


Cryptocurrencies drive a financial revolution that provides the benefits of security, lower transaction costs, and borderless settlements, etc. Thus, stablecoins often are used as collaterals in crypto exchanges and decentralized finance applications.
Introduction to Cryptos
The arrival of cryptocurrencies began with Bitcoin in 2008. Since then, crypto has witnessed a rapid surge in user adoption. The utility value of crypto was what made it so appealing to many. Crypto users can make financial settlements without the trouble of going through banks and without revealing their identity. Users can also make international payments at very low fees.
All that is required to send or receive crypto is a phone or computer. This means that that person can trade, albeit peer-to-peer, without access to traditional banks anywhere in the world. These are just the basic features that cryptocurrency possesses. Its features helped crypto quickly gain widespread adoption. Since then, the high instability associated with cryptos' market value attracted many criticisms, and it is the single most potent hindrance to it being institutionally endorsed as a store of value.

For cryptocurrencies to make a case for use as a replacement for fiat, they need to have much less volatility than what is expected with crypto. Imagine a scenario where particular crypto was worth $8 yesterday, and one unit was used to purchase an item. If by today the value relative to the Dollar drops to $0.5, the item initially purchased can only be sold at a loss now. The prices of cryptos must have to be relatively stable for users to have the confidence to use them for daily transactions.
The need to have cryptocurrencies that are not prone to price volatility while still maintaining benefits such as privacy, security and low transaction fees etc, eventually gave rise to Stablecoins.
Stablecoins Defined
The base description is in the name. The coin is practically stable in value. A Stablecoin is a cryptocurrency whose market value is pegged to another asset that has a stable value. It solves the problem of crypto volatility. Thus users don't have to worry about price fluctuations. The price of a stable coin tracks that of the asset it is pegged to, such that if any large market movement causes any deviation, the price quickly readjusts to that of the peg.
Do We Need Stablecoins?
Definitely, without a doubt, we do. If they don't exist, we could end up with a world where purchasing power will swing erratically with every market speculation. Where users on a loan or mortgage taken in crypto could see their repayments multiply exponentially etc. If crypto must be a replacement for fiat in day-to-day transactions, it must be a reliable store of value. People will not want to use it if they are not sure of its purchasing power tomorrow.
How do They Maintain Their Stability?
Different stablecoins employ different pegging mechanisms to keep their values stable. Depending on the mechanism, stablecoins generally fall into the following groups,
- Algorithmic
The stability of stablecoins in this category is controlled by codes and smart contracts rather than any physical asset. It starts out by pegging 1 unit of the coin to say, $1. If the value of 1 coin goes above or below $1, the smart contract respectively either mints more coins or withdraws more coins from circulation until demand and supply are balanced at the point that will restore 1 coin to $1 value.
- Fiat-Backed

This class of stablecoins is backed by fiat held in a treasury/bank account, usually in a 1:1 ratio. Ideally, for every single coin in circulation, a unit of the fiat backing it as collateral.
- Crypto-Backed.
The stablecoins that fall under this group are backed by fellow cryptocurrencies that are not stablecoins but which have high collateral value, likely Ethereum, Bitcoin etc. Since the cryptos backing this set of stablecoins are themselves susceptible to volatility, the backing ratio is usually 1:2 or more. This ensures that even if the stable coin's value goes below its peg, the higher backing will protect from defaulting.
- Commodity-Backed

Here we have stablecoins that are pegged to non-fiat valuable assets such as crude oil and gold etc. In this case, one token of the coin is pegged to a reference value of the asset, say 1 ounce of gold or 1 barrel of Crude oil. Since the asset's reference value has its own worth in fiat, which can vary, it means that the value of the stablecoin can also vary with respect to fiat valuation while it maintains its underlying asset-peg.
Common Applications of Stablecoins
As volatility is no longer an issue, they are used as alternatives to fiat currencies. Therefore, the settlement is done on the blockchain and is faster and cheaper to transact than using fiat. Several retail giants such as Visa and Walmart have begun to accept stablecoins for payments and remittances.

