Top things you need to know before hiring a full stack stable blockchain solution provider. Also, know how to build stablecoin on blockchain
Entrepreneurs are thinking about fixing common problems for day & night. Blockchain technopreneurs might thinking about why cryptocurrencies should not have stable fixed price and regulated by a custodian. if you are thinking about stable cryptocurrency & token then please read this article carefully. This article will help you to answer many of your questions.
The world of digital payment experienced a whirl when Bitcoin came into being 10 years ago. After facing tons of hassles and hurdles, Bitcoin, along with the other altcoins, is now enjoying great status. If you lose money in cryptocurrency trading then you should understand the importance of Stable Coins / Tokens however this article is more than just about the stability of stable cryptocurrency and how to build stablecoin on blockchain.
Surprisingly, there are around 11021 cryptocurrencies which make a list on https://coinmarketcap.com/ and 9000+ altcoins, registered with Coinmarketcap, presently. However, the instability of these coins can give you a heart attack as their value can touch ground in no time.
For the cryptocurrency lovers, who are looking for a bit more stability, Stablecoins showed up as the only ray of hope. Though only one part of the cryptocurrency world is makes up Stablecoins, it has a bright future as their influence and adoption are rapidly expanding. By the time we reached the end of 2020, the total valuation of Stablecoins hit the mark of $20B. It was 300% growth.
In this post, all your Stablecoins related questions are answered bit by bit.
You should read through this article before you hire a full stack software development company or a blockchain developer.
What Are Stable-coins / tokens and How Do They Work – The Basics
A new class of cryptocurrencies, Stablecoins are the type of cryptocurrencies whose worth is assessed against a real and stable asset to keep the higher chances of market fluctuation and risks at bay. The assorted kind of real and stable assets that are commonly used to value the Stablecoins are:
- Other most common and popular cryptocurrencies such as Ethereum and Bitcoin.
- Dollar, Gold, silver, and other tangible commodities holding real value.
- Some of the most famed Stablecoins are Tether (USDT), TrueUSD (TUSD), Paxos Standard (PAX), and Gemini Dollar (GUSD).
How do Stablecoins affect cryptocurrency prices?
Answer your question
The instability and uncertainty that come with cryptocurrency are balanced out with Stablecoins. The majority of cryptocurrency traders use them to make faster and low-cost transactions.
Recent market researchers have shown that the issuance of cryptocurrency leans to price discovery and market efficiency of leading cryptocurrencies.
There are also certain market downturns trends observed with the issuance of Stablecoins Whenever there is a Stablecoins issuance incident, the negative price treads come to a halt in the world of cryptocurrencies a day before the issuance. There is not a positive abnormal return experienced 24-hour before and after the issuance.
Hence, it’s clear that Stablecoins highly impact the future of cryptocurrencies . They will leverage the adoption and use of cryptocurrencies and help people to overcome the barriers.
How do Stablecoins work?
Theoretically, Stablecoins can be pegged against anything that has a worth in the real world. Currency, gold, or silver; you name it and Stablecoins can take their place in the virtual world. The key operational factor is how the latch is maintains and upon which factors the whole system has base on. There is a need to have a custodian to regulate the currency for some Stablecoins like Tether. This custodian is also responsible to reserve a certain amount of collateral for that Stablecoins. This is how price fluctuations are prevented.
You might ask following questions to yourself ,
“Who will be custodian for your stable cryptocurrency or token?”
“What platform or technology is used for your stable coin development?”
“Why should you go with TRON, ETH , Solana or WAVE for your stable coin development”?
“How much is the monthly expense for cloud-server infrastructure?”
“Where and How to Find the Best Full-Stack Blockchain Software Developer?”
“How many audits do you need for your stable coin?”
Types of Stable-Coins
There are 3 types of stable-cons or tokens , collateralised , non-collateralised and mixed or hybrid or algorithmic stable coins , we can discuss some of them below
collateralised stable-coin can be further classified as asset-baked or crypto-backed collateralised stable-token, it is based on custodian for particular stable cryptocurrency & suggestions from blockchain software consultant. you need to understand little about each type stable currencies.
