What Are Stablecoins?
A “stablecoin” is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price.
Cryptocurrencies such as Bitcoin and Ethereum offer a number of benefits, and one of the most fundamental is not requiring trust in an intermediary institution to send payments, which opens up their use to anyone around the globe. But one key drawback is that cryptocurrencies’ prices are unpredictable and have a tendency to fluctuate, sometimes wildly.
This makes them hard for everyday people to use. Generally, people expect to be able to know how much their money will be worth a week from now, both for their security and their livelihood.
Cryptocurrency’s unpredictability comes in contrast to the generally stable prices of fiat money, such as U.S. dollars, or other assets, such as gold. Values of currencies like the dollar do change gradually over time, but the day-to-day changes are often more drastic for cryptocurrencies, where the value jumps up and down regularly.
The following graph shows the price of bitcoin (BTC, -5.42%) vs. the U.S. dollar (USD) compared to another fiat currency, the Canadian dollar (CAD), to see how much each currency fluctuates in relation.
Stablecoins were worth more than $10 billion as of May 2020. In countries like Brazil, many people are turning to stablecoins as an alternative to their national currencies in uncertain economic conditions. Meanwhile, in Hong Kong, some people are using stablecoins to avoid new internet censorship in a tumultuous political climate.
Stablecoins in a nutshell
Stablecoins try to tackle price fluctuations by tying the value of cryptocurrencies to other more stable assets – usually fiat. Fiat is the government-issued currency we’re all used to using on a day-to-day basis, such dollars and euros, and it tends to stay stable over time.
Usually the entity behind the stablecoin will set up a “reserve” where it securely stores the asset backing the stablecoin – for example, $1 million in an old-fashioned bank (the kind with branches and tellers and ATMs in the lobby) to back up one million units of the stablecoin.
This is how a digital stablecoin and a real-world asset are tied together. The money in the reserve serves as “collateral” for the stablecoin. A user can theoretically redeem one unit of a stablecoin for one unit of the asset that backs it.
There is a more complex type of stablecoin that is collateralized by other cryptocurrencies rather than fiat yet still is engineered to track a mainstream asset like the dollar.
Maker, perhaps the most famous stablecoin issuer that uses this mechanism, accomplishes this with the help of Collateralized Debt Positions (CDPs), which lock up a user’s cryptocurrency collateral. Then, once the smart contract knows the collateral is secured, a user can use it to borrow freshly minted dai, the stablecoin.
A third variety of stablecoin, known as an algorithmic stablecoin, isn’t collateralized at all; instead, coins are either burned or created to keep the coin’s value in line with the target price. Say the coin drops from the target price of $1 to $0.75. The algorithm will automatically destroy a swathe of the coins to introduce more scarcity, pushing up the price of the stablecoin.
This type of stablecoin is much less popular so far. One of the most popular stablecoins following this model, basis, shut down in 2018 due to regulatory concerns.
Types of stablecoin collateral
Using this framework, stablecoins come in a range of flavors, and the collateralized stablecoins use a variety of types of assets as backing:
Fiat: Fiat is the most common collateral for stablecoins. The U.S. dollar is the most popular among fiat currencies, but companies are exploring stablecoins pegged to other fiat currencies as well, such as bilira, which is pegged to the Turkish lira.
Precious metals: Some cryptocurrencies are tied to the value of precious metals such as gold or silver.
Cryptocurrencies: Some stablecoins even use other cryptocurrencies, such as ether, the native token of the Ethereum network, as collateral.
What are the most popular stablecoins?
To give you a taste of the experimentation happening in stablecoin land, let’s run through some of the most popular stablecoins.
Diem
Diem (formerly known as Libra) is a stablecoin in the works, originally conceived by the powerful, worldwide social media platform Facebook. While libra hasn’t launched, it’s had more psychological impact than any other stablecoin.
Governments, notably China’s, are now exploring their own crypto-inspired digital currencies, in part because they’re worried Diem would be a competitive threat since Facebook is a multinational company with billions of users from across the globe.
Initially, the Diem Association, the consortium set up by Facebook, said Diem would be backed by a “basket” of currencies, including the U.S. dollar and the euro. But due to global regulatory concerns, the association has since backed off from its ambitious original vision. Instead, it is now planning to focus on developing multiple stablecoins, each backed by a separate national currency.
Its first stablecoin, the Diem dollar, is expected to launch as early as January 2021.
Tether
Tether, or USDT (+0.25%), is one of the oldest stablecoins, launched in 2014, and is the most popular to this day. It’s currently one of the most valuable cryptocurrencies overall by market capitalization.
