What Are Stablecoins? Why Do We Need Them?

What are stablecoins? Why do we need them?

What are Stablecoins?

Types of Stablecoins

Fiat-Collateralized

Commodity-Collateralized

Crypto-Collateralized

Algorithmic

Why and How to Use Stablecoins?

Censorship-resistant global medium of exchange

DeFi and yield farming

Volatility and inflation hedge

How to Pick a Stablecoin?

  • Type of collateral and collateralization. If you need a more widely accepted option, you can look at USD-backed tokens but if you want to secure your savings, gold-backed stablecoins might be better;
  • Degrees of centralization. Tether Ltd., for example, issues the most popular stablecoin USDT but their integrity has been questioned. More decentralized alternatives, such as DAI, are less protected from volatility and “black swan” events;
  • Available markets. If you consider trading with stablecoins or using them in DeFi, you have to know where the stablecoin is accepted in the first place;
  • Supported blockchains and protocols. Stablecoins exist across different blockchains and second layers on top of them. The same stablecoin on a different blockchain or platform is actually a different token. Some platforms, such as Ethereum, are more widespread but have problems with high transaction fees.

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