Assalamu Alaikum
How are you? By Allah's grace, I'm doing very well. Today we will discuss stablecoins, Let's get started.
What is a stable coin? :
While the world of cryptocurrency is exciting, its biggest problem is volatility. Stable coins have emerged as a great solution to this problem, acting as a bridge between the crypto world and the real world.
What is a stable coin? :
A stable coin is a digital currency whose value is backed by a natural asset (e.g. gold), or fiat currency (e.g. USD, Euro, BDT), or algorithmic methods to keep it stable.
The goal is to maintain the value while maintaining the advantages of cryptocurrency.
Why are stablecoins important? :
Maintains price stability — There is less risk of sudden price drops or increases.
Makes transactions easier — Useful for trading or payments on various platforms.
Fund protection — When the market is in a downturn, people move from Bitcoin/Ether to stablecoins.
Stablecoins are used in DeFi (Decentralized Finance) for loans, automated trading, staking, etc.
Main types of stablecoins :
০ Fiat-backed stablecoins
These coins are directly linked to the dollar or other real currency at a 1:1 ratio.
Example :
USDT (Tether)
USDC (USD Coin)
BUSD (Binance USD)
These are usually backed by dollars deposited in a bank account.
০ Crypto-backed Stablecoin
These coins are backed by other cryptocurrencies (e.g. ETH, BTC). Due to price fluctuations, they are over-collateralized across multiple cryptos.
Example :
DAI (by MakerDAO)
০ Algorithmic Stablecoin
These are not backed by any fiat or crypto, but rather a programmed algorithm controls the supply of coins in the market.
Example :
AMPL (Ampleforth)
UST (Terra – failed)
However, many algorithmic stablecoins have crashed, such as the Luna/UST crash.
Risks of Using Stablecoins :
Coins like USDT/USDC are regulated by banking regulations, so there is a risk of government intervention. Not all stablecoins are trustworthy — many projects can be fake or scams. Algorithmic stablecoins are particularly risky if market mechanisms break down.
Some examples of using stablecoins :
A trader sells Bitcoin and takes USDT for future investment. A blogger gets paid for his writing in USDC, because it has no volatility. A student sends his tuition fees to Binance using BUSD.
Conclusion :
Stable coins are the “balancer” of the cryptocurrency world, helping us navigate the market safely. However, instead of getting involved in the wrong projects, you should choose stable coins with good reviews, market cap, and trustworthy institutions. Today's discussion concludes here. I hope you've found it interesting. Please share your thoughts on today's topic. Prayers for everyone. May everyone be well