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Stablecoin Guide: Cryptocurrency with Steady Value
Stablecoin is based on blockchain technology. It provides reliability in an ever-evolving market. Join us on this blog as we delve into the world of stablecoins and discover their unwavering value and transformative potential.
Blockchain technology is causing radical changes in the economy. This technology and its products continue to have an important place in the world of the economy for about 10 years.
Blockchain consists of blocks that are arranged one after the other. Each block has encryption created with hard math problems. Through computers, these transactions are resolved, verified by other users, and stored in digital ledgers.
It may seem complicated at first glance. But thanks to the advantages it offers, it makes transfers and investments accessible for everyone. One of the most popular products of this technology is digital assets called cryptocurrencies.
Cryptocurrencies have a value just like the US Dollar and Euro. But they are not as stable as these fiat currencies. Thanks to their decentralization, cryptocurrencies offer their users impressive speed and limitlessness.
Despite all its advantages, it also has some risky aspects for investors and business projects. What investors fear most is the volatility of cryptocurrencies. There are fluctuations in many cryptocurrencies. This has intimidated investors until recently.
Fortunately, blockchain technology has eliminated this problem as well. Types of cryptocurrencies with stable value called “stablecoins” do not have volatility. Thanks to these trust-filled digital assets, investors now benefit from cryptocurrencies as a trading tool.
What is stablecoin?
Stablecoins are types of cryptocurrencies with fixed value. Popular cryptocurrencies such as Bitcoin and Ethereum experience volatility and fluctuations. For example, while 1 Ethereum was worth 50 thousand dollars in 2022, it decreased to 30 thousand dollars in the middle of 2023.
This feature of digital assets is a reason that prevents capital owners and investors from developing projects in this field. There is a solution to this problem: stablecoins.
Stablecoins move in a balanced line and there are no fluctuations. They are designed to maintain this fixed value in fiat currencies. Some types follow commodity assets. For example, the probability of volatility in the US Dollar is close to zero thanks to its adoption by the market.
Euro is one of the most preferred investment instruments in traditional banking. However, traditional banking cannot keep up with the speed of today's digital networks. Investors and businesses are also looking for ways to make their investments digitally.
Euro stablecoins are a good response to them here. They can invest with confidence thanks to reliable stablecoins that maintain a stable value. They combine the speed of digital assets with confidence.
How do stablecoins work?
We need to understand how stablecoins keep it safe through mechanisms. Stablecoins maintain the same value as their fiat currencies. This stability makes them more attractive to businesses or capital owners.
So how do stablecoins maintain this value? It has a very simple operation. The stability is maintained by keeping the same amount of the fiat currency that it is dependent on for each stablecoin purchased.
In this way, there is no contradiction in the supply-demand balance and it can be maintained. While there are some stablecoin types that maintain this supply-demand balance with algorithms, the safest method is to keep money in reserve.
How much stablecoin is available on the blockchain economy?
Capital owners who want to integrate blockchain technologies and their projects have become interested in stablecoins in recent years. It is known that there are currently more than 100 types of stablecoins on different crypto exchanges.
Economists specializing in digital assets predict that this number will increase exponentially with different cryptocurrency projects.
There are different types of stablecoins released with different mechanisms for different purposes. Fiat-backed or commodity-backed are the most common types of stablecoins.
Cryptocurrencies with the same value as fiat currencies, specifically fiat-backed ones, can be counted first. These are digital assets that have the same value and trust as fiat currencies in circulation.
For example, the value of a euro-backed stablecoin, such as EURK, will be in line with the Euro. It is a solution for those who find the euro safe as an investment tool, but also consider cryptocurrencies as risky.
The other common type of stablecoin is a commodity-backed. Commodity simply means precious metals such as gold and silver. Especially gold is still used as one of the biggest investment tools today.
It is possible to experience the trust of gold mines in fast ecosystems of digital assets with a type of stablecoins called commodity-backed. An example of such stablecoins is the low-volatility, high-liquidity GLC, which aligns with gold.
There are also types that follow other cryptocurrencies and types that have an algorithmic mechanism. Although these two types are less used, they also tend to maintain a constant value.
What are the differences between stablecoin and other cryptocurrencies?
The biggest difference between other cryptocurrencies and stablecoins is volatility. Stablecoins with high liquidity have the mechanisms to experience the least fluctuations. Check this article to learn more about liquidity in stablecoins.
Cryptocurrencies are constantly changing value depending on the factors such as the amount of investment they receive, the projects developed, and supply and demand rates.
Although there are types that develop this with algorithms and software, the basic principle is to keep 1 fiat currency in reserve for each stablecoin taken.
This mechanism ensures that volatility is close to zero. Thanks to its decentralized structure, your transactions through stablecoins are not audited.
Thanks to stablecoins, you can perform commercial transactions or transfers anywhere, anytime. Additionally, stablecoins offer great confidence to businesses with their stable value.
If you want to learn more, CBQ is here to clear your questions about stablecoins. EURK provided by Cryptobunq is a euro stablecoin 1:1 pegged to euro.
As CBQ, we are always at your service with your investment or business transactions. Benefit from the advantages of stable value for your business transactions with EURK stablecoin. Contact us now and make safe investments while growing your business with EURK euro stablecoin.
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