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Stablecoins have a special place in the world of cryptocurrencies due to their ability to combine the benefits of digital assets with the stability of volatility. These unique cryptocurrencies offer stability tied to real assets, which is what makes them a popular tool for both trading and storing funds. In this article, we'll break down what stablecoins are, their types, all the advantages and disadvantages, and how to use them.
Stablecoins - what they are
Stablecoin is a type of cryptocurrency, the rate of which is tied to the value of stable assets from the real financial system, for example, euro (EUR), US dollar (USD) or other assets. The main goal of stablecoins is to reduce volatility to a minimum, which is typical for traditional cryptocurrencies like altcoins or Bitcoin and Ethereum.
Examples of the most popular stablecoins:
Tether (USDT) - A stablecoin that is pegged to the United States dollar (USD).
USD Coin (USDC) - A centralized cryptocurrency whose value is fixed relative to the US dollar.
DAI - an ERC20 token on the Efirium blockchain whose price is directly tied to the price of the dollar.
Why stablecoins are important
Stability. Compared to most cryptocurrencies, the value of stablecoins remains constant, this makes them a convenient tool for storing funds.
Flexibility. They provide a convenient transition between cryptocurrency assets and fiat money.
Settlement tool. Stablecoins are actively used for cross-border transfers and settlements without the need for traditional banks.
DeFi support. They play a key role in decentralized finance (DeFi) where they are used for steaking, lending and trading.
How are stablecoins different from other cryptocurrencies
1. Stable exchange rate
Unlike other tokens, which can fluctuate significantly over short and long periods of time, stablecoins maintain a constant value, making them suitable for use in settlement.
2. asset backing
Stablecoins are usually backed by:
Fiat currency (dollar, euro).
Cryptocurrencies.
Valuable metals.
3. Target Audience
While traditional cryptocurrencies are popular among investors looking for high returns, stablecoins attract users who value reliability and stability.
What are the different types of steblecoins
Fiat-backed stablecoins
Are linked to national currencies, for example, USDC or USDT.
Their reserve assets are held in banks.
Cryptocurrency-backed stablecoins
Are backed by a cryptocurrency (e.g. DAI).
More decentralized, but their stability depends on the cryptocurrency market.
Unsecured Stablecoins
Regulated by algorithms and smart contracts to maintain the exchange rate (e.g. UST).
Their risk of use is higher due to the lack of real collateral.
Collateralized by physical assets
Linked to the value of gold, silver or oil (e.g. Tether Gold).
Options for using Stablecoins
1. trading and exchange
Volatility Hedging: Traders can convert their crypto assets into Stablecoins during times of high crypto market volatility to prevent losses.
Trading on cryptocurrency exchanges: All exchanges offer trading pairs involving stablecoins.
2. Transfers and payments
International transfers: Using stablecoins for cross-border payments bypasses the high fees and delays of conventional banking systems.
Micropayments: Due to low fees, stablecoins are ideal for small transactions such as payments for digital services or content.
Value preservation: In hyperinflationary countries, steblecoins can be used as an alternative to local currencies to protect savings.
3. Decentralized Finance (DeFi)
Liquidity: All types of stablecoins are actively used in DeFi protocols to provide liquidity to pools.
Lending and borrowing: Users who own stablecoins can earn interest by lending them out, or borrow funds against other assets.
Staking and yield: Stablecoins participate in yield programs where users earn rewards for depositing them.
4. E-commerce
Payment for goods and services: Some online stores and platforms accept payments in stablecoins.
Subscriptions and recurring payments: Due to their constant value, stablecoins are convenient for subscription models where a fixed payment amount is important.
5. Investments and savings
Preservation of value in cryptocurrency: Investors transfer profits from highly volatile assets into stablecoins to protect capital.
Accessibility: Due to their digital nature, stablecoins can be easily distributed to a global audience without intermediaries.
6. Stock and derivatives markets
Margin trading: Stablecoins are actively used as collateral on cryptocurrency exchanges to open margin positions.
Asset Tokenization: They play a role in creating tokenized derivatives linked to real assets.
7. Charity and social projects
Transparent donations: Stablecoins allow all transactions to be tracked on the blockchain, which increases trust in charitable organizations.
Financial aid: They are used to send humanitarian aid to regions where traditional banking systems do not work efficiently.
8. Corporate use
Corporate Settlement: Companies can use stablecoins to make cross-border settlements easier and cheaper.
Treasury management: Stablecoins provide companies with the ability to hold some funds digitally, preserving their value and liquidity.
9. Regulation and government projects
Central bank digital currencies (CBDCs): Some states are developing their own versions of stablecoins to integrate with the traditional financial system.
Automation of tax and social payments: Blockchain technology can make such transactions many times faster and more efficient.
How to automate trading in stablecoins?