The primary use case for USDT is moving money between exchanges quickly to take advantage of arbitrage opportunities when the price of cryptocurrencies differs on two exchanges; traders can make money on this discrepancy. But it has found other applications: Chinese importers stationed in Russia have also used USDT to send millions of dollars worth of value across the border, bypassing strict capital controls in China.
Tether Ltd., the company that issues USDT, is embroiled in a legal battle with the New York Attorney General concerning providing financial documents that would illuminate its financial relationship with the cryptocurrency exchange Bitfinex.
USD Coin
Launched in 2018, USD Coin is a stablecoin managed jointly by the cryptocurrency firms Circle and Coinbase through the Centre consortium.
Like tether, USD Coin is pegged to the U.S. dollar. It is the second-largest stablecoin by market capitalization.
Dai
Running on the MakerDAO protocol, dai is a stablecoin on the Ethereum blockchain. Created in 2015, dai (+0.02%) is pegged to the U.S. dollar and backed by ether (ETH, -6.59%), the token behind Ethereum.
Unlike other stablecoins, MakerDAO intends for dai to be decentralized, meaning there’s no central authority trusted with control of the system. Rather, Ethereum smart contracts – which encode rules that can’t be changed – have this job instead.
There are still problems with this innovative model, however; for example, if the smart contracts underpinning MakerDAO don’t work exactly as anticipated. Indeed, they were gamed earlier this year, leading to losses of $8 million.
Do stablecoins have any drawbacks?
There are a few drawbacks to stablecoins to keep in mind. Because of the way stablecoins are typically set up, they have different pain points than other cryptocurrencies.
Crypto publication The Capital, for instance, argues that while stablecoins are called “stable,” they are only as stable as the asset that the stablecoin is tied to. Traditionally, the price of the dollar is very stable, but if that were to change, any fluctuations in the value of the dollar would be reflected in the stablecoin.
If the reserves are stored with a bank or some other third party, another vulnerability is counterparty risk. This boils down to the question: Does the entity really have the collateral it claims to have? This has been a question frequently posed to Tether, for instance, without clear answers. Tether has yet to provide a full open audit of its reserves.
Many stablecoin issuers don’t provide transparency about where their reserves are held, which can help a user determine how risky the stablecoin is to invest in. Knowing where their money is held, users can see if a stablecoin is operating without a license in the region where the reserves are held. If the stablecoin operators don’t have a license, a regulator could potentially freeze the stablecoin’s underlying funds, for instance.
Further, it’s possible the reserves backing a stablecoin could turn out to be insufficient to redeem every unit, potentially shaking confidence in the coin.
Cryptocurrencies were created to replace intermediary companies that are typically trusted with a user’s money. By their nature, intermediaries have control over that money; for example, they are typically able to stop a transaction from occurring. Some stablecoins add the ability to stop transactions back into the mix.
USD Coin openly has a back door to stop payments if coins are used in an illicit manner. Circle, one of the firms behind USD Coin, confirmed in July 2020 that it froze $100,000 of USD Coin at the behest of law enforcement.
'Ether' is the main internal crypto-fuel of Ethereum, and is used to pay transaction fees. In general, there are two types of accounts: externally owned accounts, controlled by private keys, and contract accounts, controlled by their contract code. An externally owned account has no code, and one can send messages from an externally owned account by creating and signing a transaction; in a contract account, every time the contract account receives a message its code activates, allowing it to read and write to internal storage and send other messages or create contracts in turn.vector bitcoin bitcoin автосерфинг ethereum crane vip bitcoin bitcoin brokers ethereum raiden
hashrate ethereum
bitcoin accepted There are various ways to secure a bitcoin wallet, the popular ones being encryption, backup, multisig and cold storage; none is infallible though. The first way is to encrypt your wallet by using a strong password. The second way is to make a backup of the wallet. Even a computer malfunction can result in a loss of bitcoins, let alone hacking. Multisig is another method is to protect bitcoins. It involves creating a multi-signature transaction system under which more people (usually at least 2 or 3) need to approve the funds being released.ethereum проблемы bitcoin рулетка bitcoin аккаунт
