Stablecoins are intended to have a considerably more stable value than traditional cryptocurrencies. They are linked to other assets, such as the US dollar or gold. The idea is that stablecoins may enjoy the benefits of bitcoin without the associated high volatility. This would go a long process toward helping cryptocurrencies be recognized as a realistic means of buying anything. For instance, most companies aren’t eager to accept a payment method that may lose value the next day. If traditional Cryptocurrency is analogous to investing in a high-risk stock, stablecoins are comparable to withdrawing cash from an ATM.

Many stablecoins are tied to fiat currencies, such as the US dollar or the Euro, and maybe exchanged on exchanges. Other stablecoins are linked to different assets, such as precious metals such as gold or other cryptocurrencies.

Stablecoins, on the other hand, seek to reap the potential benefits of cryptocurrencies — such as transparency, security, immutability, and decentralized control — while retaining the assurances and stability that come with utilizing fiat currency.

Early cryptocurrency holders first utilized stablecoins as a safe refuge in a market collapse or crash. If the cost of bitcoin were to fall fast, a holder might transfer it to a stable coin in minutes on a single site, avoiding potentially enormous losses.

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