USDT trading bots provide an opportunity for those who want to trade without losing their free time. A USDT bot is an automated software that simplifies trading and helps traders execute multiple trades simultaneously using USDT as the base currency. On the Veles platform you can create and configure your own bot for trading on 6 major crypto exchanges - Bybit, Binance, OKX, Gate.io, HTX, Bing X, besides you can choose an already ready bot from the catalog.
The most popular stablecoins
1. Tether (USDT)
The most famous stablecoin, widely used on cryptocurrency exchanges.
It is backed by the US dollar.
2. USD Coin (USDC)
Created in partnership with Coinbase and Circle.
Transparently regulated and regularly audited.
3. Binance USD (BUSD)
Stablecoin from Binance, compliant with US regulatory standards.
4. DAI
Decentralized stablecoin managed by the MakerDAO protocol.
Backed by cryptocurrency.
5. TrueUSD (TUSD)
Like USDT is pegged to the US dollar and backed by independent audits.
Advantages and Disadvantages of Stablecoins
Advantages of Stablecoins
1. Price stability
Being pegged to real assets makes steblecoins less susceptible to sudden changes in the exchange rate, which is especially important for day-to-day transactions and capital storage.
For example, USDT, which is pegged to the dollar, maintains a 1:1 exchange rate.
2. Convenience in international transfers
Faster and cheaper than traditional bank transfers, especially when crossing borders.
No need to go through complex currency conversions.
3. Use in decentralized finance (DeFi)
Stablecoins are actively used in DeFi for lending, trading and farming.
They reduce the risks associated with the volatility of the underlying assets.
4. Accessibility to all
Compared to banking systems, Stablecoins are accessible to anyone with an internet connection, regardless of location or banking status.
5. Inflation protection in some countries
In regions with hyperinflation (e.g. Venezuela or Zimbabwe), steblecoins pegged to more stable currencies can act as a means of capital preservation.
6. Ease of integration with blockchains
They are supported on most blockchain platforms, making them easy to integrate into smart contracts and applications.
7. Support for microtransactions
Due to the low fees on some blockchains (e.g. Solana or Binance Smart Chain), stablecoins are ideal for micropayments.
8. Resilience to regulatory changes
Many steblecoins (e.g. USDC) are designed with regulators in mind, making them less vulnerable to bans.
Disadvantages of stablecoins
1. Centralization (for most steblecoins)
Many steblecoins, such as USDT and USDC, are issued by centralized organizations that must guarantee reserves. This goes against the decentralized philosophy of cryptocurrencies.
There may be risks of issuer bankruptcy or mismanagement of reserves.
2. Risk of lack of collateral
In some cases, the reserves of stablecoins may not be sufficient to cover all tokens issued.
Example: Tether (USDT) scandals where there were questions about the full collateralization of their assets.
3. Regulatory risks
Governments can impose strict restrictions or bans on the use of stablecoins.
For example, some countries are already discussing the need for licensing or full control of stackablecoins.
4- Limited decentralization
Algorithmic steblecoins such as UST (Terra) have strived to be fully decentralized, but their stability can be disrupted by sudden market movements, which happened with the crash of Terra in 2022.
5. Dependence on external assets
Fiat-backed stablecoins depend on the banking system to hold reserves.
In the event of account freezes or economic sanctions, the issuance and use of such steblecoins may be restricted.
6. Technical Risks
Vulnerabilities in the smart contracts on which decentralized steiblcoins operate.
The possibility of hacking or exploits could result in loss of collateral or devaluation.
7. Limited profitability
Stablecoins are not profitable if you just hold them. To earn income, users must participate in DeFi or other financial products.
How you can buy Stablecoins
1. Through cryptocurrency exchanges
On exchanges (Binance, Bybit, OKX), you can buy stablecoins for fiat currencies or cryptocurrency.
2. Through P2P platforms
Suitable for direct transactions with other users.
3. via exchanges
Services like BestChange allow you to exchange rubles and many other currencies for Stablecoins.
4. Through cryptocurrency wallets
Some wallets (Trust Wallet, MetaMask) support the purchase of stablecoins through built-in exchangers.
Conclusion
Stablecoins are an important tool in the cryptocurrency market, which combines the advantages of digital assets and the stability of fiat money. They have become an integral part of trading, settlements and investments, providing users with a reliable and flexible tool for working with cryptocurrency.
FAQ
1. How are stablecoins different from regular cryptocurrencies?
Stablecoins have a stable exchange rate that is tied to real assets, compared to traditional cryptocurrencies, whose exchange rate is subject to strong fluctuations.
2. Which stablecoins are the most reliable and widespread?
Among such steblecoins we can highlight - USDC, USDT, DAI and BUSD.
3. What is the best steblecoin to use for storing funds?
USDC and BUSD are considered the most reliable due to their full compliance with all regulatory standards.
4. Can stablecoins depreciate in value?
The possibility of depreciation exists if the steblecoin lacks sufficient collateral or there are regulatory issues.
5. Where can I buy Stablecoins for rubles?
This can be done on crypto exchanges, P2P platforms, exchangers and wallets with the function of buying cryptocurrencies.