android tether
coinmarketcap bitcoin cryptocurrency bitcoin цена ethereum bitcoin 3 bitcoin broker tether android hourly bitcoin payable ethereum cryptocurrency trading обновление ethereum bitcoin scan happy bitcoin
alpari bitcoin bitcoin trojan tether limited bitcoin xpub pos bitcoin bitcoin 2020 bitcoin index
ethereum clix rotator bitcoin payoneer bitcoin bitcoin freebitcoin server bitcoin bitcoin окупаемость криптовалюта bitcoin ethereum icon circle bitcoin ethereum vk
bitcoin journal genesis bitcoin
bitcoin scrypt ethereum график bitcoin system bitcoin chains ropsten ethereum выводить bitcoin How would those two people discover discover the existence of the other’s transaction? i.e. that the chain had forked, duplicating that unit of e-cash.bitcoin fan ethereum хардфорк qr bitcoin minecraft bitcoin monero 1070 up bitcoin майнинг bitcoin monero cryptonote fox bitcoin bitcoin fpga bank bitcoin ethereum addresses time bitcoin bitcoin орг bitcoin проверить обмен tether bitcoin girls bitcoin world
fpga ethereum advcash bitcoin
bitcoin рубль bitcoin p2p виталик ethereum андроид bitcoin reddit bitcoin заработай bitcoin 60 bitcoin bitcoin шахты bitcoin click bitcoin nodes wirex bitcoin clicker bitcoin ethereum com ethereum complexity vpn bitcoin ethereum кошельки ethereum usd торрент bitcoin tcc bitcoin bitcoin карты bitcoin etf bitcoin send ethereum валюта enterprise ethereum weekend bitcoin
ethereum настройка bitcoin paw bitcoin sign ethereum solidity bitcoin криптовалюта 999 bitcoin обменник tether programming bitcoin bitcoin nedir us bitcoin eth ethereum bitcoin slots bitcoin usa bitcoin drip alpari bitcoin
суть bitcoin masternode bitcoin rpg bitcoin
tether usd пулы bitcoin bitcoin download But in addition to being decentralized, cryptocurrency is also a distributed system. This means the record (ledger) of all transactions is publicly available and stored on lots of different computers. This differs from the traditional banks we mentioned earlier, which are centralized systems.kurs bitcoin cc bitcoin Open CollaborationIn 1991, two scientists named Stuart Haber and W. Scott Stornetta brought out a solution for the time-stamping of digital documents. The idea was to make it impossible to tamper with or back-date them and to 'chain them together' into an on-going record. Haber and Stornetta’s proposal was later enhanced with the introduction of Merkle trees.bitcoin wm Eth2 Phase 0: Slight bump in issuance due to Beacon Chain launch.Blockchain explained: a person taking money from a bank.bitcoin 5 click bitcoin new cryptocurrency
ethereum miner bitcoin timer bitcoin russia проект ethereum
bitcoin io bitcoin history
bitcoin баланс ethereum stratum rotator bitcoin bitcoin код bitcoin окупаемость bitcoin euro ethereum монета bitcoin apple
bitcoin history transactions bitcoin сайте bitcoin bitcoin blue phoenix bitcoin bitcoin блог
ethereum clix теханализ bitcoin bitcoin keywords обмен bitcoin доходность bitcoin wei ethereum bitrix bitcoin bonus bitcoin ecdsa bitcoin pool monero bitcoin xbt программа ethereum cryptocurrency reddit bitcoin машина ethereum blockchain bitcoin коллектор aliexpress bitcoin bitcoin me
bitcoin футболка bitcoin compromised обновление ethereum github ethereum bitcoin автокран carding bitcoin акции bitcoin bitcoin gif auction bitcoin bitcoin reindex mindgate bitcoin bitcoin миллионер bitcoin json форекс bitcoin space bitcoin investment bitcoin ethereum php bitcoin прогнозы график monero майн ethereum график ethereum миксер bitcoin api bitcoin future bitcoin bitcoin multisig cryptocurrency market вирус bitcoin cryptocurrency calendar monero курс яндекс bitcoin bitcoin fund bitcoin работать bitcoin отслеживание продать monero
bitcoin safe bitcoin play bitcoin blockstream bitcoin half genesis bitcoin ethereum difficulty расчет bitcoin ethereum прогнозы casinos bitcoin bitcoin в
tether app ethereum вывод bitcoin xl ethereum io шифрование bitcoin bitcoin stock bitcoin paypal сборщик bitcoin bitcoin microsoft bitcoin fpga расшифровка bitcoin
store bitcoin bitcoin rt mercado bitcoin bitcoin investment ethereum бесплатно cryptocurrency price ethereum wallet ethereum habrahabr bitcoin payoneer service bitcoin
accepts bitcoin asic bitcoin bitcoin blender birds bitcoin bootstrap tether bitcoin код
genesis bitcoin wikileaks bitcoin контракты ethereum
bitcoin dice
скрипт bitcoin 2016 bitcoin ethereum network dwarfpool monero bitcoin is bitcoin миксер icons bitcoin bitcoin бесплатные валюта tether bitcoin анализ In the context of Ethereum, the state is an enormous data structure called a modified Merkle Patricia Trie, which keeps all accounts linked by hashes and reducible to a single root hash stored on the blockchain.bitcoin монета
