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GENERAL CRYPTO

What are Stablecoins?

Published June 23, 2022 · Written by Omair Khan

What are Stablecoins? How do they help the Unbanked?

Like all other cryptocurrencies, stablecoins operate on the blockchain. However, the difference between a stablecoin and other cryptocurrencies is that a stablecoin’s price is connected to a secondary asset like the U.S dollar ($), Gold, or a Smart Contract. That means that stablecoins always remain stable and are not volatile like Bitcoin or other cryptocurrencies. This also results in the creation of a better-suited form of digital money in the crypto world. One that can be used for day-to-day living without people worrying about the price dropping due to the economy.

How Are They Kept at a Constant Price?

Stablecoin market rates chart
Stablecoins specifically fiat-backed stablecoins keep prices level by storing fiat backing each coin on a one-to-one basis. So long as the underlying currency — or basket of currencies — stays stable, the stablecoin will maintain its value. They are, essentially, backed by the “full faith and credit” of the fiat issuer, with a value defended by that nation’s central bank.

Fiat-backed stablecoin, like the USD Coin (USDC), for example, specifically link to the U.S. dollar. That means that 1 USDC’s worth is equivalent to one U.S dollar. You can use that anywhere in the digital world as a form of an actual U.S dollar.  Users who hold the coin are assured by the makers of USDC, Circle, that they can redeem their USDC for the equivalent number of U.S. dollars at any time.

Stablecoins are the perfect introduction to the digital financial world for individuals who are are bankless. With USDC you don’t need to have a checking or savings account anymore. As a matter of fact, you don’t need to associate with any bank since you can carry all your cash in a crypto wallet in the form of USDC. This way, your cash always remains safe with you and you won’t need to worry about losing value in your currency if you store it in USDC because it is directly linked to the actual U.S Dollar.

Stablecoins’ equal fair value and US-regulated accounts makes them legit. USDC like many other stablecoins operates on the Ethereum blockchain. USDC has inherited some powerful properties including:
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Being available globally for anyone with accessible internet to use.
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Being open 24/7 so you can use any time you want without having to worry about time stoppages.
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Fast, cheap, and secure to transmit, unlike other unsecured cryptocurrencies.
There many other stablecoins tied to various assets. Here are a few of the most popular ones:
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USDC Coin (USDC) – Tied to the U.S. dollar.
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Dai (DAI) – Tied to the U.S. dollar.
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Euro Coin (EUROC) – Tied to the Euro.
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Pax Gold (PAXG)  – Tied to the price of gold.

Why Use Stablecoins? What can you do with them?

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Minimize volatility: Stablecoins, backed by secondary assets, can maintain a relatively consistent value.
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Maintain digital assets: You don’t need to have a bank account to hold stablecoins, just a digital wallet. Black Swan is compatible with any digital wallet.
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Send money anywhere: It’s fast and easy to send money within and across borders without the threat that your money will lose value.
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Earn Interest: You can deposit your digital currency into a crypto exchange and earn competitive interest rates (typically higher rates than what a bank would offer).

The Future of Stablecoins

As stablecoins slowly gain recognition amongst individuals as digital currencies, they have also gained increased interest from the U.S government. President Joe Biden recently signed an executive order instructing government agencies to provide information about the U.S. government’s role in the future of digital currencies. Furthermore, as enterprises slowly get more accustomed to cryptocurrencies, they will start to enable stablecoins like USDC as the primary form of transaction. With the growing use of cryptocurrencies as a form of digital payment amongst many people, it is safe to say that stablecoins are here to stay. Due to the many perks stablecoins provide like minimum price shifts, quick transactions, and global reach with no digital barriers, many people find them to be the preferred cryptocurrency.

Black Swan Bitcoin customers can purchase large amounts of stablecoins in one go. You can stop by any of our Bitcoin ATM machines to buy USDC, Tether, & True USD. Those looking to get into crypto gold can purchase PaxGold through our services as well.
Disclaimer: The information and content manifested on the Black Swan Bitcoin blog are for educational purposes only. Nothing published by Black Swan Bitcoin constitutes as investment recommendation, nor should any data or content published by Black Swan Bitcoin be relied upon  for any investment activities.