For the crypto trader, stablecoins act as a hedge during times of high market volatility. If a trader has some Ethereum and the markets are so volatile that he expects ETH to drop in value, he can quickly swap his ETH into a stablecoin. He was simultaneously keeping the worth of his holdings intact in doing so. Similarly, if a local fiat currency is losing value, people can change the fiat into a stable coin and protect their wealth from depreciation.
Since they are stable and pegged to reliable assets, stablecoins often are used as collaterals in crypto exchanges and decentralized finance applications. Further reading on other use-cases of stablecoins is illustrated here.
Some popular stablecoins in current use are Tether (USDT), Binance USD (BUSD), True USD (TUSD), Paxos Standard (PAX), USD Coin (USDC), Dai etc
Conclusion on Stablecoins
Cryptocurrencies drive a financial revolution that provides the benefits of security, lower transaction costs, fast remittances, and borderless settlements, etc. But for all the promise cryptocurrencies hold, they have been heavily criticized as not being a reliable store of value for day-to-day transactions. This is mainly due to their highly unstable price swings. However, stablecoins are a more practical alternative to replace fiat currency. Stablecoins are cryptocurrencies quite alright, but they have their value tied to commonly accepted stable assets, which ensure that their value is practically stable. With the world moving towards full-scale cashless digital money economies, it is expected that stablecoins will become more and more integrated as day-to-day alternatives to fiat.
For further reading, check out the following sources!
1. Everything You Need To Know About Stablecoins And How They Work
3. Stablecoin
Don’t forget to download the BSC News mobile application on iOS and Android to keep up with all the latest news for Binance Smart Chain and crypto! Check out the DeFi Direct Linktree for all the access links!
For those looking for tools and strategies regarding safety and crypto education, be sure to check out the Tutorials, Cryptonomics Explainers, and Trading Tool Kits from BSC News.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $1500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $2500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
Author
Related News


BTC Price Predictions: Analysts Wade in on the Future of Bitcoin

Top experts have predicted a bullish price movement for BTC in 2024, primarily because of the upcoming halving event.
Bitcoin (BTC), the flagship cryptocurrency, has always been a hot topic for analysts and enthusiasts. Over the past year, many have ventured to predict its price trajectory.
As of January 1 this year, BTC was trading at $16,547, per CoinMarketCap data. This led to speculations that the crypto market might be entering a challenging phase, with many predicting that the bull run might come in 2024, in line with the halving event.
As we approach the end of 2023, let's evaluate some of these predictions and their current status.
PlanB’s Prediction:
PlanB, known for creating the Stock-to-Flow model, made a significant prediction on January 12, 2023. He stated on Twitter that Bitcoin's price of $15.5K in November 2022 would be its lowest. He further mentioned that BTC had surpassed its Short Term Holder (STH) phase and would continue to rise steadily towards the 2024 halving event.
According to PlanB, BTC will trade above $32K during the 2024 halving, expected around April, according to reports. He also predicted that the bull market would begin in 2025, with BTC surpassing the $100K mark.

