HOKIE: What is a stablecoin?

2021-11-03 14:11:00

You may have read in the media that central banks are working on fiat digital currencies, and you may have heard the term "stablecoin" a lot.

So what is a stablecoin? Is it the same thing as fiat money or electronic money issued by central banks? Today, we are going to talk about stablecoins.

What is a stablecoin?

Stablesoins, as the name suggests, are cryptocurrencies that maintain a stable exchange ratio with an underlying currency.

The stablecoin you hear about most in blockchain circles is USDT (Teda). Take USDT as an example. It is the token Tether USD (hereinafter referred to as USDT) that anchors the US dollar launched by Tether Company. 1 USDT=1 US dollar.

In addition to USDT, there are also TUSD, GUSD, BitUSD, etc. Of course, there are stablecurrencies anchored to other currencies, such as BitCNY, which is 1:1 anchored to the Renminbi.

You may ask whether the money transferred by wechat or Alipay is stable currency or not. After all, they are also tied 1:1 to the yuan.

In fact, the money in mobile phones and alipay can only be called electronic money, rather than stable currency. If the central bank issues a fiat digital currency in the future, which is anchored to the current YUAN, the fiat digital currency can be called stable currency.

In other words, stablecoins are more than just electronic money. They are also a programmable cryptocurrency, a currency category that didn't exist until the advent of blockchain technology.

How does the stablecoin remain "stable"?

How does the stablecoin maintain its "stable exchange ratio" when the exchange rates of currencies around the world fluctuate?

For the USDT mentioned above, Tether promises to strictly abide by the 1:1 reserve guarantee, that is, for every USDT token issued, its bank account will have a fund guarantee of $1. Users can conduct fund inquiries on the Tether platform to ensure transparency. This is "stability" through "fiat money collateral".

The second stablecoin relies on "digital asset collateral". The typical example is BitCNY, where you can pledge BTS coins to the system and the system gives you BitCNY. Since the price of digital assets will fluctuate, if the price of BTS drops sharply, the total value of BTS coins you mortgaged to the system falls close to the total value of BitCNY coins lent to you by the system, and you do not increase the amount of BTS coins mortgaged by the system, the system will force you to sell BTS coins you mortgaged and repay the BitCNY coins the system gave you. This is similar to a bank mortgage in real life, when the value of the house mortgaging to the bank goes down and you have no ability to increase the collateral, the bank takes the house and sells it to fill the loan to you.

The third stablecoin relies on algorithms to ensure stability. The classic example is Basis, which, like the Fed, adjusts its supply to stabilise its parity with the dollar. However, the Basis project has been discontinued for now.

The role and drawbacks of stablecoins

You may wonder why wechat and Alipay are so convenient.

Indeed, staboins have little use in daily life, and transfer money is not as convenient as wechat and Alipay.

But in the cryptocurrency world, stablecoins have many uses, serving as a bridge between the real world and the crypto world. Cryptocurrency prices are volatile, and stablesoins serve as a measure of value and a hedge against declines.

Of course, the stablecoin is not perfect.

The stablesoin "legal tender collateral", such as USDT mentioned above, is issued by Tether, which lacks financial transparency, and is often suspected of privately issuing USDT for profit.

Stablecoins "secured by digital assets", such as BitCNY mentioned above, fluctuate greatly in the price of BTS coins. When the price drops sharply and is close to insolvency, BTS coins pledged by many investors will be forced to sell below the market price by the system, resulting in further price decline and a series of stock explosion events.

Stablecoins, which rely on algorithms to maintain stability, have even more criticism.

conclusion

At present, many countries in the world have started to study national digital currencies, and Venezuela has even launched its own national digital currency, the petro. In digital currency research, China's central bank is in the forefront of the world.

National digital currency, also known as fiat digital currency, is a stable currency.

鄭重聲明:本文版權歸原作者所有,轉載文章僅為傳播信息之目的,不構成任何投資建議,如有侵權行為,請第一時間聯絡我們修改或刪除,多謝。

推薦文章

Uniswap公告Unichain主網明年初上線!首測路線圖兩功能,UNI強彈17%

去 中心化交易所(DEX)龍頭 Uniswap 於 10 月宣佈推出專為 DeFi 設計的 Lay...

DaFi Weaver
8 22小時前

下周必關注|LayerZero決定是否开啓“費用开關”;Aligned空投注冊結束(12.23-12.29)

下周重點預告 12 月 23 日 Aligned 將向 891322 個地址空投 26% 的 AL...

星球日報
9 22小時前

一周代幣解鎖:下周無高比例或金額重大的代幣解鎖

下周,共有 8 個項目解鎖,其中沒有重大解鎖,MOCA 解鎖流通量的 2.9% 。 Metars...

星球日報
8 22小時前

空投周報 | OpenSea基金會官推上线;Azuki、Doodles疑似即將發幣(12.16-12.22)

@OdailyChina @web3_golem Odaily星球日報盤點了 12 月 16 日至...

星球日報
9 22小時前

區塊鏈的達摩克裏斯之劍:一文讀懂谷歌新量子芯片對區塊鏈的影響

前言:谷歌推出了量子芯片 Willow 可以在 5 分鐘之內便完成了當今最快的超級計算機都需要 1...

星球日報
9 22小時前

資金費率的演變:從2021年黃金時代,到2024-2025年套利復興

資金費率起源 資金費率起源於加密貨幣衍生品市場,特別是從永續期貨合約中發展而來。它作為一種機制,用...

Block Beats
11 1天前