People have come to recognize the many advantages of cryptocurrencies. With several features such as transparency, anonymity and low transaction fees, cryptocurrencies have dared to redefine the concept of money. Additionally, cryptocurrencies rival their traditional fiat siblings with state-of-the-art security features that inhibit fraud and counterfeiting. However, cryptocurrencies are very susceptible to bouts of price volatility that discourages their acceptance and wide use. The prices of cryptocurrencies are very fickle which make it a very bad store of value. Fortunately, this problem is averted by introducing stablecoins, a type of cryptocurrency that is backed by a commodity or even computer code. As the name suggests, stablecoins are immune to price fluctuations and garners the trust of users as well as the market.
There are 4 main types of stablecoins. They have been listed below:
As the name suggests, this type of coin is pledged against a country’s fiat currency such as the dollar, yen and rupee to name a few. The value of the coin oscillates according to the market price of the guaranteed fiat currency. Some popular examples of fiat backed stablecoins are Tether, TrueUSD and Gemini Dollar.
In contrast, asset-backed stablecoins are tethered to the value of tangible assets such as bullion, real estate and even art. The price of these coins is relatively firm. Examples of asset-backed stablecoins include Digix Gold Tokens, Maecenas and more.
This type of stablecoin uses popular cryptocurrencies such as Bitcoin, Ether and others as collateral. Smart contracts are used to manage the price of this stablecoin. Havven and DAI are examples of cryptocurrency backed stablecoin.
This crypto coin variety is unique because it does not associate itself to any fiat currency or precious metal. Instead algorithmic stablecoin are backed by computer scripts that manage the flow of funds and in turn stabilize the coin’s value. Basis is a prominent example of an algorithmic stablecoin.
Given its ability to resist price volatility, stablecoins are gaining a lot of popularity and acceptance. Today, it is very easy to launch a stablecoin with Blockchain App Factory. We are a trusted blockchain and cryptocurrency development company with unparalleled experience in this domain. We offer white labelled and customizable solutions that make your product stand out from the crowd.
