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Stablecoins

Stablecoins are a category of DeFi tokens that are designed to maintain a stable value relative to an underlying asset, typically a fiat currency such as the US dollar. Stablecoins offer several advantages over other cryptocurrencies, such as Bitcoin and Ethereum, which are known for their high volatility and price fluctuations.

Stablecoins aim to provide the benefits of cryptocurrencies, such as speed and global accessibility, while avoiding the price volatility that makes them unsuitable for use in everyday transactions. Stablecoins can be used for a range of purposes, such as trading, lending, and remittances.

Types of stablecoins

  1. Fiat-backed stablecoins: These are stablecoins that are backed by fiat currencies, such as the US dollar. These stablecoins are typically issued by a centralized authority, such as a bank or financial institution, and are redeemable for the underlying asset. Representative tokens: USDT, USDC, TUSD.
  2. Crypto-backed stablecoins: These are stablecoins that are backed by other cryptocurrencies, such as Bitcoin or Ethereum. These stablecoins are typically issued by a decentralized platform, such as a smart contract on the Ethereum blockchain. Representative token: DAI.
  3. Algorithmic stablecoins: These are stablecoins that use algorithms to maintain a stable value. These stablecoins are not backed by any underlying asset, but instead rely on the supply and demand of the token to maintain a stable value. Representative tokens: UST, USDD

Overall, stablecoins offer an important use case for DeFi, as they enable users to transact in a stable currency without the volatility associated with other cryptocurrencies. They provide an important building block for DeFi applications, such as decentralized exchanges and lending protocols.

How to exchange stablecoins

  1. Stablecoins can be exchanged on a variety of decentralized exchanges, such as Uniswap, 1inch, and Kyber. You need to set up a Wallet to start.
  2. Also, you can pick a centralized exchange that supports the stablecoin you want.Some examples are Coinbase, Binance, or OKCoin. You need to set up an exchange account to start.

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