DAI – everything you need to know about the stable cryptocurrency
Many people who invest in cryptocurrencies are aware that cryptocurrencies generally have very high volatility.…
Stablecoins are a cryptocurrency that stands out in the crowd, as this is a cryptocurrency that is known for a volatility that is much lower than the volatility tends to be in connection with traditional cryptocurrency.
As the majority broadcast on the name of the cryptocurrency suggests, there are also several types of Stablecoins. We will take a closer look at several of these types in this article.
There are some cryptocurrencies that are linked to a specific currency, and Stablecoins is one of them. When you buy or invest in Stablecoins, it is the US dollar you have to deal with. It is no problem that you usually use another currency.
In this article, we will take a closer look at the different types of Stablecoins, and finally, we will also try to give you some useful tips that you can use when you are going to buy and invest in Stablecoins at some point.
What are Stablecoins?
Like several other cryptocurrencies, Stablecoin is a concept composed of two different words. One word is «stable», which means stable in Norwegian, and the other is «coin», which is the English word for «coin». Stablecoins are in other words stable coins.
Since Stablecoins has several subgroups, it is a bit difficult to determine a specific year as the beginning of this cryptocurrency. But what we can say is that Stablecoins is a cryptocurrency that really picked up speed last year, ie in 2020.
Stablecoins, as mentioned, differ from their competitors in that this cryptocurrency has a more stable graph attached to it . While cryptocurrency is generally characterized by high volatility, this is not the case with Stablecoins. This cryptocurrency has much lower volatility.
The low volatility means that Stablecoins are very popular with consumers, especially those who want to invest in cryptocurrencies where the risk is not as great as it is in connection with the other cryptocurrencies.
Different types of Stablecoins
As mentioned, stack coins can be divided into different types. In total, there are three main groups. The main groups of Stablecoins have been given the following names:
Stackable coins with security in fiat.
Stablecoins with security in cryptocurrency.
Stablecoins without security.
The reason why there have been three main groups of Stablecoins is that each main group of users has their own procedure which they use to ensure that the value of the Stablecoins is kept at a stable level.
If you are one of those who relate to cryptocurrency (and thus Stablecoins) in English, then these names apply:
Below we will look at all the three main groups of Stablecoins. We take the list in chronological order and therefore start with Stablecoins with security in fiat.
Stackable coins with security in fiat
Stable coins with security in fiat are a cryptocurrency that derives its security from fiat. Fiat is a term used instead of saying that it is about traditional money. By traditional money we mean the currency that you use on a daily basis, for example Norwegian kroner.
However, it is important to remember that some cryptocurrencies are locked into a specific currency. In the case of Stablecoins, it is the US dollar that counts. This means that your Norwegian kroner will be converted to US dollars in the transaction process.
The traditional currency acts as a reserve for the value of the cryptocurrency. This is what makes this form of Stablecoins experience better stability than the rest of the cryptocurrencies that you have certainly heard of in your quest for a good cryptocurrency.
With that said, it’s not like you have to spend traditional money to get Stablecoins with security in fiat. If you have values such as silver or gold lying around, you can also use this if you want to finance the purchase of this form of Stablecoins.
Stablecoins with security in cryptocurrency
There is also a form of cryptocurrency that derives its security from another form of cryptocurrency. The security can also consist of several different cryptocurrencies. In practice, this means that if you have Bitcoin and Ether , then you can use this as security for Stablecoins.
With that said, it is not certain that this is a good practice. Of course, it depends on what the ulterior motive of your investment is. But this type of Stablecoins assumes that you have a larger number of, for example, Bitcoin and Ether than you get.
What keeps the value of these stack coins stable is that these stack coins use smart contracts to maintain control over development. This is a very practical tool.
There are many examples of Stablecoins with cryptocurrency security. A classic example of this is the cryptocurrency we know as DAI . But we will not go into this in more detail right now.
Stablecoins without security
The third, and last, main group of Stablecoins are Stablecoins without security. As the name of the main group suggests, this is a form of Stablecoins that does not require any form of security at all. Another name for these stablecoins is algorithmic stablecoin.
In practice, that means exactly what the name tells us – when buying Stablecoins without security, you do not need any kind of security. This is what makes this form of Stablecoins stand out from the other two forms we looked at above.
This form of Stablecoins is equipped with a mechanism that takes on the task of keeping the price stable. It is very beneficial for the customers who want to invest in Stablecoins by purchasing this form of Stablecoins.
Also in connection with Stablecoins without security, there are a number of examples of cryptocurrencies that work in this way. One of these cryptocurrencies is the Ampleforth cryptocurrency which has the ticker code AMPL.
The process of a stack coin remains stable – which is the whole point.
