Stablecoins are a type of coin that is tied to various assets, which can be gold, fiat currencies, and even other cryptocurrencies. As a rule, Stablecoin has a stable exchange rate with a low level of volatility, or even boasts no volatility. Most often, stablecoins are backed by fiat money reserves. This solution allows to reduce the volatility of the exchange rate, thereby making the stablecoin a stable medium of exchange.
In the long term, the value of the most well-known and proven cryptocurrencies in the market is growing. At the same time, virtual money has extremely high volatility. Most often, they attract long-term investors and those interested in speculative trading. This feature of cryptocurrencies prevents their mass distribution as a ubiquitous medium of exchange.
In turn, the value of stablecoins is easily predicted, since it is tied to the value of another asset. It should be added that in addition to fiat currency, other assets, in particular gold, can be used as collateral.
One of the most famous stablecoins today is Tether. The price of this cryptocurrency is pegged to the dollar exchange rate in a one-to-one ratio. The Tether token is called USDT, and one USDT is equal to one US dollar, respectively. The reserves of funds that are needed to secure Tether are stored centrally, which means that a high level of trust on the part of users is required for the cryptocurrency turnover.
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