A Stablecoin is…
A crytpocurrency token that is generally pegged to a fiat currency.
eg. $1 US Dollar = 1 USDC token or USD Coin.
The exchange rate should always be 1-for-1.
Are Stablecoints Government Owned?
No. Or not yet. They are setup by 3rd parties.
Are All Stablecoins Equal?
No. The difference lies in how they are
- Backed (collateralised).
- Managed.
- The technology behind them.
3 Examples of different stable coins;
- USDC – USD Coin – US Dollar stablecoin backed 1-for-1 with fiat US Dollars and an open ledger.
- USDT – Tether – US Dollar reference with some sort of credit system that is in dispute.
- DAI – Maker DAO – US Dollar that is backed with crypto assets like Ethereum through Decentralized Finance contracts.
Some come in different currencies as well, like Euros and Great British Pounds.
What Can I Do With Stablecoins?
Learn to use cryptocurrency without any exchange risk.
It’s easier to move the asset around. No waiting on banks, wire transfers or swift codes.
This digitization of the fiat system, is like when movies went from physical medium, to a digital medium.
Much easier access to systems that will pay you interest. In exchange for the ability to use your capital for loans. This is largely what banks have been doing, and paying you a small profit.
Now there are financial companies that will take your capital and loan it out, and pay you a large profit.
For example, Nexo.io is paying 8% APY on stablecoins. Take a look at their system, it’s a great experience and easy place to start.
Should I Use Stablecoins?
Yes. They have become an important part of the eco system. Which one to use, is up to you.
For Example, if you find an exchange that allows you to trade bitcoin to a stablecoin, this is better than the original system of trading bitcoin to fiat, or bitcoin to Ethereum if you are looking to avoid exchange risks.
They hold their fiat value, no market exchange risk. This is a big plus for anyone who just wants to be part of Finance 2.0 without the excitement of the market value.
They are also a great tool for payments that require an exact dollar for dollar exchange.
They are a great starting point to use the technology without worry of investment value changing.
Which Stablecoin Would I Recommend?
I recommend you take a serious look at www.paxos.com.
- Great off ramp to traditional banks.
- Solid capitalization.
- Widely accepted on exchanges and other services.
- On the Ethereum network as an ERC20 token.
Recommended Reading for a technical deep dive: How stable are the top stablecoins? A quantitative analysis.
Here Be Dragons
Take responsibility for yourself, everything you think, say, do. Greatest lesson ever learned.
Do research. Question everything. Decide where you are going, and set your sails.
“Hey, you created me! I didn't create some loser alter-ego to make myself feel better. Take some responsibility!”
― Chuck Palahniuk, Fight Club