Stablecoin: What is it?
Stablecoins are digital currencies whose value is tied to a specific good (such gold, silver, etc.) or fiat moneys (Dollar; Euro,...). Given its great volatility and the absence of local fiat currencies, this makes moving capital flow on cryptocurrencies easier.
How do stablecoins function?
In order to work, stablecoins must be able to maintain their denominated value. Nowadays, the bulk of stablecoins are tied to the USD.
Different methods have been developed to keep the price consistent at a specific value; each method has a unique kind of stablecoin. The most common and cost-effective option up to this point has been to back stablecoins at a 1:1 ratio with actual fiat currency.
Stablecoins Risks
Stablecoins are nevertheless vulnerable to losing their predetermined value. The majority of assets are volatile and illiquid because the crypto market is still in its infancy. The same is true with stablecoin. The sixth most valued Stablecoin, MIM, is unable to maintain its constant value permanently.
There are 4 different sorts of stablecoins, and each one has a unique way of keeping its value set.
Fiat-backed (USDT, USDC, BUSD): Stablecoins that are fully backed by fiat currencies include USDT, USDC, and BUSD.
(DAI, VAI, USDP) cryptocurrency-backed Decentralized stablecoins are stablecoins that do not reliant on physical assets to maintain their fixed value, also known as stablecoins.
Algorithmic: Rebase (AMPL, BASE), Seigniorage (UST, BAS, FEI), and Fractional (FRAX) are examples of algorithmic stablecoins. Algorithmic stablecoins are stablecoins whose value is solely determined by algorithms.
Stablecoins that are commodity-backed (PAXG, XAUT) function similarly to those that are fiat-backed.
Where to purchase stablecoins
Stablecoins may now be bought via a variety of methods as a consequence. Following are some suggestions:
Through CEXs, you may purchase stablecoins using any supported cryptocurrency and fiat money. The CEXs Binance, Coinbase, etc. are recommended.
DEXs: You can also buy stablecoins using DEXs. Stableswap AMM DEXs like Curve Finance (Multichain), Ellipsis (BSC), and Mobius (Celo) are recommended for stablecoin purchases in order to minimize slippages.
Protocols: As an alternative to directly purchasing Stablecoins (minting MIM), you may mint them through compatible protocols like MakerDAO (minting DAI), Terra (minting UST), and Abracadabra Money.
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