What is a stablecoin? A stablecoin is a digital asset whose value doesn’t fluctuate in relation to an externally pegged traditional asset class. By securing its value against a traditional asset, stablecoin lowers price volatility. A group of currencies, a single fiat currency, or other priceless assets could serve as the backing asset. Table of Contents • What areStablecoins? • Different kinds of Stablecoins • What are Stablecoins used for? • How to keep Stablecoins stable • Hybrid Stablecoins • Non-collateralized or seigniorage-style stablecoins • Conclusion What are Stablecoins? Stablecoins are designed to make the adoption of cryptocurrencies more secure and trustworthy while reducing the speculative nature of digital assets. They provide the steadiness of fiat currency with the security and decentralization of cryptocurrencies. Since the beginning, cryptocurrencies have been seen as extremely price-volatile investment vehicles. Due to the dangers for sellers and merchants, this has caused price jumps and collapses, making it difficult in some situations for cryptocurrencies to be used for basic products and services. Stablecoins can help with that. According to the notion, you can avoid price fluctuations by creating a currency that is “pegged,” or linked, to a standard fiat currency like the US dollar or another asset with a generally constant price. Stablecoins are designed to make cryptocurrencies more secure and trustworthy while reducing the speculative nature of digital assets. They provide the steadiness of fiat currency with the security and decentralization of cryptocurrencies.   Different kinds of Stablecoins 1. Centralized Stablecoins One of the original stablecoins and the most well-known is Tether (USDT). It asserts that it is supported by an actual cash reserve—referred to as “collateral”—that is “off-chain,” or in a physical place under the supervision of a centralized third party. Investors can be confident that their tethers truly are worth one dollar apiece because this supply is securely stored in a bank’s vault, which helps to maintain the price stability. A staggering 48% of the total cryptocurrency trading volume is accounted for by stablecoin. There is only one issue: Investors’ skepticism is fueled by the fact that Tether Ltd, the company that issues Tether tokens, has never definitively demonstrated that the currency actually has full backing. (More below on this.)   (EMOJI): Filecoin (oneFIL) OneFIL was created by ICHI, a system for establishing “decentralized money authority,” and it serves as the Filecoin network’s stablecoin. It is backed by the native coin of Filecoin, FIL, and USDC. In addition to offering incentives and discounts for Filecoin storage purchasers and providers, its goal is to create a stablecoin for the further expansion of the Filecoin network.   Gemini Dollar (GUSD)/Paxos Dollar (PAX)/USDC: These stablecoins were created by venture capitalists the Winklevoss twins, blockchain startup Paxos, and cryptocurrency exchange Coinbase (in collaboration with payment platform Circle), respectively. They have all undergone stringent Wall Street audits and comply with regional regulatory frameworks. These tokens are growing in acceptance as people become less confident of Tether.   (EMOJI): Filecoin (OneFIL): OneFIL was created by ICHI, a system for establishing “decentralized money authority,” and it serves as the Filecoin network’s stablecoin. It is backed by the native coin of Filecoin, FIL, and USDC. In addition to offering incentives and discounts for Filecoin storage purchasers and providers, its goal is to create a stablecoin for the further expansion of the Filecoin network.   2. Gold-backed Stablecoins Although the vast majority of stablecoins are backed by US dollars kept in a bank vault, the development of stablecoins backed by other assets, such as various gold-backed cryptocurrencies, has been prompted by the general deterioration of opinion toward the USD and fiat in general. They all have investment-grade gold as a backing but range greatly in form and usability. • CACHE gold (CACHE)within the most well-liked of them Each CACHE is backed by 1g of pure gold that is kept in global vaults. Although CACHE tokens can be quickly exchanged for actual gold at any time, sending them is the same as sending 1 gram of gold per token. • There’s also Tether Gold (XAUt)and PAX Gold (PAXG), which operate in a similar way, but are instead pegged to one troy ounce of investment-grade gold. They also have a higher minimum redemption amount than CACHE.   3. AlgorithmicStablecoins • Terra (LUNA) is a decentralized stablecoin, meaning it uses a sophisticated algorithm to maintain stability rather than relying on a reliable third party. • Ampleforth (AMPL) uses a similar methodology. It uses a procedure known as a “rebase” to automatically alter the circulating supply of the cryptocurrency in reaction to changes in supply and demand rather than backing each AMPL physically with 1 USD. The circulating supply will be increased or decreased in an effort to bring the price of AMPL back to $1 if it is more than 5% above or below the USD reference price. Holders of AMPL always retain their proportionate share of the whole AMPL network because this rebase is proportional across all wallets. • Dai (DAI) is said to distinguish itself from rival stablecoins by allowing for broad usage while remaining decentralized and trustless. DAI is an ERC20 token with a value tied to the US dollar that can be transferred between Ethereum wallets and was developed by blockchain startup MakerDAO. Stablecoins are backed by a real cash reserve that is kept “off-chain” or in a physical location under the control of a centralized third party, such as Tether (USDT), Filecoin (OneFIL), Gemini Dollar (GUSD), Paxos Dollar (PAX), and USDC.   What are Stablecoins used for? Because stablecoins are based on the blockchain, they provide holders with a variety of advantages. The first stablecoins were released as exchange-traded alternatives to fiat money, providing investors with shelter from the turbulence of other crypto assets. Stablecoins can now be used in the decentralized finance (DeFi) sector to borrow money at rates that are higher than those provided by conventional savings accounts or to take out cryptocurrency-backed loans. It is important to note that while stablecoin services may offer higher