- Stablecoins have proved to act as mitigators for volatility while also working as shields for investments against the fluctuations of prices, indicating their avid importance for investors and the users of cryptocurrency in general.
- Prominently pegged to U.S. dollars, Tether is a widely accepted and widely used stablecoin.
Addressing The Need For Stablecoins
An increased amount of volatility was caused when Bitcoin and Ethereum came in handy for investment purposes in assets. Cryptocurrencies, however, do not benefit from stability since they are built on an entirely different concept from paper currency. Stablecoins have emerged to support the healthy growth and proper maturity of the cryptocurrency.
Stablecoins come forth as a practical solution to problems, for they are designed to be backed by real-world assets, ensuring a stable value. Multiple options can cause a wide number of circumstances, and hence, users are often unsure about the safety and security of these options. Even after much competition, Tether comes out to be the safest coin to invest in.
Several stablecoins have flooded the market, each with its own mechanism and working system. There are assets held for every circulation of some coins, for example, TrueUSD. These stablecoins are primarily grouped into the following categories.
- Blacked by the Government
‘CBDCs, backed by a government and controlled by a central bank, would give households, consumers, and businesses a secure means of exchanging digital currency. A CBDC also provides a country’s central bank with the means to implement monetary policies to ensure stability, control growth, and influence inflation.’
Another example of these coins is ‘Tether’,’ which is backed by the USD; thus, the price of a single coin will always be equivalent to the value of a single USD. USDC is another coin that is pegged to the US dollar.
- Stablecoins Backed by Commodities
Gold or real estate are known as hard assets. A certain number of stablecoins are completely backed by hard assets that serve as collateral for these stablecoins.
The Launch Of Tether
Dating back to 2014, a circle of a few members launched a coin by its name, which was to be backed by real-life USD. The idea was mainly to have the value of each coin equal to the value of a single US dollar over time. Tether can be used for all purposes the crypto platform has to offer, keeping in mind the strict regime of its value that sticks to the value of the USD.
Tether gained fame in no time; however, it has also gained criticism for its transparency and the way it is backed. The company, as reported, lacked evidence of holding the amount of USD equal to the mount coin in circulation, disrupting the whole purpose of the existence and creation of the coin itself.
USDC: A Game Changer
Not to mention that the market was already stunned by the influx of NFTs and coins each day before the arrival of USDC triggered a new wave. Based on the Ethereum blockchain, USDC is accessible to anyone who owns an Ethereum wallet.
