How stablecoins differ from Bitcoins? | Stablecoin Development

Wolfie Zhao
Oct 7, 2019 at 01:48 PM
Updated Oct 9, 2019 at 12:43 PM

Bitcoin is the master of the cryptocurrency market and many exchanges use bitcoins as a major source of trading. Stablecoin is an emerging cryptocurrency like Bitcoin but with the difference that its value is merely constant and backed up to any assets. The stablecoin finds application in many real-time businesses and tends to replace the place of bitcoin in the crypto globe.

Here we are going to discuss the general concept of Stablecoin Vs Bitcoin in detail and some interesting facts about stablecoins.

We all know about Bitcoin. Rite? Have you all come across the word Stablecoins? If not no issues. Let us here discuss in brief about "Stablecoins ".

What is Bitcoin?
Stablecoin - What is it?
Stablecoin Vs Bitcoin 
Why Stablecoins are Becoming Popular over Bitcoins?
Types of Stablecoins
Real-World Applications of Stablecoins
Where to get the best stablecoin development services?

What is Bitcoin?

Bitcoin is the first digital currency developed by  Satoshi Nakamoto in  2008. Bitcoin and Ethereum are the most popularly used cryptocurrencies. The exchanges of this type of virtual currency are encrypted and decentralized. 

Stablecoin - What is it?

The headlines of the crypto market in recent months has the word "Stablecoins". Stablecoins are also digital currencies developed to minimize the volatility of the price. These are cryptocurrencies that are pegged to the value of any cryptocurrency, fiat currency, or trade commodities or any other commodities.

Stablecoin Vs Bitcoin

Stablecoin is a cryptocurrency that has non-volatility price and Bitcoin is a cryptocurrency whose price is volatile in nature. The concept of stablecoins is introduced only to minimize the price volatility of Bitcoins.

Bitcoin is one of the most popular cryptocurrencies whose price rise and fall simultaneously which makes traders wait for the right time to exchange their Bitcoins. Stablecoins whose value merely equal to any fiat currency and doesn't change accordingly helps in the exchange of them anytime by the stablecoins.

 

 

This nature of stablecoins makes the people who love to invest in bitcoins, also invest in stablecoins too.

Why Stablecoins are Becoming Popular over Bitcoins?

When all crypto coins undergo steep increase or decrease in their price, stablecoins remain stable in its price, notably equal to the US dollar. 

The popularity of stablecoins in the current crypto ecosystem is a function of two main factors.

1. Stablecoins stabilize a volatile crypto market

Stablecoins do not have a limited supply or fixed schedule, unlike conventional cryptocoins. Instead, stablecoins are disbursed based on market economics and conditions. These stablecoins are backed with any collateral to safeguard investors from clash occurring in the crypto market.

For example Tether is a stablecoin that claims to have as many dollars in an unspecified account as there are many numbers of tether coins in circulation.  Stablecoins's nature of non-volatility in price means that it can be used for purchase items or exchange fiat currencies or to buy other cryptocurrencies. 

In some exchanges like Bitfinex, the first step to purchase cryptocurrencies is buying Tether, which trades at parity with the US dollar. Then , this Tether coin can be used to buy other cryptos.

2. The influx of venture capital money 

The other main factor that influence the growth of stablecoins is its nature of influx of venture capital money. This development might seem to be odd, as the absence of volatility of price in stablecoins decreases the chances for the investor's profits.

The chance of new business models emergence in this stablecoins market provides a way to make profits for venture capitalists and regular investors.

Types of Stablecoins

As discussed earlier, Stablecoins are designed with the non-changeable price of any assets. Here let us look at the types of stablecoins.

There are three types of stablecoins as follows :
1. Fiat-collateralized
2. Crypto-collateralized and 
3. Non-collateralized
4. Commodity-collateralized

Source : Dailyhodl

Fiat-Collateralized Stablecoins

This type of stablecoins are those which undergoes the pegging process to fiat currency or real-world assets such as US Dollar, Euro, Yen or Pound.
Tether shortly know as USDT is a well-known fiat-collateralized stable currency that is backed by US Dollar of 1:1 ratio meaning, 1 Tether is equal to the value of 1 US dollar.

Another well-known fiat-collateralized stablecoins is Gemini ( GUSD ) which is regulated and built on Ethereum based on ERC 20 token. This is also backed by a 1: 1 ratio to US Dollars which developed with a motto to "establishes trust through cryptographic proof and regulatory oversight".

