Recently, the crypto market has always been known for its strong volatility in both short-term and long-term investments. With the ambition of DeFi to bring cryptocurrencies to soon become a digital asset in the future, many countries do not believe in an unregulated market.
The coin market becomes very vulnerable because of policies from countries around the world or with statements from influential people who also easily manipulate the value of cryptocurrencies. Stablecoins were born and gradually became extremely important to become a piece to connect the DeFi market (decentralized financial market) and CeFi (traditional financial market).
What are stablecoins?
When it comes to Stablecoins, people often think of Tether (USDT) and think that stablecoins have a 1:1 conversion value to US Dollars. In fact, in the crypto market, USDT is just one of many other stablecoins in existence.
This article Finnews24.com will help you answer questions around the following questions:
- What are stablecoins?
- Should you invest in Stablecoins?
- How does stablecoin affect the Vietnamese market?
All of the above questions will be answered for you through an article.
What are stablecoins?
Stablecoin is a digital currency that is encrypted based on the true value of a tangible asset whose purpose is to minimize price volatility (volatility) by being pegged to a highly stable currency. Fiat Money, commodities (gold, silver, ..), or can be tied to another virtual currency.
Stablecoins were born to solve what?
One of the issues that is mentioned when it comes to the crypto-currencies market is the drastic price changes.
For traders who hold and trade coins: They can convert the crypto assets they are holding into stablecoins to avoid the volatility taking place in the market without having to exchange it for fiat. (Fiat is real currency like USD, VND, EUR, GBP, ...)
For trading: Because of the fast up and down fluctuations of Crypto currencies, trading cannot take place because the value may drop lower than 20-30% of the current value of the cryptocurrency. virtual currency assets. To make it easier to buy and sell, Stablecoins will become a unit of conversion and then used for transactions between buyers and sellers.
Thereby, investors can see that Stablecoins play a very important role when becoming a bridge between the virtual currency market and the traditional centralized market. Now, thanks to the appearance of Stablecoins like USDT, the conversion from fiat money (GBP, USD, VND, EUR, ...) to crypto assets (Bitcoin, Ethereum, Cardano,....) can take place. extremely easy.
The advantages and disadvantages of Stablecoins
Basically Stablecoin is also a pure cryptocurrency, so there are good and bad things.
Advantages
Borderless is one of the advantages of any cryptocurrency and Stablecoin also inherits this good factor of the crypto market.
Fast transaction, conversion transaction, stablecoin trading based on Blockchain platform, buying and selling takes place without confirmation or costing any fees to pay third-party confirmations. transaction. P2P transaction is one of the popular forms of stablecoin transactions.
Stability, is a cross between tangible and intangible assets. Stablecoin inherits the stability of fiat currencies and is completely unaffected by any Elon Musk no matter how much he goes on Twitter and writes Status. Stablecoins as digital currencies of national currencies should only depreciate due to inflation like other currencies.
Transparency, every transaction is recorded on a public ledger and anyone can observe this transaction. That is the great advantage of information objectivity and stablecoins bring.
Defect
Stablecoins take away the decentralization of the crypto market, which means that Stablecoins make other digital currencies dependent on it as the asset's exchange value.
Stablecoins Faced with Third Party Audits, DeFi Countability is Once Again challenged as Stablecoins are overseen by an intermediary observed by the CeFi Marketplace.
There is no investment potential because of its high stability, the return performance of this coin seems to be non-existent.
Top 5 popular stablecoins today
Top 5 popular stablecoins today
Stablecoin Paxos Standard
Paxos Standard (PAX) is known as the world's first regulated crypto-asset founded by Charles Cascarilla, launched by Paxos Trust Company. Paxos tokens are backed 1:1 against USD, and are approved and regulated by the New York State Department of Financial Services.
The Paxos Standard Stablecoin is here to give financial markets the power to trade in a fully USD-backed asset with the benefits of Blockchain technology.
From the date the Paxos Standard Token is in circulation, the corresponding amount of dollars is held in segregated accounts at various US banks insured by the FDIC. And upon redemption of dollars, PAX Tokens will be destroyed immediately.
Features of Paxos Standard
- If you own an Ethereum wallet, you can send and receive PAX, because PAX is considered an ERC-20 Token.
- Through Paxos.com, PAX verified customers can buy and redeem Tokens directly.
- Investors will trade using itBit or OTC, where you can quickly cash out their crypto holdings using PAX.
Stablecoin Tiberius Coin
Tiberius Coin (TCX) is a unique stablecoin space cryptocurrency. It is backed not only by assets (USD, silver) but also by a combination of 7 precious metals: gold, nickel, cobalt, platinum, tin, aluminum and copper.
Tiberius Coin was founded by Giuseppe Rapallo – Director of Tiberius Group AG. The presence of TCX aims to provide Coins with diversity, making it more stable and attractive in the eyes of investors.
Features of Tiberius Coin
- Buying and holding TCX is like investing in the tech metals market.
- When the technologies using the 7 metals mentioned above support TCX, over time the value of TCX will increase accordingly.
- Coins will be sold under Swiss law for around $0.70 instead of going through unregulated ICO sales.
Stablecoin lbx peg
LBX, the abbreviation of the phrase “London Block Exchange”. In the UK, LBX officially issues their own Stablecoin, called LBX Peg. It is a cryptocurrency that is initially pegged to the British pound (GBP), and held in a 1:1 verifiable UK bank account.
