Bitcoin and other cryptocurrencies are extremely volatile, especially compared with conventional financial instruments like stocks and bonds. That volatility plays a central role in crypto's appeal for investors. Sure, you can lose all your money on any coin or token -- or you could become a millionaire overnight. There is, however, a subset of cryptocurrencies designed to hold steady, to provide a value that doesn't fluctuate. They're called stablecoins, and they're playing an important role in cryptocurrency prediction markets bitcoin wiki. At the moment, a number of stablecoins -- specifically terraUSD and tether -- are making headlines for their respective failures to deliver stability. Terra has now lost nearly 100% of its value and tether, the largest and most popular stablecoin, is showing signs of fragility.
Stablecoins have become central to the crypto ecosystem, serving important functions for investors and speculators. Below, we'll run through what makes a stablecoin one -- in theory, anyway -- how they're different from other cryptocurrencies and how people are using them today.
Are stablecoins cryptocurrency?
A stablecoin is cryptocurrency with a twist. Instead of being "mined'' by an open, distributed network of computers performing a combination of math and recordkeeping, a stablecoin derives its price from the value of another asset. In short, a stablecoin is pegged to another underlying asset.
What are the leading stablecoins?
The most prominent stablecoins are the ones used for trading on crypto exchanges. These include tether, the most popular stablecoin, which is usually in the top-five highest market caps for cryptocurrencies; USD coin, or USDC, an
And it's within this use case that lies the seed of one of bitcoin's more grandiose potential goals -- namely, to give relief to populations that are subject to rapid inflation and could benefit from transferring funds out of a distressed local currency into a stablecoin. (As long as the stablecoin isn't tied to that local currency, it would theoretically be insulated from the regional inflation.)
Are all stablecoins pegged to a national currency?
Similar to how the US dollar serves as a reserve currency for countries around the world, the most popular stablecoins are currently pegged to the US dollar. A single unit of tether, USD coin or binance USD is each worth approximately $1.
But the underlying asset doesn't have to be a national currency. The asset could be a commodity like gold (as with ), an algorithm ([url=]dai) or even another cryptocurrency like bitcoin ().
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