Why We Need Stablecoins

Dawid Paluch
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You ask us many questions about stablecoins. How does stablecoin work? Why buy stablecoin? Which stablecoin to use? What is best stablecoin? Today, we want to answer a few of them.

Last time, we tackled almost every topic related to blockchain. Today, we want to explain another interesting matter.

The cryptocurrency industry is developing at a rapid pace. There are many crypto exchanges, where you can buy digital assets. However, not all of them accept fiat money. That is where stablecoins can be useful.

What is stablecoin?

Basically, stablecoins are cryptocurrencies constructed to minimize the variability of the price of the stablecoin. Stablecoin can be associated with fiat currency or commodities (gold, silver, etc.). The currency or commodity is backing the stablecoin. This is the primary requirement. Every digital dollar, pound, or lira has to be backed by fiat dollar, pound, and lira.

There are a lot of stablecoins in the cryptocurrency world. The most popular one is Tether (USDT). There are also TrueUSD (TUSD), USD Coin (USDC), Paxos Standard (PAX), and many others.

Why buy stablecoin?

Stablecoins are not an investment, so you won’t make any return from buying and holding them because they are pegged to a stable asset (usually one unit of stablecoin is worth approximately one unit of fiat asset).

Stablecoins are just a useful tool. The idea behind them is to make it easier and safer to purchase and invest in other cryptocurrencies. Many crypto exchanges don’t allow fiat money. So, to buy altcoins on these exchanges, you have to buy Bitcoin or another cryptocurrency first. Stablecoins get rid of that problem. Also, they are stable in that sense, that they won’t lose in value overnight. Because of that, they are the safest option.

Which stablecoin to use?

Probably the best decision is Tether. USDT is the most popular one. It is listed on the highest number of crypto exchanges. However, it had many problems at the end of 2018. You can read more about them in our articles.

An interesting alternative is TrueUSD. It is widely popular among those, who don’t trust Tether. Nevertheless, TUSD has a high minimum withdrawal amount.

Every stablecoin is a little different and offers something else. You just need to read about them and pick the best stablecoin for you.

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