Features of LBX Peg
- The birth of LBX Peg allows users to transfer the digital equivalent of GBP easily and quickly on a global scale, through a decentralized network.
- LBX Peg is currently using the Ethereum Blockchain to develop, distribute, and manage its new Cryptobound.
Stablecoin Gemini Dollar
Gemini Dollar (GUSD) is marketed by Gemini Trust Company – a custodian and digital currency exchange operated by the Winklevoss billionaire twins.
Gemini Dollar was introduced at the same time as the Paxos Standard, which was approved and controlled by the New York State Department of Financial Services.
Features of Gemini Dollar
- Gemini Dollar is a combination of the reliability and price stability of the US dollar with Blockchain technology.
- The code of GUSD smart contracts is checked by Trail of Bits to ensure safety.
- GUSD is listed and traded with exchanges such as Bitbox, BTEX, HitBTC, DigiFinex, etc.
Stablecoin Carbonusd
Stablecoin CarbonUSD (CUSD) was founded by Miles Albert. This is a stablecoin pegged to the US dollar, built on the Ethereum platform.
Features of CarbonUSD
- CUSD is considered a coin that can be used by exchanges, Traders, hedge funds and institutional investors.
- Unlike a bunch of Stablecoins, USD-backed CUSD is Carbon, using a unique algorithmic model on Hedera Hashgraph.
Should you invest in Stablecoins?
As analyzed above, in addition to the advantages, Stablecoins still have disadvantages that are difficult to overcome. Therefore, Stablecoins are not profitable and will not be in the portfolio of venture capitalists.
The cost of holding a stablecoin for a long time will be accompanied by a slide due to inflation mainly because the currency depends on the current value of fiat money and is not a true Cryptocurrency of the DeFi market.
Are Stablecoins Similar to Bitcoin and Altcoins?
Stablecoins are not the same as Bitcoin and Altcoins like ETH, ADA, SOL, etc., because the value of Stablecoins is tied to the value of the fiat currency in which the country is in circulation.
In other words, Stablecoin is not subject to the fluctuations of transactions on the Crypto exchange, it is only governed by the government of the CeFI market.
Who are the people who often buy Stablecoins?
Investors often choose Stablecoins because of its stability. When the Crypto market is affected by banning policies from countries, traders tend to convert the amount of crypto they are holding into Stablecoins and wait for the market to stabilize again.
The stability of Stablecoin also comes into play when it becomes a payment unit for trading other coins such as BTC, ETH, ADA, Dogecoin, etc.
How many types of Stablecoins are there?
There are many stablecoins on the electronic market and they have been divided into 4 main categories:
1. Stablecoins backed by fiat currency
This is the most common type, Stablecoins backed by fiat currency will be tied to the value of the fiat currency.
This relationship is a 1:1 relationship, which means 1 USDT = 1 USD.
Some Stablecoins supported by fiat currencies:
- Tether (USDT)
- TrueUSD (TUSD)
2. Commodity-backed stablecoins
This type of stablecoin is backed by commodities. Commodities are derivatives that can be traded in the same market. The most commonly collateralized commodity is gold.
Some typical stablecoins:
- Digix Gold Tokens (DGX)
3. Stablecoins Backed by Cryptocurrency
Cryptocurrency-backed Stablecoins are those that are backed by other digital currencies, usually the top-ranked cryptocurrencies with large market capitalizations such as Bitcoin (BTC) or Ether (ETH). ). Typically, crypto-backed coins are backed by a “mixture” of cryptocurrencies rather than being backed by a single currency. This allows for a better risk distribution; The volatility risk for a single cryptocurrency is much higher than for a group of cryptocurrencies combined. Furthermore, a stablecoin backed by a single cryptocurrency wouldn't make much sense as cryptocurrencies are extremely volatile and wouldn't make for a good store of value.
Stablecoins Backed by Cryptocurrency
This is the main reason why crypto-backed stablecoins are often collateralized, so that it can withstand the extreme price fluctuations of base cryptocurrencies. department. The most common form of crypto-backed stablecoins requires users to stake (and lock) a certain amount of cryptocurrency into a smart contract, which in turn generates a fixed rate. of stablecoins.
Typical stablecoins:
- MakerDAO (DAI)
4. Stablecoin inflation tax
Seignorage is the only stablecoin that is not backed by any assets. Seignorage-style coins use an algorithmically managed approach to expand and contract the money supply of a stablecoin, in the same way a central bank prints or destroys money. As the total demand for coins increases, a new supply of stablecoins is created to drop the price back to a stable level. The main goal is to get the coin price as close as possible to 1 USD. It is not surprising that inflation tax-based stablecoins, while not very popular, have enjoyed significant gains in recent times.
Typical stablecoins:
- Basiscoin (aka Basis)
How will stablecoins affect the Vietnamese market?
The rise of Stablecoins that threaten the position of the USD is what the Vietnamese press has been talking about all this time. But is that the truth?
The 1:1 conversion doesn't hurt USD at all. The digitization of currency is what developed countries have been doing. Even China with 1 phone you can pay for everything.
Therefore, USDT is not meant to replace USD but it is the development of digitalization in today's 4.0 society.
Summary
Through the above article, Finnews24 believes that you have more or less got a better view of what Stablecoin is?
As the world has been and is gradually opening up, it has also accepted an objective view of the crypto market and its potential. When will the perspective of the "uncle and uncle" in high positions of Vietnam be acknowledged.
Human history has proven one thing that a country will go further and further backward.
