Today, I will continue to publish the 2nd post from the series "How crypto is seen through the eyes of a newbie". I've started yesterday, with ETH 2.0 through the eyes of a newbie, which proved to be a total success, with almost 1700 views and a total of $2.27 tips from readers. The main thought behind this idea is that I decided to learn as many things as I can about crypto. Consequently, this post is also dedicated to those that are at the beginning, like myself.
So, this post is about a very interesting subject with which I came across many times in the past 6 months, since I've started this adventure. It's about stablecoins. These are crypto-currencies with a "relative" stable value. The main characteristic of a stablecoin is that this type of crypto-currency is dependent on a real world monetary reserve, in our case the US dollar. But this doesn't necessarily mean that it is also linked with a central bank. In the same time, a stablecoin has a low volatility. That's why stablecoins have been created, to solve one of the main problems in crypto - volatility.
According to Coindesk.com, a stablecoin is
a type of crypto-currency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the price.
If we look at Bitcoin and Ethereum, where their value fluctuates even in milliseconds, the difference comes with a stablecoin. I will refer further to Tether/ USDT, the most known stablecoin from the market. USDT is dependent on a monetary reserve, the dollar. For every USDT that circulates within the market, there is one US dollar deposited in the bank. This is the theoretical part, but not everyone follows the rules.
Why was this stablecoin concept created?
In the crypto-market, the volatility is huge and up until the creation of the first stablecoin, the conversion was made into USD dollars, EURO or fiat. This represented a barrier, an obstacle, for the crypto-industry. Thus, the first crypto-currency with a stable value has been invented and its generic name is "stablecoin". Currently, there are many more available on the market.
What do I mean by a stable value (actually it's a relative stable value) is if I sell now 1 BTC at a price of 32.000 USD/BTC, I will get in exchange approximately 32.000 USDT. If, after 10 more minutes, the BTC value increases or decreases, I'll have the same value of 32.000 USDT. This thing is extremely useful and it will be used even more in the future. Currently, Tether is in the 3rd place in the top of crypto-currencies with a daily volume of almost $104.6 billion.
Most of the stablecoins can be found on most of the exchanges. Approximately 98% of all traders, professionals and amateurs, use USDT as a parity coin. When BTC or ETH transactions are made, traders use USDT.
Given the above, I think USDT will rise in the top and there is a high probability to become the first crypto-currency, because the need of stablecoins in the world is huge. USDT can be used, as I was saying earlier, with pretty much all exchanges and virtual wallets, thus being available to anyone who wants to use it. In specific situations, where larger amounts of money are involved in transactions, traders can buy USDT directly from Tether developers.
As a conclusion, Tether is easy to use, the fees are acceptable and it functions on 4 types of blockchain.
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