Stablecoins may be the answer to many of cryptocurrency’s problem, including its volatility.
– Stablecoins are said to have a more stable price while retaining its purchasing power.
– Stablecoins achieve stability through fiat, crypto, or non-collateral means.
– If proven successful, stablecoins will make using cryptocurrencies popular.
Bitcoin, the most popular cryptocurrency right now, is facing problems related to high volatility.
Bitcoin isn’t a stable currency, and while this makes them attractive for speculators, it cannot be used on a mainstream level.
Stablecoins aim to be much less volatile, and at the same time have the advantages of cryptocurrency which is decentralization, anonymity and security.
For fiat-controlled stablecoins, several collaterals can be used such as oil, gold and silver.
The problem with this solution is that a custodian is needed along with some operational processes to make this functional.
Another way to make stablecoins stable is through crypto collateral.
In crypto-collaterized stablecoins, intangible cryptocurrencies are used as collateral, one that is higher-valued.
The problem with crypto collateral is that there are risks the valuations of stablecoin will go down if the collateral cryptocurrency becomes a bust.
Read more about the article written by Shobhit Seth at – https://www.investopedia.com