STABLECOINS

AN ULTIMATE GUIDE

“Stablecoins are Crypto

tokens designed to reduce the effect of

volatility and backed by a fixed assets or stable

fiat currency”

We will discuss:

Why stablecoins are so important?

What is stablecoin?

What are different types of stablecoins?

Let’s get started...

How stablecoins work?

Real-world application of stablecoins

What is Stablecoin?

Whenever there is a fluctuating condition in the crypto market, stablecoins offer a secure place to its owners in order to store their assets. Customers can rapidly and effectively convert from unpegged cryptocurrencies to stablecoins when they are stressed about the market. This conversion can be affordable as compared to converting crypto into fiat.

Stablecoins are new types of cryptocurrencies whose value is backed with another fixed asset like the US dollar. These coins can be pegged to fiat currency, for example, the US dollar, different digital forms of money, valuable metals or a combination of the three. Fiat is likely a mainstream alternative in the marketplace nowadays, which means one unit of a stablecoin equals $1.

Introduction

Stables are often called as

“Fixed-price cryptocurrency” or “Pegged Cryptocurrency”.

Why do we need stablecoins?

Content itself is what the end-user derives value from also can refer to the information provided through the medium, the way in which the information was presented, as well as the added features included in the medium in which that information was delivered.

Non-collateralized

Fiat Collateralized Stablecoins are backed by a real-world currency like US dollar. It works by depositing dollars into a bank account and issuing stablecoins in a one-to-one ratio against these dollars. When a user needs to exchange their stablecoins again into USD, you destroy their stablecoins and wire them the USD.

Fiat Collateralized

To remove the centralization from stablecoins, the idea of crypto collateralized stablecoins comes in. They operate in the same way, as fiat collateralized stablecoins, but are backed with reserves of another cryptocurrency as opposed to a fiat currency like USD. This way, the entire system can live on the blockchain & remain decentralized.

Crypto Collateralized

Different Types of Stablecoins

Why Stablecoins are so important?

• Stablecoins stay stable in its price, almost equivalent to the US dollar.

• Stablecoins don't have a fixed supply, like othercrypto coins. Rather, stablecoins are disperseddepending on financial market conditions.

• To protect investors from crashes occurringin the crypto market, these stablecoins arebacked with any fixed asset.

• Stablecoin’s property of non-volatility implies that it can be utilized to buy things or trade fiat currencies or to purchase different cryptocurrencies.

How

Stablecoins

Work?

Fiat Reserves held byStablecoin Bank

Stablecoin User

Stablecoin User

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1) Users deposit fiat currency into a bank account (For this example, we are assuming the fiat is USD).

2) Bank issues an equivalent amount of stablecoins and deposits it into the users’ stablecoin accounts.

3) Users can transact with one another.

4) Users looking to exchange their stablecoins for USD can redeposit their tokens into their stablecoin account.

5) Stablecoin bank destroys the deposited coins and gives the users an equivalent amount of USD.

Real World Applications of Stablecoins

Cryptocurrency

Trading Platform

• The primary use of stablecoins today is cryptocurrency trades.

• Utilizing stables coins, traders can exchange volatile

cryptocurrency for stable cryptocurrency when they need to

bring down their risk.

• For example, suppose I have invested in Bitcoin and I don’t want

to risk the price of Bitcoin falling against the US dollar, I can

simply trade my Bitcoins for USDT (also called Tether), which is

pegged to USD value) and hold my dollar value. When I need to

"get back in the game" and hold Bitcoins, I can simply trade my

USDT back to BTC. This strategy is popular with crypto-only

exchanges as there is restriction to users to exchange bitcoins for

fiat currency because of regulation.

Protection From

Local Currency

Crash

• Stablecoins carries the ability to protect the people

from hyperinflation.

• Hyperinflation is described as rapid, excessive and

out-of-control price growth of goods & services.

• Instead of holding the currency which reduces the

purchasing power of resident one can preserve the

value of the currency by converting local fiat currency

into stablecoins.

Faster, Less

Expensive Global

Remittance• The current system requires people to depend on banks

and financial institutes for cross border transactions.

• This is a slow and expensive procedure – it takes three to

five days to clear a transaction, and charges normally 4%

to 4.5% of volume.

• On the other hand, stablecoins give a superior option.

Foreign workers over the globe can use crypto wallets to

transfer stablecoins to their home country instantly, with

low fees and with no price volatility.

Thanks!You can find us at: www.rwaltz.com

Any questions?