So far, PlanB's forecast seems accurate. BTC has not dipped below $15.5K since November 2022 and has climbed from $18K in January to $26K currently. PlanB reaffirmed his prediction by quoting his January tweet, saying, "To be clear, I still stand by my January 12 prediction."
To be clear, I still stand by my January 12 prediction:
— PlanB (@100trillionUSD) September 18, 2023
✅ Nov 2022 $15.5k was the bottom
✅ Bitcoin will rise towards 2024 halving. BTC already rose from $18k to $27k since Jan 12.
❓ 2024 halving will be >$32k ($32k-$66k IMO)
❓ 2025 bull market >$100k ($100k-$1m IMO) https://t.co/V74Y8VYCVo pic.twitter.com/VBjsHObMMl
Tim Draper’s Prediction:
Tim Draper, a renowned venture capitalist, made a bold prediction in 2018, stating that BTC would hit $250K by 2022. As we're in 2023, this prediction has yet to materialize.
Oops! I predicted $250k in 2022. My tweet last night was missing a zero. $250k is the number!
— Tim Draper (@TimDraper) April 13, 2018
However, Draper has been right before. In 2014, after buying millions worth of BTC, he predicted its price would reach $10K within three years. This prediction came true in 2017.
In an interview with Hall of Fame, Draper admitted feeling pressured to make another prediction after his first one's success. He attributed the unfulfilled $250K prediction to actions by the U.S. government. Yet, he remains hopeful, stating in December 2022 that BTC would reach $250K before the 2024 halving. He humorously added, "If it’s not $250,000 or higher, then don’t listen to me ever again on that kind of prediction."
Robert Kiyosaki’s Views:
Robert Kiyosaki, a prominent figure in the crypto space, has been vocal about his BTC price predictions. In July, he tweeted that BTC would reach $120K the following year (2024). This came after his earlier prediction of BTC hitting $500K by 2025. Despite BTC's price fluctuations, Kiyosaki has consistently advised people to invest in it and gold and silver.
SOFT LANDiNG? HARD LANDING? Or CRASH LANDING? I say crash landing. I hope I am wrong yet that is what I believe. Corruption is high & leaders corrupt. Buy gokd, silver, Bitcoin. Still best insurance against corruption & incompetence,
— Robert Kiyosaki (@theRealKiyosaki) May 18, 2023
However, his recent tweet with the caption "BYE BYE Bitcoin and US Dollar?" has left many wondering about his current stance on BTC.
BYE BYE Bitcoin & US Dollar? Citibank announced today it is offering bank block chain technology to turn institutional savings into Citibank tokens which can be used for instaneous 24/7 cross border transactions. Bye bye BC & US $?
— Robert Kiyosaki (@theRealKiyosaki) September 26, 2023
Pantera Capital and Chartered Bank
As reported by Crypto News Flash, American hedge fund Pantera Capital and Chartered Bank, a British multinational bank, have similar views about the BTC’s price.
The news outlet disclosed that Pantera Capital predicts $150K for BTC, while Chartered Bank sees BTC reaching the $120K mark in 2024. Both bold predictions have been made due to the highly anticipated halving event in 2024. Historically, Bitcoin's halving is seen as a bullish event in the blockchain industry.
What Next For BTC?
Predicting BTC's price is challenging, given its volatile nature. While some predictions are on track, others have not materialized. As with any investment, it's essential to do thorough research and consult with financial experts before making decisions. Only time will tell which of these predictions, if any, will come to fruition.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $1500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
This is a paid press release, BSC.News does not endorse and is not responsible for or liable for any content, accuracy, quality, advertising, products, or other materials on this page. The project team has purchased this advertisement article for $2500. Readers should do their own research before taking any actions related to the company. BSC.News is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods, or services mentioned in the press release.
Follow us on Twitter and Instagram!
If you need tools and strategies regarding safety and crypto education, be sure to check out the Tutorials, cryptonomics explainers, and Trading Tool Kits from BSC News.
Looking for a job in crypto? Check out the CryptoJobsNow listings!
Author

Try Now!

Sign up Now
Coming Soon

WIN BIG

Coming Soon

Sign Up Now

Earn Now
Coming Soon

Sign Up Now

Play & Mine!
Coming Soon
Editors Choice
Other Currencies
- nameLTBuyLitecoin
Sponsored
Buy Crypto with Fees as low as 0%
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.
£0£0+0% - nameLTBuyEOS
Sponsored
Buy Crypto with Fees as low as 0%
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.
£0£0+0% - nameLTBuyMonero
Sponsored
Buy Crypto with Fees as low as 0%
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.
£0£0+0% - nameLTBuyBitcoin Cash
Sponsored
Buy Crypto with Fees as low as 0%
Buy Crypto with a bank transfer, credit or debit card, P2P exchange, and more. Not investment advice. All trading risk. Terms apply.
£0£0+0%