Stablecoin Definition - What are Stablecoins?

What are Stablecoins?
What are Stablecoins?

Stablecoins are crypto-currencies based on a real currency and represent the value of a currency. Therefore there are only very small exchange rate fluctuations. Stablecoins are more likely to be used to park money from other crypto currencies because it is cheaper than converting it directly into a real currency. Here is an example:

Example: I own 100 Ethereum. If I want to sell them now, because I believe that the exchange rate will go down, I have to pay high fees.

But if I convert them into a Stablecoin which is linked to the dollar exchange rate, I have protection against exchange rate fluctuations and pay less fees.

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Stablecoins risks

However, there are also risks with Stablecoins, as it can happen that a Stablecoin does not keep its promises and loses value. Therefore, you have to act with caution and look carefully in which Stablecoin you invest your money. Prominent examples of Stablecoins are Tether and also the currency Libra announced by Facebook.

Tether (USDT) is a block chain-based asset linked to the US dollar, making it a stablecoin. 1 USDT is always $1.00

The planned internet currency Libra is to be tied to a basket of currencies through active monetary policy of the associated Libra Association.

Youtube-Video: What are Stablecoins? What is Tether?

Crypto Glossary / Lexicon