what is a stablecoin

Within the current US dollar-based financial system, some might hesitate to use GBA stablecoin. Financial products issued outside mainland China could be priced in GBA stablecoin. Get started in minutes on Binance, the largest cryptocurrency exchange in the world.

FDUSD/USDT and ETH/FDUSD also contribute, albeit to a lesser extent. These pairs indicate significant trading activity involving Bitcoin, Etherum and stablecoins like FDUSD and USDT on Binance’s platform. Tron overwhelmingly dominates USDD usage among blockchains with 99.26%, illustrating its central role in facilitating transactions involving this stablecoin. Tron’s dominance reflects https://www.tokenexus.com/what-is-a-stablecoin-and-how-does-it-work/ its robust infrastructure supporting USDD transactions, while Ethereum’s smaller indicates lesser utilisation for USDD transactions within its ecosystem. Ethereum’s dominance reflects its robust infrastructure supporting Dai’s decentralised stablecoin ecosystem. Ethereum dominates stablecoin market cap among blockchains with $72.143 billion, followed by Tron at $51.487 billion.

Why have stablecoins become so popular?

The territory’s own currency, the Hong Kong dollar, is pegged to the US dollar, making its “Digital HKD” essentially a stablecoin. Hong Kong is well-suited for pilot financial projects, thanks to its well-regarded monetary and regulatory authorities and its open, market-oriented, and globally connected institutional environment. One such scheme could involve the creation of a stablecoin pegged to the offshore renminbi for use in China’s Greater Bay Area. In Binance’s active trading pairs, BTC/FDUSD leads with 13.02%, followed by ETH/USDT at 9.81% and BTC/USDT at 7.93%.

Unlike an algorithmic stablecoin, commodity-backed stablecoins are collateralized by interchangeable assets, like precious metals. Some issuers, like Daxos Gold and Kitco Gold, design their stablecoin to work by cashing out coins with gold bars. But, in other cases, stablecoins are backed by real estate, oil, or other precious metals.

9. What is a Blockchain

The stability of fiat with  the borderless, peer-to-peer nature of cryptocurrencies and full transparency over their supply. This combination puts Stablecoins in the unique position of creating a bridge between cryptocurrencies and the traditional economy. This type of crypto can offer cheaper, faster transactions and greater security — in some cases. And while governments are scrambling to accelerate crypto asset regulation, stablecoins may just be a palatable solution to upgrading payment systems and facilitating cross-border remittance. The main difference between bitcoin and stablecoins is that the value of bitcoin is not pegged to another asset. Instead, the price of bitcoin can fluctuate and is generally seen as being quite volatile.

  • And while governments are scrambling to accelerate crypto asset regulation, stablecoins may just be a palatable solution to upgrading payment systems and facilitating cross-border remittance.
  • Imagine buying a €500,000 house – with the relative cost in bitcoin constantly changing you’ll be glued to price charts desperately trying to time the transaction favourably.
  • A cryptocurrency worth $2 million might be held as reserve to issue $1 million in a crypto-backed stablecoin, insuring against a 50% decline in the price of the reserve cryptocurrency.
  • This means it’s often tricky for investors to swiftly cash out their cryptocurrencies when the going gets tough.
  • Similar to the types of stablecoins listed above, crypto-backed stablecoins are pegged to other cryptocurrencies.