Topic: Stablecoins- what they are? How do they work? Benefits and uses causes (Read 36 times)

Stablecoins are cryptocurrencies that have a durable price against the otherwise volatile nature of regular cryptocurrencies,

Stablecoins were created as a possible solution to the volatility problem of cryptocurrencies. As you may know, cryptocurrencies are extremely volatile in terms of price movement and behavior.

This is because the values of cryptocurrencies such as bitcoin and ETH are not backed by any real assets, which means this is virtual money managed by people and not by the government or central banks.

This allows the price of many cryptocurrencies to fluctuate abruptly and unexpectedly, which can be a major problem for both investors and those looking to make cryptocurrencies mainstream.

To deal with the volatility problem of cryptocurrencies, stablecoins were created.

What’s a stablecoin?
A stablecoin is a special type of cryptocurrency that has its value pegged with a real asset or currency. It can be the dollar or any other fiat currency or even a commodity like gold that can be used to represent the value of a stablecoin. The idea is to bring stability to the movements of an otherwise volatile crypto market.

Stablecoins act as a kind of bridge between fiat currencies and cryptocurrencies, providing fiat stability to the crypto market while maintaining the high utility and mobility of digital currencies.

Because the value of a stablecoin is directly based on a stable asset such as the dollar or gold or another stablecoin, it is highly likely to maintain a stable price, which makes it suitable for a wide range of uses in the world.

How does a stablecoin work?
Stablecoins were created on the concept of building price stability directly into the asset itself. Here’s how it works.

To make a cryptocurrency stable, the only way was to stabilize its price, which will only be possible if the token’s price is backed by a stable asset.

To make this happen, a new type of cryptocurrency was created whose price is inherently pegged to the value of a real-world asset.

Stablecoins are meant to extend the benefits of the crypto industry to the masses while maintaining stability in the price of digital assets.

Stablecoins can be used for a host of applications and can be represented by all kinds of real assets, including stocks.

Reflection stablecoin, for example, gets its value from stock tokens, which are a type of crypto token that gets its value from the shares of stocks of companies listed on traditional stock markets.

The value of the Reflection stablecoin is backed by a combination of other stablecoins such as BUSD and USDC and cash. The Reflection stablecoin provides a means to buy, sell and trade stocks of leading companies across all top stock exchanges in the world through the convenience and security of cryptocurrencies.

All benefits of regular cryptocurrencies, including faster speed, lower transaction fees, programmability, borderless, and transparency, are also enjoyed by stablecoins.

Plus, they get the added benefit of stability in the price, which makes stablecoins suitable for everything from use as a haven asset to real-world payments, settlements, lending, payroll (salary, etc.), escrow, trading, remittance, alternative banking, and decentralized applications.