{"id":1742,"date":"2021-10-09T17:10:36","date_gmt":"2021-10-09T16:10:36","guid":{"rendered":"https:\/\/ajooda.ch\/en\/?p=1742"},"modified":"2022-10-03T16:26:01","modified_gmt":"2022-10-03T15:26:01","slug":"what-are-stablecoins","status":"publish","type":"post","link":"https:\/\/ajooda.ch\/en\/what-are-stablecoins\/","title":{"rendered":"What are Stablecoins?"},"content":{"rendered":"\n

When you\nhear cryptocurrencies, you probably think of Bitcoin, Ethereum, Cardano,\nLitecoin or the like instead of stablecoins.<\/p>\n\n\n\n

But in the\nworld of cryptocurrencies, these particular coins perform an important\nfunction.<\/p>\n\n\n\n

The world\nof cryptocurrencies is characterised by strong fluctuations due to political\nand economic influences. Well-known figures like Elon Musk, for example, have\ncaused the Bitcoin to either shoot up or plummet through simple tweets.<\/p>\n\n\n\n

An\ninteresting phenomenon is that the prices of altcoins (Ethereum, Cardano,\nAlgorand, etc.) often follow the direction of Bitcoin.<\/p>\n\n\n\n

Especially the cryptocurrencies with the highest market capitalisation<\/a> (market cap) often follow Bitcoin’s direction.<\/p>\n\n\n\n

Stablecoins\nare unaffected by these movements. They always have the same value, hence the\nname “stable”.<\/p>\n\n\n\n

What is the point of\nstablecoins?<\/h2>\n\n\n\n

The purpose\nof these stable cryptocurrencies is to make payments as well as to have a\nstable “intermediate port” as a hedge when you are not currently\ninvested in volatile cryptocurrencies.<\/p>\n\n\n\n

This is\nbecause a swap from, for example, Ethereum into USDT is cheap, while a swap\nfrom Ethereum into euros but also into US dollars is associated with higher\nfees.<\/p>\n\n\n\n

Stablecoins\nare also ideal for risk-averse investors to protect their assets against\ninflation-prone economies.<\/p>\n\n\n\n

Why do stablecoins remain\nstable in contrast to Bitcoin and the altcoins?<\/h2>\n\n\n\n

The\nstablecoin is subject to a different value depending on the specific coin and\ncan be divided into three categories.<\/p>\n\n\n\n

  1. Commodity-linked<\/li>
  2. Fiat-bound<\/li>
  3. Crypto-bound<\/li><\/ol>\n\n\n\n

    Commodity-linked\nstablecoins<\/h2>\n\n\n\n

    Commodity-linked coins are backed by commodity-based assets such as gold, silver or palladium. An example of such a cryptocurrency is the Digix Gold Token (DGX).<\/p>\n\n\n\n

    Advantages<\/h2>\n\n\n\n
    • Relatively\nstable<\/li>
    • Easy\nto understand<\/li><\/ul>\n\n\n\n

      Disadvantages<\/h2>\n\n\n\n
      • Commodities\nare dependent on the current economic situation<\/li><\/ul>\n\n\n\n

        Fiat-linked stablecoins<\/h2>\n\n\n\n

        These are\npegged to classic currencies such as the US dollar. One of the best-known\nstablecoins is the USD Tether (USDT).<\/p>\n\n\n\n

        Advantages<\/h2>\n\n\n\n
        • Stability<\/li>
        • Easy\nto understand<\/li><\/ul>\n\n\n\n

          Disadvantages<\/h2>\n\n\n\n
          • Centralised\nand therefore vulnerable<\/li>
          • The\ncentral authority must be trusted<\/li><\/ul>\n\n\n\n

            Crypto-linked stablecoins<\/h2>\n\n\n\n

            The crypto-linked stablecoin stands behind various cryptocurrencies and crypto portfolios. Through this mix, it keeps its value stable. One such example is the Wrapped Bitcoin (WBTC).<\/p>\n\n\n\n

            Advantages<\/h2>\n\n\n\n
            • Decentralised<\/li><\/ul>\n\n\n\n

              Disadvantages<\/h2>\n\n\n\n
              • Higher volatility possible<\/li>
              • More complex to understand<\/li><\/ul>\n\n\n\n

                Conclusion<\/h2>\n\n\n\n

                Stablecoins\nhave a practical use and can be used as a tool in crypto trading as well as for\ncurrency hedging.<\/p>\n\n\n\n

                They are\ncharacterised by their stability and low transaction fees.<\/p>\n\n\n\n

                The fact that central banks are currently working on their own coins shows that they will only become more important in the future.<\/p>\n","protected":false},"excerpt":{"rendered":"

                When you hear cryptocurrencies, you probably think of Bitcoin, Ethereum, Cardano, Litecoin or the like instead of stablecoins. But in the world of cryptocurrencies, these particular coins perform an important function. The world of cryptocurrencies is characterised by strong fluctuations due to political and economic influences. Well-known figures like Elon Musk, for example, have caused […]<\/p>\n","protected":false},"author":2,"featured_media":1534,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[137,48],"tags":[],"class_list":["post-1742","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all","category-crypto"],"yoast_head":"\nWhat are Stablecoins? | ajooda.ch | Your digital finance platform<\/title>\n<meta name=\"description\" content=\"The world of cryptocurrencies is characterised by strong fluctuations due to political and economic influences. 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