Cryptocurrency stablecoin

Julian Dossett Sept. He's covered a range of topics, such as tech, travel, sports and commerce. On his days off, you can find him at Isotopes Park in Albuquerque watching the ballgame. From bitcoin to dogecoin , these digital tokens don't behave the same as conventional financial instruments like stocks and bonds, but their volatility is one of the reasons they remain appealing to crypto investors. Yes, you could lose all your money when a coin or token takes a dive -- or you could become a millionaire overnight.

There is, however, a subset of cryptocurrencies designed to hold steady, to provide a value that doesn't fluctuate. They're called stablecoins, and they're playing an important role in cryptocurrency markets. A number of stablecoins -- specifically terraUSD and tether -- previously made headlines for their respective failures to deliver stability.

Stablecoins have become central to the crypto ecosystem, serving important functions for investors and speculators. Below, we'll run through what makes a stablecoin one -- in theory, anyway -- how they're different from other cryptocurrencies and how people are using them today.

Are stablecoins cryptocurrency? A stablecoin is cryptocurrency with a twist. Instead of being "mined" by an open, distributed network of computers performing a combination of math and recordkeeping, a stablecoin derives its price from the value of another asset. In short, a stablecoin is pegged to another underlying asset.

What are the leading stablecoins? The most prominent stablecoins are the ones used for trading on crypto exchanges. These include tether, the most popular stablecoin, which is usually in the top-five highest market caps for cryptocurrencies; USD coin, or USDC, an open-source project run by a consortium called Centre; and binance USD, a stablecoin issued by Binance , the world's largest crypto exchange.

What can you do with a stablecoin? The primary use for a stablecoin is facilitating trades on crypto exchanges. Instead of buying bitcoin directly with fiat currency, like the US dollar, traders often exchange fiat for a stablecoin -- and then execute a trade with the stablecoin for another cryptocurrency like bitcoin or ether.

In this way, stablecoins are sort of like poker chips for crypto exchanges. Though advanced crypto traders may use stablecoins for a variety of purposes, including staking and lending, most beginners use them to mitigate trading fees. That's because many exchanges don't charge for exchanging US dollars for a stablecoin.

If you're looking to quickly liquidate bitcoin at a certain price, you can transfer it into a less volatile entity like USD coin or tether. In fact, tether currently accounts for more than half of all bitcoin traded into fiat or stablecoin, according to CryptoCompare , a global cryptocurrency market data provider. Another use for stablecoins is remittances; that is, transferring funds across international borders.

Sol Digital , a stablecoin that's pegged to Peru's sol national currency, launched on the Stellar blockchain in September. The Monetary Authority of Singapore MAS has said it discourages the public from speculative trading in cryptocurrencies and has already brought in restrictions on advertising of cryptocurrency services in public places. Cryptocurrencies play a supporting role in the broader digital asset ecosystem, and it would not be feasible to ban them," MAS said in a media release, adding that the proposed measures should help to reduce risks.

Apart from addressing money laundering, terrorism financing, technology and cyber risks, the MAS said it wanted to ensure regulated stablecoins had a high degree of value stability. The assets must also be denominated in the same currency as the pegged currency.

Banks in Singapore will be allowed to issue SCS and no additional reserve backing and prudential requirements will apply, the statement said.

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Here's what you need to know: What is a stablecoin? A stablecoin is essentially a cryptocurrency that seeks to peg itself to a stable currency, typically the U. But they want to trade and invest in cryptoland only, not in dollars or euros or pounds. So stablecoins act as a kind of reserve currency, an asset whose value everyone understands — and that shouldn't change.

Story continues How do they work? Most stablecoins, like Tether and USDC, aim to back up their coins with hard assets, like dollars, gold, or treasuries. Every coin, in theory, is backed up with an equivalent hard asset. Cryptocurrencies are volatile, but they have the promise of removing currency from oversight by politicians and finance bureaucrats, and "if you could take those assets, extract stability out of them, and productize it, then that's huge," he adds.

Basically, there was a run on the bank. That created a downward spiral where investors withdrew their UST coins from Anchor, spooking other investors, who followed suit. This is how the system was supposed to work, the Journal says. Share Tweet Share Share Share Email Stablecoins are meant to protect against the volatility of regular cryptocurrencies, but how do they work?

You know the gist, right? Buy low, sell high, get rich, or hodl because numbers go up. Some cryptocurrencies are known for their price volatility, but some coins, known as "stablecoins," are actually designed to maintain a consistent value over time.

Where's the fun in that? What's the point? Where's the profit? Read on to find out what a stablecoin is and why you might want to use one. What Are Stablecoins? This may surprise you, but cryptocurrencies were conceived to be used as currencies. Right now, people speculate on their notoriously volatile prices more than they use these digital assets to buy and sell goods and services, but it's not supposed to be that way.

There are a couple of reasons for this, but one of the biggest is that most cryptocurrencies aren't "backed" by any organization or "pegged" to any consistent value. Most cryptocurrencies are worth whatever the market is willing to pay, thus the volatility. Many long-term crypto advocates believe that these prices will stabilize with greater adoption and regular use. In the meantime, many people want to use cryptocurrencies like regular money without all of that price volatility.

That's where stablecoins come in. Stablecoins are blockchain-based digital currencies just like Bitcoin or Ethereum, but they are designed to maintain a consistent price over time, usually by being pegged to the value of another currency or being backed by a trusted agency. How Do Stablecoins Work? Volatility aside, there are a number of great use cases for cryptocurrencies. These include greater transaction transparency, security, and the potential privacy of users.

Stablecoins try to maintain these benefits and bring benefits of their own, which we'll get into in a moment. However, stablecoins do this without bringing along all of the price volatility that makes other cryptocurrencies difficult and intimidating to use in regular transactions.

The dollar is significantly more stable than a cryptocurrency like Bitcoin or Ether. However, you should note that neither of these coins is backed by the United States government like the dollar. However, national currencies can and do have volatility issues of their own.

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