What are Stablecoins -

With how volatile the digital asset market can be for investors, how about getting to know the six stablecoins that can bring your portfolio some stability during these ups and downs.

What is a stablecoin?

A “stablecoin” is a type of cryptocurrency whose value is pegged to another asset class, such as a fiat currency or gold, to stabilize its price.

Stablecoins Pegged to USD

These are the most commonly seen types of stablecoins. Stablecoins pegged to the US Dollar at a fixed 1:1 rate include: Binance USD (BUSD), Tether (USDT), USDC Coin (USDC), and TerraUSD (UST)

Stablecoins Pegged to Gold

Pax Gold (PAXG) is a gold-pegged token by the Paxos Standard (PAX) creators. Since PAXG represents physical gold, its value is tied directly to the real-time market value of that physical gold. Anyone who owns PAXG has ownership rights to that gold under the custody of Paxos Trust Company.

Cryptocurrency-backed Stablecoins

These stablecoins are issued with other cryptocurrencies backing them as collateral. One prominent example of a cryptocurrency-backed stablecoin is DAI, which maintains its peg through the collateralization of a mix of cryptocurrencies deposited into on-chain smart contract vaults every time a DAI token is minted.

Commodity-backed Stablecoins

Commodity-backed stablecoins are tokens that represent ownership of real-world assets that are backed by reserves held by an organization. Commodities such as precious metals, oil, and real estate are used to back these types of stablecoins. Commodity-backed stablecoins are appealing for investors looking to swap tokens for custody of the underlying tokenized asset.

Seignorage-style Stablecoins

Seignorage-style stablecoins maintain their peg algorithmically without having to rely on collateral. Depending on which direction the prices move, on-chain algorithms automatically adjust the supply of the stablecoins in order to control their value.

Materials on Bitazza Content Hub are intended to be used and must be used for informational purposes only. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily represent those of Bitazza and its employees.

The website and the information contained herein is not intended to be a source of advice or financial analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice.

Post Views: 1,939