The Numerous Benefits of Various Types of Stablecoins

Unlike classic crypto coins like Bitcoin and Ethereum, stablecoins like Tether are not subjected to typical market volatility. In turn, this makes them suitable as a means of payment since they retain all the advantages that come with using the blockchain network, including the speed of transactions, not being subjected to the whims of a financial institution, as well as stablecoin-specific advantages that we will be covering in today’s article.

On top of that, we will help you get acquainted with the most popular types of stablecoins and give you the rundown on each.

1. Stablecoins – how do they work?

The key component of stablecoins of various sorts is that they’re backed by an asset, which means their value is not subjected to typical crypto market volatility swings. For instance, Tether (USDT) is a popular stablecoin and one of the first ones that came to be. If you had 100 of those coins, their value would in almost all cases be equal to $100 in fiat currency, regardless of the state of the general crypto market.

Other than that, stablecoins retain all the advantages of traditional cryptos (if we can call them that – it’s a relatively new technology). This includes the ability to send them to any remote corner of the world without unnecessary delay. In comparison, if you were to make a bank transaction, not only could it take days to reach the other end, the bank could freeze it and start asking you questions pertaining to the nature of the transaction.

Furthermore, stablecoins, just like their traditional crypto cousins, are generally considered to be safe to transfer as long as you make sure that you’re sending them to the right crypto wallet address. As the world seems to be headed towards cashless transactions, it wouldn’t be unusual to see them being used for everyday purchases. In fact, this would be a more realistic scenario compared to paying with Bitcoin due to the fact their value is designed to remain stable over time.

2. The concrete advantages of stablecoins

Now that you have a solid general understanding of what stablecoins were designed to do, let’s delve a bit deeper by listing out some concrete advantages they bring to the table.

1. Sending money without third party interference

Stablecoins are suitable for making a transaction even to the most far-away place on Earth. Pick any of the coins with low transaction fees like Tether, and you’ll be able to combine borderless transactions with cost-efficiency, the kind no third-party financial institution can interfere with.

2. Earn rewards on your investment

While it’s possible to earn interest by holding money in a traditional bank, generally, the yields are nothing to write home about. Stablecoins, on the other hand, can be quite a different story in this regard.

3. No need for a bank account

Depending on your nationality, background, the country you live in, and all sorts of other factors, opening a bank account can be a challenge in some cases. The good news is that you don’t need to have a bank account to hold stablecoins, which could be beneficial in your unique situation.

4. Protect yourself from market volatility

The issue with traditional cryptocurrencies like Bitcoin is that their value fluctuates up and down all the time and there’s no way to predict what they’re going to be worth tomorrow. Putting your money in stablecoins, on the other hand, will safeguard you from the volatility of the crypto market.

5. A store of value

If you don’t trust your country’s banking institutions for any reason, putting your assets in stablecoins is an alternative that’s worth considering.

6. Low transaction fees

Stablecoins have low transaction fees, making them suitable for transferring large sums of money.

3. Popular stablecoins

Below, you will find examples of popular stablecoins with a brief description attached:

- Tether (USDT): Tether (USDT) is a stablecoin that has its value pegged to the value of the US dollar.

- USD Coin (USDC): a stablecoin that’s similar to USDT. However, some consider it somewhat safer due to it being subjected to more rigorous regulation.

- Binance USD: a fiat-backed stablecoin issued by Binance.

- Terra (LUNA): a stablecoin that has its value adjusted and corrected by an algorithm.

- Paxos Gold: a stablecoin with a value that’s tied to the value of gold.

- Dai (DAI): a stablecoin that rests on the ERC-20 blockchain.

- CACHE gold (CACHE): another gold-backed stablecoin.

Bear in mind these are only a couple of examples. If you want to Learn Crypto and see what are some of the other stablecoins you can use in practice, it’s a good idea to study additional resources.

Stablecoins like Tether are not affected by the typical crypto market volatility swings.

4. Conclusion

Stablecoins offer all the advantages of traditional cryptocurrencies with some additional benefits on top, the most notable of which is the fact that they can withstand market volatility. As the future unfolds, it could be that we will start seeing more of these being used as a means of payment in day-to-day affairs.

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