[SSC_Stable Stake Coin] #2 What is a Stable Coin?
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Hello, this is Delio’s Alyssa. It is time for the second part of the Stable Coin series. Nowadays the interest towards stable coins is growing, and it is easy to find stable coin related articles in blogs or other media outlets. Since this blog post is directed to the people who are learning about the stable coins the first time, I will try to explain the concept as simply as I can.
1. What is a Stable Coin?
As you could guess, Stable Coin’s price does not fluctuate (/fluctuation is minimized). Bitcoin’s and other cryptocurrencies’ price changes numerous times during the day — so, how is it possible for stable coin’s price to actually be stable?
For example, we can guarantee price stability by linking the coins to money or real assets, such as gold or the US dollars. (1 coin= $1)
If this happens, it does not matter where you are, 1 coin has still the same value as 1 dollar. We can roughly divide stable coins to three main categories: the ones that are secured by legal currency, the ones that are secured by cryptocurrency and the unsecured ones. I will explain the details of these types later on the series!
2. Why do we need Stable Coins?
So, why would we need stable coins? Everybody knows Bitcoin, right? Like stocks, Bitcoin’s price goes up and down during the day and Bitcoin’s holders are in the never ending circle of first laughing when price goes up, then crying when it goes down and the same again. Because of the high price volatility, preexisting cryptrocurrencies (virtual currencies) are not suitable to be used in the everyday life. For example, if I bought noodles with 1 coin worth of 5 dollars yesterday, there might have been a drop in the value and today I would need 2 coins to get the same bowl of noodles. Therefore, current cryptocurrencies are not suitable for commercial payments, and there is a need for a stable coin with a guaranteed price!
3. The Shortcomings of Current Stable Coins
As the need for stable coins has emerged these days, many companies offer a variety of stable coins. Outside of Korea, Tether is the most famous stable coin. Tether’s main goal is to make it more convenient to exchange currencies and to make overseas remittances. 1 tether, which is linked to 1 dollar, is known to be a fast and convenient stable coin improving the problems of high currency exchange fees and foreign remittances that take many days to complete.
However, Tether is also one of the stable coins that has lost a lot of credibility as there has been suspicions about whether the tether coins issued are actually linked to the US dollar or not. There are stable coins appearing in Korea also, and one of the well-known projects issues two coins: one stable coin and one coin with price volatility — both being listed on exchanges. Even if it is called a stable coin, if listed in an exchange it will be hard to solve the problem of price volatility due to the logic of supply and demand. In other words, it means that it is difficult to guarantee stable coin’s price stability with a simple self-controlled demand quantity and supply quantity algorithm method.
The explanation is quite long, but in conclusion the biggest problem of stable coins probably is the point that because of the need for stable price, there is no investment value. From investor’s or just an ordinary person’s viewpoint, possessing a coin has the charm of the anticipation for a price rise in the future but in the case of stable coins, since the price is fixed it does not have that kind of anticipation value. For commercial payments it is ideal, but not really worth to invest in. So, is there a suitable coin that could satisfy both of these factors?
4. Delio Token
Today, I will introduce you the Delio token and later on the series I will explain it in more detail. Delio token is a stable coin that satisfies both the price stability as well as the need for value appreciation. How is that possible? Delio token is made of DELO’s and DELIO’s pairing through DTP (Dual Token Pairing) method which adopts both the mechanism design and algorithm method at the same time. Thus, it is able to satisfy both the user and the investor, making it the first stable coin actually created for payment purposes.
In other words, Delio token is a stable coin suitable for commercial payments + coin to invest in with the value appreciation potential. Therefore, it is called the Delio “Stable Stake Coin (SSC)” which solves the problems of preexisting stable coins. Furthermore, Delio aims for complete decentralization which is one of the core points of blockchain. Delio shares and distributes all the profits with the Delio ecosystem participants who use SSC.
5. Final Words
Did you get the grasp of what stable coins are? Stable coins are needed for commercial transactions, but there is the lack of investment value due to the stable price. But… Delio has found the way to satisfy both of these needs!
Next time we will discuss the variety of stable coins in the third part of the Stable Coin series! :)
Delio | Croschain Technology
Alyssa Yoon alyssa@croschain.com
Originally written by Delio’s Alyssa in Delio’s blog.
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