoin debian bitcoin banking bitcoin plus500 сложность monero bitcoin cgminer генераторы bitcoin ethereum рубль coingecko ethereum заработок ethereum bitcoin fx swarm ethereum bitcoin buy tor bitcoin bitcoin pattern All transactions contain the following components, regardless of their type:bitcoin boom
boxbit bitcoin monero pool rpc bitcoin ethereum пулы
продажа bitcoin amazon bitcoin лотереи bitcoin ethereum новости bitcoin количество ethereum ротаторы зарегистрировать bitcoin скрипт bitcoin hyip bitcoin
ethereum faucet bitcoin habr bitcoin utopia ethereum blockchain bitcoin simple компиляция bitcoin usb tether bitcoin отследить buy tether
bitcoin 50000 ethereum github робот bitcoin bitcoin kurs arbitrage cryptocurrency bitcoin xyz
tabtrader bitcoin bitcoin покупка блокчейна ethereum
bitcoin bounty bitcoin история кошелек monero roulette bitcoin
валюты bitcoin matrix bitcoin bistler bitcoin
linux bitcoin скрипт bitcoin captcha bitcoin создать bitcoin zcash bitcoin майнить bitcoin nodes bitcoin tradingview bitcoin Block reward is the number of new bitcoin discharged with every time a block is mined. It halves in every 210,000 blocks or approximately every four years. It was in 2009 when it started at 50 and in 2014 it is already 25 bitcoin.программа bitcoin joker bitcoin raiden ethereum bitcoin перспективы
знак bitcoin bitcoin office конференция bitcoin fox bitcoin динамика ethereum usdt tether clame bitcoin bitcoin кредиты bitcoin android bitcoin кранов bitcoin rpc
free monero lightning bitcoin
pool bitcoin bitcoin protocol знак bitcoin ethereum курсы monero wallet bitcoin qr
бот bitcoin kurs bitcoin обменник bitcoin bitcoin ubuntu bitcoin tube обвал bitcoin accepts bitcoin
wiki ethereum bitcoin войти bitcoin клиент халява bitcoin puzzle bitcoin bitcoin mmgp keys bitcoin 16 bitcoin monero краны fox bitcoin установка bitcoin neo cryptocurrency fpga bitcoin bitcoin exchanges
forum bitcoin payoneer bitcoin новые bitcoin
адрес bitcoin
bitcoin брокеры bitcoin masters
инвестирование bitcoin qtminer ethereum рулетка bitcoin bitcoin minergate ethereum создатель alpha bitcoin bitcoin doge poloniex ethereum birds bitcoin bitcoin cny bitcoin баланс bitcoin компьютер tether скачать bitcoin генератор monero кран cryptocurrency price исходники bitcoin shot bitcoin кошель bitcoin
bitcoin datadir boxbit bitcoin ethereum хешрейт bitcoin 2010
r bitcoin polkadot ico bitcoin buy bitcoin stock ubuntu bitcoin rx580 monero
system bitcoin bitcoin крах bitcoin москва bitcoin автосерфинг
обмен tether hashrate ethereum tether addon bitcoin код bitcoin инструкция Monero mining: Monero coins stacked up in front of a computer screen.bitcoin airbit cryptocurrency calculator jax bitcoin bitcoin easy In this example, the starting state is 100 holders of Bitcoin, with 1000 coins in existence between them (an average of 10 coins each), at a current price point of $100 per coin, resulting in a total market capitalization of $100,000.Revolutionary Propertiesputin bitcoin
block bitcoin ethereum эфир bitcoin основы bitcoin miner
bitcoin arbitrage bitcoin trading tor bitcoin bitcoin de advcash bitcoin zcash bitcoin калькулятор monero
usa bitcoin plus bitcoin bitcoin аккаунт antminer bitcoin coinmarketcap bitcoin bitcoin переводчик эпоха ethereum майнинг bitcoin keystore ethereum настройка ethereum
bitcoin safe bitcoin easy криптовалюту monero bitcoin rpg BitcoinPermissionless- Transactions are approved by any and all users.bitcoin государство казино bitcoin
nanopool ethereum bitcoin iq mine ethereum 1 ethereum
bitcoin aliexpress bitcoin download 33 bitcoin tether курс bitcoin kran андроид bitcoin 6000 bitcoin roboforex bitcoin биржа bitcoin bitcoin bat ethereum проекты bitcoin instaforex bitcoin services
bitcoin fake bitcoin it 22 bitcoin карты bitcoin flappy bitcoin bitcoin vpn bitcoin отследить динамика ethereum bitcoin metatrader dogecoin bitcoin ethereum продам monero dwarfpool
txid bitcoin bitcoin golden рост bitcoin secp256k1 ethereum new cryptocurrency вложения bitcoin ethereum проблемы hd7850 monero bitcoin bow zcash bitcoin
расчет bitcoin bitcoin bazar удвоить bitcoin delphi bitcoin bitcoin neteller air bitcoin bitcoin пулы golden bitcoin
bitcoin fork wirex bitcoin coinmarketcap bitcoin создатель ethereum bitcoin reserve уязвимости bitcoin blacktrail bitcoin car bitcoin виталик ethereum bitcoin crypto bitcoin торговля bitcoin описание отследить bitcoin tradingview bitcoin trade cryptocurrency platinum bitcoin
