Bitcoin’s innovation as a trustless, immutable form of money requires more user responsibility than most people are accustomed to. We trust banks with the money in our bank account, and we trust a financial intermediary to securely hold stocks. To truly possess Bitcoin and take advantage of its trustless nature, users need to hold their own private keys rather than allow a third party to do so on their behalf. As a bearer instrument, whoever is in possession of these private keys has ultimate control of the bitcoin in a wallet. There are no refunds or chargebacks in Bitcoin. If an attacker steals your private keys, that bitcoin is unrecoverable. Thus, properly securing private keys is the single most important topic for Bitcoiners to learn and stay up-to-date on. Let’s discuss three vital lessons with regard to properly securing bitcoin.
Stable coins or stablecoins are a new class of cryptocurrencies. They’re different from the dogecoins and Bitcoins of the world. Those coins don’t have much stability and keep going through booms and busts.
What are Stablecoins?
Stablecoins attempt to offer price stability and are backed by assets in reserve. These coins have gained the interest of investors because they offer not just quick processing, but also security. They also offer privacy of payments like other cryptocurrencies.
Hence, they’re a much less risky asset than cryptocurrencies. However, they have all the great qualities that people love about the crypto world.
Why are Stable Coins so Stable?
There are two main reasons why stablecoins are so stable.
- They are made stable by the existence of fiat currencies in the form of a reserve which backs them. Hence, they are protected against overvaluation and undervaluation. There is a much, much lower risk of them forming a bubble like Bitcoin has twice in the past 5 years and then devaluing.
- Since fiat currencies are themselves backed by gold reserves and natural resources, and bank authorities, this ensures greater stability. Hence, even in extreme cases where a fiat currency valuation may decline, controlling authorities can jump in to stay the fall.
This in turn provides stablecoins with something to cushion the fall. That’s why investors can breathe a sigh of relief that their investments won’t be so easily compromised.
Why Do Stablecoins Matter?
Unlike other cryptocurrencies like Bitcoin, Ethereum, and Dogecoin, Stablecoins have something physical backing their value. They’re not totally dependent on investor perception and thus they don’t experience the volatility that other cryptocurrencies do.
This means that the stablecoins can be depended on to maintain their value for long. Thus, they can also maintain their purchasing power and have the lowest possible inflation. This can not only encourage investment, but also encourage more spending.
Stablecoins are thus a stabilizing force in the crypto world. They may be the boring, or safe alternative to the more exciting crypto tokens, but they significantly lower risk. In fact, you can think of them as cryptocurrencies minus the risk.
Types of Stable Coins
There are 3 types of stablecoins you can buy on the open market.
Fiat-Collateralized coins are backed by fiat currencies like the dollar or euro. You can buy these without much deep thought since they’re as stable as you can get.
The crypto-collateralized variety of stablecoins are backed by cryptocurrencies themselves. These are, of course, more volatile, and are called “over-collateralized”. These experience more frequent audits and monitoring so that price stability can be ensured.
Non-collateralized stablecoins don’t have any kind of reserve. Hence, they include a working mechanism, which mirrors that of a central bank. This allows them to retain a stable price. The dollar-pegged basecoin for example uses a consensus algorithm. This increases or decreases the supply of tokens based on the need.
This mirrors how a central bank prints more notes to maintain the valuations of fiat currency.
Stable Coins are worth investing in, if you want to maintain the value of your currency. They’re a much safer bet than regular cryptocurrencies.
Security is of top priority at ChainMyne and even if you don’t have your wallet set up and your seeds in hand, sometimes you don’t want to miss out on a great price. Rest assured that ChainMyne holds 99% of coins in cold storage and they are secured until you’re ready to withdraw to your own personal private key.