A stablecoin is a digital asset built on the blockchain that is designed to maintain a price peg at a designated price, most often $1. This effectively removes holders from the swings of the market whilst providing a secure and stable way.
Stablecoins act as a mid-point between holding assets and withdrawing to the fiat system or are used as a more effective way of executing cross-border payments. Centralized stablecoins are usually fiat collateralized off-chain, usually directly connected to third-party custodians like a bank. Tether (USDT) and Coinbase’s USD Coin (USDC) are examples of centralized stablecoins. These stablecoins require you to trust that the third party has the corresponding dollars they issued.
Decentralized stablecoins are fully transparent, non-custodial with no or partial third-party control. All collateral-backing is visible to all as funds are on a publicly verified blockchain. This enables the stablecoin to be more trustless and secure with a single entity controlling the funds. They can be divided into two parts: crypto-collateralized and algorithmic.
Collateralized stablecoins can increase or decrease the supply manually, by minting or burning when required. Algorithmic stablecoins utilize smart contracts, or algorithmic markets operations controllers (AMOs), to automatically control the supply.
Related Articles
Decentralized
Decentralized organizations are those that do not rely on a single center of authority to enforce the rules and maintain operation. Instead, they are composed of numerous decision-makers with the same or comparable degrees of authority over the rest ...
Decentralized Database
Due to the rapid growth of blockchain products, there has been an increasing need for robust data storage solutions. While most DApps store data on blockchains like Ethereum, the costs are extremely high. As a result, most DApps are forced to migrate ...
Decentralized Marketplace
A decentralized marketplace, built on blockchain technology, allows traders or investors to trade with each other while eliminating middlemen. They are available globally and require no intermediaries to make trades possible. No one has to know or ...
Decentralized Governance
Decentralized governance entails a variety of voting techniques for platform technology, strategy, upgrades, and regulations. On-chain governance and off-chain governance are the two most common approaches to blockchain governance. On-chain ...
Crypto Invoicing
Crypto invoicing allows you to create different itemized bills and invoices for the products or services you offer. It enables you to bill clients in crypto via email, without the hassle of switching between wallets and apps. As cryptocurrencies ...