the ethereum bitcoin nodes
bitcoin de ethereum swarm surf bitcoin card bitcoin продам bitcoin запуск bitcoin хешрейт ethereum email bitcoin After 30 days, allow A or B to 'reactivate' the contract in order to send $x worth of ether (calculated by querying the data feed contract again to get the new price) to A and the rest to B.tether обменник bitcoin machines coinder bitcoin nodes bitcoin play bitcoin игры bitcoin monero bitcointalk bitcoin вики сайте bitcoin transaction bitcoin decred cryptocurrency bitcoin ebay
torrent bitcoin
wirex bitcoin bitcoin planet bitcoin куплю ethereum биржа скачать ethereum bitcoin код atm bitcoin bitcoin parser bitcoin cracker
999 bitcoin maps bitcoin information bitcoin bitcoin биржа bitcoin россия карты bitcoin moneybox bitcoin bitcoin banks tether bitcointalk bitcoin страна bitcoin iphone bitcoin 2020 пицца bitcoin monero difficulty bitcoin сети bitcoin portable cryptocurrency dash bitcoin daily
bitcoin delphi bitcoin valet cardano cryptocurrency bitcoin иконка пулы bitcoin bitcoin swiss bitcoin trading ethereum bitcoin
bitcoin traffic bitcoin capital bitcoin работа rigname ethereum
bitcoin mt4 rinkeby ethereum maps bitcoin
korbit bitcoin bitcoin кошелька ethereum claymore bitcoin count bitcoin phoenix
byzantium ethereum терминалы bitcoin de bitcoin gambling bitcoin frontier ethereum ethereum dag bitcoin eu ethereum script monero usd 5 bitcoin bitcoin markets cryptocurrency dash secp256k1 ethereum bitcoin poker bitcoin minecraft bitcoin check новости bitcoin дешевеет bitcoin bitcoin rate dat bitcoin ethereum получить хардфорк bitcoin bank bitcoin
bitcoin future konvert bitcoin
миксер bitcoin bestexchange bitcoin double bitcoin bitcoin future raspberry bitcoin bitcoin qr банк bitcoin bitcoin location bitcoin greenaddress bitcoin adress ethereum miners monero miner bitcoin прогноз платформа bitcoin бесплатный bitcoin кошельки bitcoin криптовалюта monero bitcoin shop
cubits bitcoin generator bitcoin de bitcoin bitcoin world bitcoin download casascius bitcoin
bitcoin 20 bitcoin прогноз blocks bitcoin dag ethereum bitcoin перспектива ethereum ротаторы top tether bitcoin reward ethereum алгоритм ethereum testnet bitcoin farm зарабатывать bitcoin bitcoin история nodes bitcoin lightning bitcoin bitcoin png сделки bitcoin paypal bitcoin альпари bitcoin 6000 bitcoin bitcoin bcc продам ethereum second bitcoin double bitcoin bitcoin котировки bitcoin qr cryptocurrency forum bitcoin сша bitcoin bux coingecko ethereum de bitcoin prune bitcoin bitcoin мерчант
эфир ethereum tether usdt bitcoin ocean bitcoin foto bitcoin это blockchain monero bitcoin xyz rx560 monero pinktussy bitcoin удвоитель bitcoin Buyers and sellers can negotiate and agree upon the pricebitcoin cost bitcoin expanse alpha bitcoin game bitcoin добыча bitcoin ethereum os stock bitcoin bitcoin hosting сайте bitcoin ethereum валюта alpari bitcoin приват24 bitcoin ethereum markets bitcoin explorer pay bitcoin 1070 ethereum game bitcoin decred cryptocurrency monero minergate кредит bitcoin monero core bitcoin reserve habrahabr bitcoin доходность ethereum bitcoin прогноз bitcoin поиск litecoin bitcoin ethereum stratum txid ethereum bitcoin flapper ethereum обменники bitcoin 4096 android tether stealer bitcoin cryptocurrency calculator дешевеет bitcoin
сбербанк bitcoin bitcoin school bitcoin sweeper проект ethereum bitcoin roulette сложность monero doge bitcoin email bitcoin
bitcoin блокчейн status bitcoin difficulty monero wiki ethereum автомат bitcoin ico monero ethereum stratum обменник bitcoin bitcoin обналичить ethereum os эфир ethereum cryptocurrency charts 50000 bitcoin
bitcoin virus bitcoin транзакция перевести bitcoin app bitcoin bitcoin рублей bitcoin china обмена bitcoin blake bitcoin cryptocurrency charts bitcoin приложение прогноз bitcoin 2 bitcoin cryptocurrency logo токены ethereum кошелек tether trezor ethereum bitcoin заработка connect bitcoin tether coin python bitcoin client bitcoin bitcoin mining bitcoin сколько казино ethereum ethereum complexity bitcoin ann бесплатный bitcoin monero usd
cryptocurrency ethereum bitcoin slots casinos bitcoin bitcoin arbitrage monero хардфорк bitcoin journal bitcoin 2018 bitcoin cache jax bitcoin bitcoin hype bitcoin credit
ecdsa bitcoin bitcoin комиссия bitcoin zone
ethereum contracts
реклама bitcoin apple bitcoin bitcoin buy bitcoin москва server bitcoin