Benefits of Stablecoins
There are a number of benefits to Stablecoins. These benefits apply regardless of which of the main groups appeals to you the most.
Below we will take a closer look at some of the benefits that you can take advantage of when using Stablecoins.
Stablecoins have convenient features
There is no doubt that Stablecoins have many convenient features. Stablecoins work in a slightly different way than the other cryptocurrencies, in that this cryptocurrency is made up of codes. Stablecoins are therefore characterized by simple functions.
If necessary, it is very easy for the developers behind Stablecoins to change the codes that make up the cryptocurrency. The crypto market is something that is constantly changing at a rapid pace, and Stablecoins manages to adapt to this in a very good way.
Some of the stack coins have their own loyalty programs that their customers can take advantage of. This is one of the practical features we are aiming for, which Stablecoins has no doubt known quite a bit about!
Stablecoins are cheaper
It is also not to be underestimated that Stablecoins are cheaper.
The price level of Stablecoins is related to the fact that one does not take an equally great risk by investing in Stablecoins. But it is important not to forget that Stablecoin is still a cryptocurrency, and with cryptocurrency there will always be some risk.
The risk is not as great when buying Stablecoins, but it is important to keep in mind that changes may occur. But the changes will not be as drastic as we are used to from other forms of cryptocurrency.
When dealing with cryptocurrency, it is not uncommon for there to be a fee on the transactions. The size of the fees will vary from cryptocurrency to cryptocurrency. In connection with Stablecoins, they manage to keep the fees at a very low level.
You can use the service at any time
Stablecoins is a service you can use at any time. There are no restrictions on the time of day you can use this cryptocurrency. Instead, you can use it just when it’s best for you, and it’s very convenient.
This means that this is a cryptocurrency that is available around the clock and at all hours of the day, or 24 hours a day, 7 days a week. And it is without a doubt very convenient for Stablecoins.
Less chance of inflation
As Stablecoin is characterized by low volatility, ie the price does not increase and fall as much as it does in connection with other cryptocurrencies. Since the price remains at a much more stable level, there is a much smaller chance that inflation will occur.
The reason why there is less chance of inflation is also that Stablecoins have a much higher value than other cryptocurrencies.
Available to everyone
Because you can use Stablecoins at any time, this can be described as a service that is available to absolutely everyone.
You can use Stablecoins regardless of which time is most convenient for you. If you work 12-hour shifts and only have the night to spare, then you can do what you are supposed to do with the stack coins then. Here are no guidelines for when you can use them and not!
Stablecoins is also a very secure service, since Stablecoins, like other cryptocurrencies, is built up of blockchain technology.
Is Stablecoins a good investment?
If you are considering investing in some form of cryptocurrency, then Stablecoins will be a very good choice. In fact, we would venture to say that Stablecoins will be the best choice for most people.
The reason why Stablecoins will be a good investment is because this cryptocurrency has a much lower volatility when compared to other cryptocurrencies on the market today. In practice, this means that the value of this cryptocurrency does not fluctuate as much as others.
It is also a bit in the name, in that it is called Stablecoins. This is a name that in Norwegian translates to «stable coins». In other words, you take a lower risk by investing in Stablecoins rather than choosing another cryptocurrency with high volatility.
Stablecoins will be a good choice for most people, but especially for those who do not have much experience with investing in cryptocurrency. A cryptocurrency with low volatility will be a great way to practice, until you become a little more secure in the manege.
How to invest in Stablecoins
If you are skeptical about investing in cryptocurrencies due to the high volatility most cryptocurrencies bring, then you do not need to worry about this anymore. For Stablecoins, a cryptocurrency is a bit out of the ordinary – with low volatility!
This means that an investment in Stablecoins is much safer than it would be to invest in any of the other cryptocurrencies. When it comes to how to invest in Stablecoins, this can be done in several different ways. Below we will consider some of the steps.
Choose which crypto exchange you want to use
First of all, you need to find out which cryptocurrency you want to use to buy your stack coins. There are many different crypto exchanges, so here you can formally choose and reject among a number of good crypto exchanges.
However, it is important to choose a cryptocurrency exchange that actually offers the cryptocurrency you want to invest in, which in this case is Stablecoins.
Choose which Stablecoin you want to invest in
Then you have to find out which Stablecoin you want to invest in. It may also be convenient to have figured this out before choosing a crypto exchange, as not everyone may offer all forms of Stablecoins.
You can invest in these
As mentioned, there are various crypto exchanges. Some of the most popular are eToro and Firi. The latter was formerly known as MiraiEx, in case there was any doubt whether it is a good crypto exchange or not.
Once you have found out which crypto exchange you want to invest in, just follow the guidelines of the relevant crypto exchange to register and create a user account. And then just invest in the road!
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