What are stablecoins?
Stablecoins are cryptocurrencies that are pegged (attached) in price to a fiat currency (USD) at all times during the existence of the coin.
How do they achieve this?
A. Centralized IOUs (Tether, Digix, TrueUSD) - The fiat currency is held in a physical location (some bank, somewhere).
B. Collateral Backed (Bitshares BitUSD, Maker DAI, Havven Nomins) - You need to lock up X amount (usually 1.5 to 2x) of crypto to generate 1x stable coin.
C. Seigniorage shares (Nubits, Basecoin) - Whether through algorithms or market demand, using another crypto (Basecoin Shares and Bonds, or NuShares), to expand or contract the supply of the stable coin.
Risks with Stablecoins
- They lose their peg
- Counterparty risk (centralized stablecoins)
- Undercollaterized (collateral backed stablecoins)
- death spirals (seigniorage shares stablecoins)
Should people use stablecoins?
My opinion (not financial advice) is if you don’t care about the price of Bitcoin, whether it is at $1,000 or $50,000, you shouldn’t use stable coins. But if you are a swing trader, it is an absolute MUST as you want to lock in your gains. You don’t want to make a 30% gain on an alt-coin trade only to have Bitcoin drop 25% or more on you.
If you are a day trader, it doesn’t matter too much because your only mission is to accumulate Bitcoins (or Satoshis if you are working on a budget).
List of exchanges and stable coins trade pairs:
Bancor Network - DAI
Binance - Tether
Bitfinex - Tether (but just use fiat as they support multiple)
Bittrex - Nubits, Tether, True USD
Cryptopia - Tether
HitBTC - Tether
Huobi - Tether
IDEX - DAI
Paradex - DAI
Radar Relay - DAI
Some more counterpoints to using stablecoins:
Preston Byrne - Stablecoins are doomed to fail
Bottom line: All stablecoins have risks, until we have an exchange that supports direct trade pairs for newer alt-coins (EOS/USD, ADA/EUR), they are our best options for avoiding Bitcoin volatility.
Links:
https://tether.to/
https://makerdao.com/
https://bitshares.org/technology/price-stable-cryptocurrencies/
https://www.trueusd.com/
https://nubits.com/
https://havven.io/
http://www.getbasecoin.com/
https://digix.global/
https://multicoin.capital/2018/01/17/an-overview-of-stablecoins/
https://prestonbyrne.com/2017/10/13/basecoin-bitshares-2-electric-boogaloo/
https://prestonbyrne.com/2017/12/10/stablecoins-are-doomed-to-fail/
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