A stablecoin is a digital token (such as a bitcoin or an NFT ) whose value remains linked to that of other assets, frequently non-digital – mostly a fiat currency (euro, dollar, yuan …) or a commodity (gold, silver, Petroleum…)-. Thus, the issuance of each unit of a stablecoin must be backed by a certain amount of the asset in question, which the issuer of the token must have in storage to allow its conversion.
Also called ‘stablecoins’ are two other types of tokens, in this case decentralized, which do not quite fit this description:
Stablecoins linked to cryptocurrencies: They are the most complex operating mechanism based on smart contracts.
Algorithmic or ‘uncollateralized’ stablecoins: In this case, your algorithms are designed to reduce the volatility of their value, basically by automating the standard behavior of a central bank.
What is the point of creating something like that? Very simple: have currencies based on blockchain technology that, unlike Bitcoin or Dogecoin, for example, remain safe from their intrinsic volatility; That is to ‘ay, of the ‘sudden rises and falls in its valuation that has made many investors mistrust the ‘traditional’ cryptocurrencies.
Let’s add that it will be difficult for non-stable cryptocurrencies to become consolidated as a means of payment if they are still susceptible to their valLet’srning over in the short space of time in which an online purchase process is carried out. Let’s remember how Tesla had to limit the use of bitcoin when buying one of its new vehicles through its website.
It might seem that digital currencies like these, ‘doomed’ to always be worth – for example – one euro, lack the speculative appeal of Bitcoin and co. But stablecoins are an alternative to the main cryptocurrencies on the market when making payments.
And furthermore, like gold and Treasuries, they can stand as a haven for investors in times of instability.
On the other hand, for those who continue to see a solid store of value in classic fiat currencies, resorting to stablecoins linked to them will only mean adding the advantages of their digital nature and greater privacy in operations.
An invisible boom
It is no longer just that, as the research department of the Bitmex exchange house expressed a few months ago, the rise of stablecoins will soon make “Bitcoin meaningless”…
… is that stablecoins are already much more used than their ‘unstable’ equivalents, although they attract much fewer media interest: the two most used stablecoins (Tether and BinanceUSD) alone add a volume similar to that of the seven largest cryptocurrencies together. Tether is itself more widely used than the almighty Bitcoin. And this is thanks, above all, to its function as an intermediate currency in exchange operations.
Of course, they have their disadvantages: it is useless for the issuance of a stablecoin to be backed by external assets if we do not trust the honesty of the issuing entity. The ‘Petro,’ the Venezuelan public cryptocurrency, is backed by PDVSA oil … but what if investors do not trust official information about Venezuelan oil reserves?
But the rise of stablecoins only supports the plans of those governments and central banks that have considered the possibility of issuing their own digital money: if ‘crypto dollars’ and ‘crypto euros’ issued by private companies garner the support of investors, Why shouldn’t the issuers of the fiat currencies they are tied to launch them?
Examples of stablecoins
Linked with a Fiat currency: Tether, BinanceUSD, TrueCoin, TrueUSD, USDCoin (linked to the US Dollar); EURO Stasis (Euro); Brazilian Digital Token (Real).
Linked to other cryptocurrencies: DAI (Ethereum).
Algorithmic: Basis, NuBits, Kowala.
Mixed: Celo Euro (Celo + various cryptocurrencies).
Related to commodities: PAX Gold, DigixDAO (Gold); AGX Silver (Silver); Petro (Oil); Tiberius Coin (Various Metals).