What pegged your stable curreny?
The simplest of all, fiat collateralised Stablecoins are produced is the currency against which it is pegged on. The issuer handles the production and liquidation of the coin . The price of such Stablecoins remains highly stable as one can buy the coin for less than $1 and can exchange it with the issuer for $1 and vice-versa. Some of the key examples of fiat-collateralized are PAX Circle, Tether-USDT, USDC, GUSD Paxos, TrustToken, and TUSD Gemini.
is your stable-cryptocurrency pegged by another cryptocurrency ?
It’s clear from the name that this type of Stablecoins gets its back through cryptocurrency. As the crypto values remain unstable, these Stable-coins follow a set of protocols to maintain price stability. MakerDAO and Havven are two key examples of such types of Stablecoins.
These kinds of Stablecoins are not backed by any collateral and they work just like the fiat currencies and are governed by a sovereign such as a country’s Central Bank. It is also known as Algorithmic Stablecoins. Basis and Carbon are two examples of non-centralized Stablecoins.
Are Stablecoins worth considering?
It depends on one’s expectations Stablecoins is a great option to consider for a beginner. As they are less complicated and bear fewer risks, a novice will have no worries while dealing with them.
Investing in cryptocurrency seems lucrative. However, one must not forget the fact that it demands great dedication on fronts like getting market updates and checking up the prices. If it sounds next-to-impossible for you then it’s wise to consider Stablecoins. Don’t ever think of it if you dream of turning a millionaire with Stablecoins as it’s not going to happen.
Slowly and gradually, Stablecoins is coming into the mainstream. If you’ve plans to consider it in the future then hold your thoughts for a second. Know about the perks that you can enjoy after adopting this cutting-edge cryptocurrency type:
- Make faster transactions
As Stablecoins get their control and monitored to great extent, it takes less amount of legal processing to conduct transactions. Settlement and banking takes place while using the Stablecoins get their issue at all hours. The set hours don’t bind it.
- Pay less transactional fee
Try using a high-end credit card like Visa, MasterCard, and AmEx average for transection and get ready to pay around 2% transactional charges per transaction. This is one of the major reasons behind the limited usability of limited credit cards. Using Stablecoins sets you free from such high unwanted fees.
- Pay without any limits and restrictions
Stablecoins are universal. You don’t have to exchange your dollar currency with pounds while you want to make an international or overseas transaction. Also, flat currency comes with per-day transaction limits. So, you can make as much as a transaction you want without any limits and restrictions with Stablecoins.
- Easy to program
Can you imagine using a programmable currency? Well, Stablecoins is the perfect example of this. Stablecoins build on codes and new features shall add easily by altering the codes. This way, one can have 100% customized currency. They shall change as per the changing needs.
- Better stability
This one is evident. We already know above that Stablecoins have value valued against real assets and are generally more stable than the other types of cryptocurrencies. Stablecoins owners will have more mental peace.
Every coin has two sides and it’s hard to believe that Stablecoins are here to churn out only perks and benefits. There are some cons are well which are as below:
- Not an impressive return. Stablecoins are indeed stable but another point to note here is that one can’t expect better returns. An investment of $100 in Bitcoins shall have value as much as $100,000 in five years. But, very unlikely, the same investment in Stablecoins will touch the mark of $10,000 for the same period.
- Algorithm manipulation is likely to happen more in the case of Stablecoins as the majority of the decentralized Stablecoins remain to live as per the smart contracts protocols such as Ethereum or Stellar. It could lead to the failure of the algorithm that keeps the currency stable. Any third party can manipulate the code and cause havoc.
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The future of investing and online trading is going to change for good with Stablecoins as they are here to reduce the risks of cryptocurrencies and give more confidence to the new investors. It is a safer escape point for many and is likely to impact the market presence of cryptocurrencies as well.
It comes with a fair share of pros and cons. Before you make any decision on this burgeoning investment system, don’t forget to weigh down these two factors as well. Stablecoins have come so far but they still have a long way to go. So, let’s wait and watch how things take turns.
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