Stablecoins: How to earn them

Stablecoins are stable cryptocurrencies that are backed by other assets. The main advantage of stablecoins is the fixed exchange rate due to the linkage to other assets and the lack of volatility. 

 

Buying stablecoins is a great option for those who want to invest in cryptocurrency, but do not want to expose their assets to risks due to the high volatility of the crypto market. In simple terms, stablecoins are the digital embodiment of real physical assets that are used to lock in a balance sheet so as not to suffer losses due to the high volatility of the crypto market. 

 

Depending on how they are backed, stablecoins are divided into the following types.

 

 

1. Fiat-backed

 

A cryptocurrency whose exchange rate is pegged 1:1 to fiat currency. For example, each USDT is backed by one real US dollar. The central issuer holds a certain amount of the reserve currency and issues a proportionate amount of cryptocurrency. In this way, users can exchange Stablecoins for fiat currency and vice versa at any time. 

 

2. Crypto-backed

 

Coins backed by another cryptocurrency. To get such a Stablecoin, you need to lock the required amount of cryptocurrency into a contract, which then issues a certain amount of new coins. To exchange it back, the stablecoin is sent to the same contract and the cryptocurrency that secured it is returned to the user, taking into account the fees and interest rates. 

 

3. Algorithmic 

 

These stablecoins have no currency reserves — they are not tied to fiat or any other cryptocurrency. The issuance of new coins is controlled by an algorithm in a smart contract that reacts to supply and demand. Coin algorithms reduce the supply of tokens if their price falls below the monitored price. This is similar to the way a central bank regulates fiat currency. 

Stablecoin opportunities

 

- Minimal volatility. For both novice and experienced investors, stablecoin is a reliable asset that supports financial capital. Stablecoins can be compared to bonds, which are used to fix or stabilize profits. 

- Fast and easy transfer of assets. You don't need a bank account to store stablecoins, and they are easy to transfer thanks to fast processing and low transaction fees. In addition, Stablecoins can be transferred quickly around the world. 

- Stablecoins bring more liquidity and volume to the cryptocurrency market. With minimal volatility, stablecoins attract many people to join the crypto market. And the more participants in the market, the greater its liquidity, which makes the crypto market more efficient. 

- Earnings Opportunity. Stablecoins give you the opportunity to earn through lending or staking. Let us tell you about the possibilities of making money with stablecoins.

Ways to make money with stablecoins

Using stabelcoins, you can earn in two ways: lending and sending assets to staking. 

 

Lending involves receiving interest for the user "lending" the cryptocurrency to other members of the network. Simply put, you deposit the desired amount of Stablecoins into a pool, which the company then uses to provide loans to other users. At the end of the lending period, you get your money back and the interest for providing the loan. 

 

Stablecoin stacking involves locking up assets in a smart contract to keep the network running. For providing funds to the network, users receive interest. Stakeblocking can be compared to creating a deposit in a bank. Only the rate of return on staking is many times the interest rate of banks.

 

Most popular Stablecoins

Tether — USDT

The most popular stablecoin, with a total market capitalization of $78.4 billion. USDT has a daily transaction volume of over $47 billion.

USD Coin — USDC

Stablecoin launched by cryptocurrency exchange Coinbase in cooperation with startup Circle. Its exchange rate is equal to the US dollar at a ratio of 1 to 1.

 

It is the 5th most capitalised coin in the world. There are now 52 billion coins in circulation at $1 each. But this crypto is inferior to Tether in terms of daily transaction volume. That is a turnover of 2.67 billion. 

DAI

 

The uniqueness of this token is that it uses Ethereum as collateral. It is authored by Maker, which also maintains the platform.

 

The exchange rate is stabilised and controlled by smart contracts running on the Ethereum blockchain. Currently, USDT is used by most people who need a convenient means of settlement. But that could change if some startup offers a more convenient or profitable tool.

Conclusions

Stablecoins are an integral part of the crypto-economy, allowing you to invest in a safe and reliable asset without worrying about high volatility. In addition, stablecoins give you the opportunity to earn by providing credit or sending funds to the stacker.