Stablecoins are a type of cryptocurrency designed to have a stable value and are typically pegged to a national currency like the US Dollar, meaning that the cryptocurrency's value sits at 1:1 with a national currency.
Unlike other cryptocurrencies, such as Bitcoin or Ethereum, which can experience significant price fluctuations, stablecoins aim to maintain a steady value over time.
They, therefore, represent a unique category of cryptocurrency, designed to uphold a consistent value, unlike the more typical unpredictable type of cryptocurrencies.
Stablecoins achieve this stability through various mechanisms:
National currency-backed stablecoins: These are tethered to traditional currencies like the US Dollar or the Euro. For instance, Tether (USDT) maintains its stability by being backed by the US dollar.
Crypto-backed stablecoins: Instead of relying on national currencies like the US Dollar, these stablecoins find support in other cryptocurrencies. Take Dai (DAI), for instance, which is pegged to the US Dollar, but reaches this value from smart contracts on Ethereum, rather than being backed by physical dollars.
Algorithmic stablecoins: Employing intricate algorithms, these stablecoins dynamically adjust token supply to stabilise value. Though complex, they offer an innovative approach to stability.
Why own stablecoins?
Stablecoins offer several compelling advantages:
Stability: True to their name, stablecoins provide a dependable store of value and a secure medium of exchange, shielding users from the jolts of sudden price swings.
Fast and Borderless Transactions: Like their volatile counterparts, stablecoins facilitate swift and cost-effective transactions globally. They function as an ideal solution for cross-border payments, offering a quicker and more economical alternative to traditional banking channels.
Transparency: Many stablecoins undergo regular audits, ensuring complete backing and transparency. This transparency fosters trust among users, reassuring them of the safety of their funds.
Funds for Swaps: Having stablecoin funds allows you to swap and own new cryptocurrencies very quickly. Instead of the slower bank-to-crypto process, you can quickly and seamlessly swap some of your stablecoins for a pumping meme coin or altcoin.
Uses of stablecoins
Stablecoins serve a multitude of purposes:
Trading: Cryptocurrency traders often rely on stablecoins to safeguard their funds during turbulent market conditions, minimising the risk of value erosion. They also are a good way to hold stable funds in cryptocurrency, ready to be swapped for another cryptocurrency that might be experiencing a sharp price increase.
Remittances: Offering a swift and cost-effective channel for transferring money across borders, stablecoins prove invaluable, especially for individuals without access to traditional banking services.
Decentralised Finance (DeFi): Vital cogs in the burgeoning DeFi ecosystem, stablecoins furnish liquidity and stability for protocols like decentralised exchanges and lending platforms.
Can I buy stablecoins in Best Wallet?
Yes, you can buy stablecoins directly in the Best Wallet app. Through the Best Wallet app, you can seamlessly buy stablecoins like Tether (USDT), USD Coin (USDC), and Dai (DAI).
Swapping your stablecoins
You can also easily swap your stablecoins in Best Wallet for another cryptocurrency, meaning you can react to market movers quickly and own cryptocurrencies that are increasing in price.
Stablecoins, a crucial crypto hold
Stablecoins epitomise a dependable bridge between traditional finance and the crypto sphere, combining the advantages of cryptocurrencies with the stability of national currencies.
Their versatility and utility render them appealing to a broad spectrum of users, from traders to individuals seeking efficient cross-border transfer solutions.
Despite lingering regulatory uncertainties, the future appears bright for stablecoins. Their capacity to facilitate fast, borderless, and cost-efficient transactions positions them as indispensable components of the evolving cryptocurrency landscape.