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Stable coins are emerging as an innovative new way to handle payments, settlements, and other financial transactions. Especially in markets where traditional banking infrastructure doesn’t exist or isn’t reliable enough to handle volume at scale. Stable coins are here to stay, and regulation is well underway. Check this headline out!

We’ll walk you through what stable coins are, how they work, and how to utilize them to save your portfolio from massive swings! 

What is a Stable Coin?

A stable coin is a cryptocurrency with a value that is pegged to another stable asset, usually the United States Dollar. The idea behind stable coins is to avoid the volatility, or hassle of accepting cryptocurrencies payments for businesses to create an asset for everyday use by the general public.

Although there have been some hiccups along the way, both large companies and small startups have brought products to market using stable coins. Take VISA, for example, one of the largest financial companies on the planet.

These financial instruments are just the beginning of bringing liquidity to any market anywhere in the world, instantaneously. It’s no wonder titans like VISA are looking into stable coins further.

How do Stable Coins Work?

A Stable Coin is a cryptocurrency with a value that is pegged to another stable asset, usually the United States Dollar. The idea behind these coins is to avoid the volatility of other cryptocurrencies, like Bitcoin or Ethereum, in order to create an asset for everyday use by the general public. Although there have been some hiccups along the way, both large companies and small startups have brought products to market using stable coins.

It’s an ingenious and simple method to utilize blockchain. However, pegging a stable coin to the United States dollar is not their only use. Stable coins can also be pegged to other commodities such as Gold, Silver, Wheat, Oil, you name it. 

So for all you commodity traders out there, check it out!

Why Do We Need Stable Coins?

People want a currency to be stable in terms of purchasing power. Although in the long term, the purchasing power of BTC will rise, in the short term, maybe not so much…

When we buy an asset we don’t want its value to drop below what we paid for it. Especially if we planned on using cryptocurrency as a means of exchange. There are also sometimes regulatory difficulties when it comes to businesses accepting crypto payments in certain countries. Stable coins may be a method to circumvent these regulatory obstacles in the meantime.

Now, there are other cryptocurrencies out there that aim to fix this exact problem such as Ripple XRP or Stellar Lumens XLM, but until regulation matches innovation. Stable Coins like USDC, USDP, or USDT will have to do.

Bottom Line

Stable coins seem here to stay. With regulation keeping a close eye on the development and financial payment giants like VISA looking into their utility for payment systems, the need is there.

But how do you utilize stable coins to their fullest potential? What are the different types of stable coins? Keep your eyes out for our next article in the series showing how you can earn passive income just for letting your stable coin sit on a de-fi platform! Earning way more interest than your “savings” account.

Author:
Jake McCarthy

1 Comments

  1. Thank you for your article on Stablecoins Jake. I am a beginner and I would appreciate it if you walk me through what types of Stable coins are the safest as I understand that Tether though it is the biggest stablecoin is not safe. And what exchanges are the safest and best to purchase them through with the smallest amount of gas fees. Also how do you use them to do farming?

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