An Overview of Stablecoins
As the cryptocurrency market matures, we are starting to see more categories forming. In this post, we will explore stablecoins — a type of cryptocurrency that has emerged following the criticism that some cryptos are too volatile to be used as actual currency.
What are Stablecoins?
To start, a stablecoin is any cryptocurrency or digital asset pegged to a stable asset. A stable asset could be a fiat currency (US dollar, Japanese yen, Chinese yuan) or commodity (gold, silver, platinum, oil). Some stablecoins are even pegged to other cryptocurrencies.
Because the value of a stablecoin is determined by the current market price of another asset, stablecoins avoid the large price fluctuates that are can be seen in coins like Bitcoin (BTC) and Ethereum (ETH).
According to Sherman Lee, a stablecoin must check 4 boxes:
- Price stability: Steady, predictable prices
- Scalability: Able to support hundreds of thousands to millions of users
- Privacy: Built from the ground up with privacy and security in mind
- Decentralization: Governed by the community consensus
Examples of Stablecoins
Today, there are dozens of stablecoins. Below we have provided a description of a handful of them. As a note, the list below is organized alphabetically and does not reflect our opinions of the projects.
Basis — Formerly Basecoin, Basis is building a stablecoin with an algorithmic “central bank”
bitCNY — Stablecoin that is pegged to the Chinese yuan in a 1:1 ratio
CorionX — ERC20 token that can be thought of as the “gas” for other stablecoins
Dai — The first decentralized stablecoin on the Ethereum chain, pegged to $1 USD
TrueUSD — Regulated, exchange-interdependent coin pegged to the USD
The Future of Stablecoins
As with other blockchain technology, there were early pioneers in the stablecoin movement. In the past few years, we have started to see more robust “2.0” solutions. We can expect to see more stablecoins launching soon, especially those that are backed by more unique assets.
Furthermore, we anticipate an increasing number of companies and ecosystems to start accepting stablecoins. For example, in countries with unstable currencies, accepting payment and paying employees in a stablecoin may prove to be a convenient way to escape currency fluctuation.
Stablecoins also provide an opportunity for crypto enthusiasts to trade in and out of a position (e.g., exchange BTC or ETH for a stablecoin) without going all the way back to a fiat currency. This also allows traders to avoid the high fees and slow transaction times associated with fiat currencies.
Conclusions
At Hilo, we’re building the next generation social community. We are bringing together the best aspects of traditional social media with decentralization, tokenization, and much more. On the Hilo platform, users can follow the latest crypto news, learn about upcoming ICOs, follow influencers, and more. Users are rewarded with HILO tokens for their participation and interaction with the community.
We’ve built Hilo to solve a personal need — how to learn about cryptocurrencies and the blockchain in a way that’s efficient and effective. To learn more about stablecoins, or any other aspect of the crypto economy, be sure to check out Hilo.
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