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Author: Admin | 2025-04-28
To maintain a constant value regardless of market conditions using various techniques. As a result of the use of different methods, there are four different kinds of stablecoins. These are:Fiat-Collateralized Stablecoins – these are the most common stablecoins with the largest market share compared to their counterparts. The value of these cryptocurrencies is tied to that of a traditional currency such as the US Dollar or a basket of currencies. Leading stablecoins Tether (USDT), USD Coin (USDC), TrueUSD (TUSD), and Binance USD (BUSD) are all pegged to the US Dollar currency;Crypto-Collateralized Stablecoins – these cryptocurrencies derived their value from other more established cryptocurrencies such as Bitcoin. They could be backed on a 1:1 ratio against one or a basket of other digital assets. One such crypto-collateralized stablecoin is DAI, whose value is pegged to the US Dollar, but its collateral is comprised of Bitcoins; Algorithmic Stablecoins – this is a more recent type of stablecoin whereby developers use a system of incentives and smart contracts to maintain a stablecoin’s peg to another asset. It is worth noting that these assets do not have collateral associated with them. The idea behind such assets is that market participants will be incentivized enough to participate in the price stabilization of an asset.If the stablecoin loses its peg, the system is designed to deploy countermeasures that adjust the supply of tokens. However, this stablecoin model is prone to significant risks that could lead to de-pegging. Such an incident happened to Terra-Luna in 2022 when
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