What is a stablecoin? Learn more about low risk cryptocurrencies

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Of course, you know Bitcoin and also the most famous cryptocurrencies, but there are other digital currencies with less volatility that can help you invest safely.

Bitcoin, Ethereum, Solana, Cardano, Shiba Inu, Dogecoin, etc. These are the cryptocurrencies everyone is talking about. Their huge benefits have made them very famous and many want to invest.

The cryptocurrency market has quite a bit of risk and many may want to enter but are not daring due to the dangers it entails. Fortunately, there are the stable coins.

These tokens they are safer and their value is much more stable. This is because they are associated with specific and almost always real values. The US dollar, the euro or even gold are the basis for this type of cryptocurrency, and can be divided into two types:

Stablecoins backed by stable securities

These types of cryptocurrencies are directly related to fiat currencies (or being legal tender) or some other item of value, such as gold.

There are also some who relate to the value of certain cryptocurrencies. These examples are a bit more specific, as they use their own mechanisms to regulate their own value, but let’s take a closer look:

If you are planning to enter the world of cryptocurrencies, here are some tips on how to avoid running out of money.

Linked to fiat currencies. The best known examples are TrueCoin and Tether. They are based on the US dollar and in the case of Tether it is a great triumph with a stake equivalent to 2.6 billion dollars.

All you have to do is deposit the relevant fiat currency as a deposit, then we get tokens of the cryptocurrency. Transactions and exchanges can be carried out just like any other digital currency, but its value remains on fixed scales.

It is also easy to get the money we have deposited back. If we return the tokens, they would give us their value in the fiat currency that supports the cryptocurrency as their value will not have changed much.

Linked to material values. The value of these coins is tied to that of a specific good, such as gold. Recently, the Gold Token was announced, which provides digital currencies based on the value of gold and which can even be exchanged for gold.

This type of stable coins is maintained thanks to the market price of the goods to which they relate is safe and reliable. They use blockchain technology and are the perfect entry for those who don’t want to take a lot of risk.

Linked to another cryptocurrency. These are a bit riskier. At first, they use the value of a cryptocurrency, but they are usually exchanged for the token they relate to. For example, DAI is based on Ethereum, so we will have to give Ethereum tokens to get DAI coins.

It remains stable due to the fact that more Ether is deposited than DAI tokens are received. This transaction reduces the risk and investors can protect themselves in case Ethereum drops in value. These are a little weirder stable coins that have relative safety.

Stablecoins regulated by algorithms

These cryptocurrencies are not tied to any market value, but rather use algorithms and smart contracts.

Smart contracts are a series of instructions built into the blockchain. These directives execute actions automatically and they do it securely, transparently.

An example of an algorithm regulated stablecoin would be the USDX. These tokens are held at a value similar to the dollar, although they are not backed by them as was the case in previous cases.

These types of cryptocurrencies can pose some issues with country regulations. They can even return the money invested if they find that they cannot meet a nation’s standards.

Everyone talks about crypto-currencies but … do they really add anything, beyond their status as a commodity to be speculated? Let’s see what they are for.

It happened with Basecoin, which was backed by a central bank, until its creators saw they couldn’t continue. $ 133 million has been returned and the initiative is dead.

Investing in cryptocurrencies is not easy. They carry a lot of risk and stable coins can avoid some of that risk. If you are not convinced that you are acquiring some of the most valuable, this may be the option for you.


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