Crypto-Collateralized Stablecoins

Crypto-collateralized stablecoins are one which is backed to some cryptocurrencies. This stablecoins maintain their 1:1 ratio through over-colleteralization.

For example DAI, a stablecoin backed up by another cryptocurrency, which is created by MakerDAO, a Blockchain Company. BitUSD is another well-known crypto-collateralized token, which is collateralized by Bitshares.

Commodity-collateralized stablecoins

Some stablecoins are backed to precious metals such as Gold, or any other metals or commodities such as oil are known as non-collateralized stablecoins. This type of stablecoins is also called Commodity-collateralized stablecoins.

The best example of Commodity-collateralized stablecoin is Digix which is backed to gold which means 1 DGX is equal to 1 gram of gold on the ETH network.

Another example of Commodity-collateralized stablecoins is Tiberius Coin (TCX) which is backed by the combination of 7 precious metals that are commonly used in hardware technology. The inbound idea behind this is as these metals are increasingly used to make technology will increase the value of TCX. 

Non-Collateralized Stablecoins 

The stablecoin that is not backed by any assets but use algorithms to adjust the supply or demand of the stablecoin is known as Non-Collateralized Stablecoins 

Some examples of Non-Collateralized Stablecoins are CarbonUSD (Carbon) and kUSD (Kowala).

Real-World Applications of Stablecoins

Like blockchain technology, stablecoins are also in the early stage of its growth. Hence there are many real-time applications of stablecoins which are listed below:

1. As a day-to-day currency 

Stablecoins are just like fiat currency that can be used for mainstream commerce, but with the additional benefits of being a virtual coin that is legally backed and secured.

These are also especially useful for overseas payments since there will be no conversation of different fiat currencies.

For example IBM which Launches Stablecoin Backed By FDIC-Insured Banks.

IBM in partnership with  Stellar brings different sets of capabilities for overseas payments with the development of stablecoins. 

Check out here the IBM'S cross-border transfers project using the Steller network !!

2. In streamlining P2P payments and recurring 

Smart contracts are automatically executing coding that triggers exchange between two counterparties without the presence of third-party to enact. This method of transaction is traceable, irreversible, transparent which makes them ideal for loan payments, rent payments, subscriptions and lot more,

Stablecoins, when used in this process, requires a small fraction of the usual transaction fees and time.

3. Affordable and Fast  remittances for migrant workers

It becomes complex for migrant workers to send remittances through businesses and also their families to get back as money. It is a slow and cost-effective process. So, the concept of cryptocurrency is included in the process to make it effective.

Stablecoins could make the process much better. The migrant workers and their families can use digital wallets to send/receive stablecoins from anywhere in the globe almost instantly with low cost and with no price volatility.

4. Protection from local currency crashes

On average, the prices of goods have been doubling every few weeks. To maintain fiat currencies from crashing in value, stablecoins can be used. 

Stablecoins may offer a notable solution to all those crises by allowing them to quickly exchange their dropping/fiats currency into a stable currency, thus preventing them from further price drops.

5. Improved cryptocurrency exchanges

There is very few crypto exchange platform that currently supports fiat currency due to regulations. Since the use of stablecoins allows allow exchanges to get around this problem by offering crypto-fiat trading pairs by the use of USD backed stablecoins instead of US Dollars.

Where to get the best stablecoin development services?

Bitdeal - Leading Cryptocurrency Development Company offers the best stablecoins development services overseas. Our blockchain experts are experienced in developing the best stablecoins out there and stand unique in the crypto market.

Our stablecoin development services involve 

1. Consultation services for developing stablecoins
2. Whitepaper preparation
3. Fiat-backed stablecoins Development
4. Crypto-Collateralized Stablecoins Development
5. Non-Collateralized Stablecoins Development
6. Multi-Payment Integration
7. Automated AML/KYC Services
8. Community Support Management 
9. Stablecoin Marketing.
10. 100% Backed stablecoin development by Assets

Want to create your own stablecoin ? We provide 100% Backed stablecoin development with many enhanced features.  

Contact Our Experts to Develop Your Own Stablecoins now !!

Reference :

1Are Stablecoins the New and Improved Bitcoin?​

2.   The ultimate cryptocurrency explainer: Bitcoin, utility tokens, and stablecoins

3.  Why Are Stablecoins Becoming Popular?

Blockchain stablecoin bitcoin stablecoin Vs bitcoin stablecoin development