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What Are Stablecoins: An Ultimate Guide

Stablecoins are cryptocurrencies whose value is tied directly to external assets, usually fiat currencies or precious metals. Throughout this guide, you will get to know about what are stablecoins, different types of stablescoins, their real-world applications, why they are so important, etc.

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What Are Stablecoins: An Ultimate Guide

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  1. STABLECOINS AN ULTIMATE GUIDE

  2. “ “Stablecoins are Crypto tokens designed to reduce the effect of volatility and backed by a fixed assets or stable fiat currency”

  3. We will discuss: What is stablecoin? What are different types of stablecoins? Why stablecoins are so important? How stablecoins work? Real-world application of stablecoins Let’s get started...

  4. What is Stablecoin?

  5. Stables are often called as “Fixed-price cryptocurrency” or “Pegged Cryptocurrency”. Why do we need stablecoins? Introduction Whenever there is a fluctuating condition in the crypto market, stablecoins offer a secure place to its owners in order to store their assets. Customers can rapidly and effectively convert from unpegged cryptocurrencies to stablecoins when they are stressed about the market. This conversion can be affordable as compared to converting crypto into fiat. Stablecoins are new types of cryptocurrencies whose value is backed with another fixed asset like the US dollar. These coins can be pegged to fiat currency, for example, the US dollar, different digital forms of money, valuable metals or a combination of the three. Fiat is likely a mainstream alternative in the marketplace nowadays, which means one unit of a stablecoin equals $1.

  6. Different Types of Stablecoins Non-collateralized Fiat Collateralized Crypto Collateralized Fiat Collateralized Stablecoins are backed by a real-world currency like US dollar. It works by depositing dollars into a bank account and issuing stablecoins in a one-to-one ratio against these dollars. When a user needs to exchange their stablecoins again into USD, you destroy their stablecoins and wire them the USD. To remove the centralization from stablecoins, the idea of crypto collateralized stablecoins comes in. They operate in the same way, as fiat collateralized stablecoins, but are backed with reserves of another cryptocurrency as opposed to a fiat currency like USD. This way, the entire system can live on the blockchain & remain decentralized. Content itself is what the end-user derives value from also can refer to the information provided through the medium, the way in which the information was presented, as well as the added features included in the medium in which that information was delivered.

  7. Why Stablecoins are so important?

  8. Stablecoins stay stable in its price, almost • equivalent to the US dollar. • Stablecoins don't have a fixed supply, like other • crypto coins. Rather, stablecoins are dispersed • depending on financial market conditions. • To protect investors from crashes occurring • in the crypto market, these stablecoins are • backed with any fixed asset. • Stablecoin’s property of non-volatility implies that it can be utilized to buy things or trade fiat currencies or to purchase different cryptocurrencies.

  9. How Stablecoins Work?

  10. Users deposit fiat currency into a bank account (For this example, we are assuming the fiat is USD). Bank issues an equivalent amount of stablecoins and deposits it into the users’ stablecoin accounts. Users can transact with one another. Users looking to exchange their stablecoins for USD can redeposit their tokens into their stablecoin account. Stablecoin bank destroys the deposited coins and gives the users an equivalent amount of USD. 3 Stablecoin User Stablecoin User 4 2 Fiat Reserves held by Stablecoin Bank 5 1

  11. Real World Applications of Stablecoins

  12. Cryptocurrency Trading Platform • The primary use of stablecoins today is cryptocurrency trades. • Utilizing stables coins, traders can exchange volatile cryptocurrency for stable cryptocurrency when they need to bring down their risk.

  13. Protection From Local Currency Crash • Stablecoins carries the ability to protect the people from hyperinflation. • Instead of holding the currency which reduces the purchasing power of resident one can preserve the value of the currency by converting local fiat currency into stablecoins.

  14. Faster, Less Expensive Global Remittance • The current system requires people to depend on banks and financial institutes for cross border transactions. • This is a slow and expensive procedure – it takes three to five days to clear a transaction, and charges normally 4% to 4.5% of volume.

  15. Thanks! Any questions? You can find us at: www.rwaltz.com

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