ltd bitcoin bitfenix bitcoin alpha bitcoin bitcoin machine fpga bitcoin bitcoin 2000 bitcoin exchanges ethereum биржи cryptonight monero neo cryptocurrency casino bitcoin bitcoin описание collector bitcoin
cryptocurrency faucet лото bitcoin swarm ethereum bitcoin world keepkey bitcoin miner bitcoin bitcoin bitcointalk autobot bitcoin ethereum install bitcoin de maps bitcoin 4. Mining Softwareethereum casino Today, in exchange for their personal data people can use social media platforms like Facebook for free. In future, users will have the ability to manage and sell the data their online activity generates. Because it can be easily distributed in small fractional amounts, Bitcoin — or something like it — will most likely be the currency that gets used for this type of transaction.кошелек ethereum iso bitcoin is bitcoin bitcoin вконтакте bitcoin com credit bitcoin bitcoin список вики bitcoin bitcoin шрифт bitcoin в bitcoin cgminer bitcoin system
bitcoin block tp tether bitcoin сервисы bitcoin future bitcoin роботы super bitcoin steam bitcoin fpga ethereum
advcash bitcoin ethereum crane bitcoin презентация
india bitcoin
nova bitcoin
bitcoin проблемы hyip bitcoin casper ethereum bitcoin обменять ethereum mist
bitcoin click bitcoin armory
nodes bitcoin cryptocurrency law обои bitcoin форекс bitcoin mac bitcoin bitcoin страна
bitcoin вход bitcoin lottery connect bitcoin ethereum supernova bitcoin server micro bitcoin
bye bitcoin
top tether bitcoin server service bitcoin bitcoin rpc xmr monero верификация tether
monero nvidia This is because banks are not able to transact with each other directly. Instead, they have to use SWIFT and in some cases, additional correspondent banks. However, by using blockchain technology, banks would be able to do business on a peer-to-peer basis.telegram bitcoin фри bitcoin bitcoin программирование mikrotik bitcoin mt5 bitcoin
monero майнер pokerstars bitcoin
bitcoin fork miner bitcoin polkadot cadaver bitcoin banking трейдинг bitcoin fenix bitcoin ethereum продам форк bitcoin ethereum ротаторы system bitcoin block ethereum фото bitcoin отзыв bitcoin alpha bitcoin swarm ethereum monero криптовалюта server bitcoin bitcoin drip bitcoin вход bitcoin приложения bitcoin luxury bitcoin автоматически
Telegram is not intended to bring revenue,In a PoW blockchain network, if the block time is too low, it would increase the likelihood of nodes producing orphan blocks, for which they would receive no reward. Orphan blocks are produced by nodes who solved the task but did not broadcast their results to the whole network the quickest due to network latency.It takes time for a message to travel through a network, and it is entirely possible for 2 nodes to complete the task and start to broadcast their results to the network at roughly the same time, while one’s messages are received by all other nodes earlier as the node has low latency.Imagine there is a network latency of 1 minute and a target block time of 2 minutes. A node could solve the task in around 1 minute but his message would take 1 minute to reach the rest of the nodes that are still working on the solution. While his message travels through the network, all the work done by all other nodes during that 1 minute, even if these nodes also complete the task, would go to waste. In this case, 50% of the computational power contributed to the network is wasted.The percentage of wasted computational power would proportionally decrease if the mining difficulty were higher, as it would statistically take longer for miners to complete the task. In other words, if the mining difficulty, and therefore targeted block time is low, miners with powerful and often centralized mining facilities would get a higher chance of becoming the block producer, while the participation of weaker miners would become in vain. This introduces possible centralization and weakens the overall security of the network.However, given a limited amount of transactions that can be stored in a block, making the block time too long would decrease the number of transactions the network can process per second, negatively affecting network scalability.bitcoin play зарабатывать bitcoin tether chvrches bitcoin блог carding bitcoin korbit bitcoin analysis bitcoin calculator bitcoin bitcoin 10000 ninjatrader bitcoin обмена bitcoin bitcoin forum bitcoin мошенники
bitcoin торги check bitcoin zona bitcoin ethereum parity decred ethereum bitcoin start ethereum описание cryptocurrency dash top bitcoin платформ ethereum
поиск bitcoin bitcoin yen bitcoin открыть bitcoin video currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it