At present, not many people are showing interest in account-based money transfers or fiat currency. They are more into digital currency. Initially, when Bitcoin was launched into the market, not many people knew what it exactly was or showed any interest in it. But now, not just the business owners and investors, even common people are showing interest in it via trading robot.
If you keep yourself updated with the latest news related to cryptocurrencies, then you must have come across Stablecoins. Stablecoins are also a type of crypto but the only difference is they are not volatile, at least not as much as the other cryptocurrencies are. They are pegged to an asset or real currency and hence they stay stable for a specific period of time. Most of the time, the value of stablecoins is pegged to US dollars. That means, if you are holding one crypto coin, then you are holding one unit of real currency. That means, these stablecoins do not fluctuate like the other cryptocurrencies like Bitcoin or Ethereum.
What actually are Stablecoins?
Stablecoins are also a cryptocurrency, rather you can call them a sub-class of cryptocurrency. They are stable in their price because they are pegged to another reserved asset with a ratio of 1:1. The stable assets usually include US dollars or Euros. In some cases, they are also pegged to other assets like oil, Silver, or Gold.
The ratio 1:1 here donates that the value of the asset to which it is pegged and the value of the coin will remain the same. That means, external factors like celebrities, news, and other political events will not affect the value of stablecoin, which is very common with cryptocurrencies.
But the advantage that you will be able to enjoy with the stablecoins is they are also decentralized just like the other cryptocurrencies. They are secured and private as well. In simple words, you can treat them like other traditional currencies that are backed by the country’s central banks. These are backed by the asset to which they are pegged.
Stablecoins Vs Cryptocurrencies:
Some of the main cryptocurrencies like Bitcoin, Ethereum, and others are highly secured and private, also they are highly volatile. Cryptocurrency is decentralized and none of the transactions done through crypto can be traced. None of them will be linked to any individual so there will not be any breach of privacy. But the only problem with cryptocurrency is many online criminals are making use of this privacy factor. Cryptocurrency trading has become one of the most common ways of money laundering. This is a very major problem reported by many governments.
Along with that, the cryptocurrency market is very sensitive. Any changes in the economics, market or even some people on social media are able to influence it.
Are stablecoins really stable?
As we have already discussed, stablecoins have the same features as that cryptocurrencies, they are safe and secured. But you will have the volatility issue. Some of the most popular stablecoins that are in use are Tether, TerraUSD, and USD coin.
When it comes to the point of whether stablecoins are safe and stable or not, then they are safe. But only when compared to the other cryptocurrencies. But if you look at them as an individual coin, then there are several risks. Just like the other cryptocurrencies, you will have to store these in wallets. So, the same hacking and security issues to stablecoins as well.
That means, they may remain stable to some extent but not totally stable or safe. The value of the stablecoins will be stable and do not get affected by the market volatility. But all the security issues that raise with cryptocurrency can be seen in stablecoins as well. So chances of losing money even when you are investing in stablecoins is also possible. It looks more like the real currency that you use. But it is not the real cash that you can spend for daily use.
So, finally, they do offer you some percent stability in price that is not offered by most of the cryptocurrencies. But again you will have to invest with your own risk because they also have a set of cons and risks involved with them.