What is a stablecoin or “stable cryptocurrency”?
The stablecoins they are a type of digital asset that maintains a stable price pegged to another traditional asset, such as the US dollar.
They gained a lot of popularity for offering the possibility of entering the crypto world without having to be exposed to the price volatility of more popular digital assets such as Bitcoin or Ethereum.
Most of these assets fix their value in relation to the US dollar, since it is the fiduciary currency most used in the traditional international market.
In a nutshell: 1 Stablecoin = 1 USD.
Given the restrictions on the purchase of dollars through the Argentine banking system, stablecoins became a very interesting savings alternative, for several reasons:
- They have the same market value as the US dollar
- Does not have a maximum purchase limit
- Like the dollar, they are a safeguard against the devaluation of the peso
- It is another way to preserve value, without depending on banks
- It is not necessary to have a bank account to access them
- Easier to store and care for than cash
- It is easily transferable around the world
For these qualities, in the local jargon they are known as “cryptodollars”.
What types of “cryptodollars” are there?
There are mainly two types, which use different systems and strategies to keep their price stable.
First of all, we have stablecoins that are backed by a fund made up of traditional assets or fiat currencies.
An example is USD Coin (better known as USDC).
For each USDC issued, there is a US dollar reserved in a bank account that is constantly monitored and audited by different actors, such as traditional financial entities and other companies in the sector.
In second place are stablecoins backed by other digital assets.
An example of this type is the ICD. DAI also tries to maintain a peg to the dollar, but it does so using the Ethereum (ETH) cryptocurrency as backing, through a decentralized collateral system.
What is USDC?
USDC it is a stablecoin whose value is pegged to the US dollar. It was developed by the companies Coinbase and Circle, two of the largest and most recognized companies in the crypto world.
1 USDC equals 1 dollar.
Each USDC issued is backed by one dollar stored in an exclusive bank account, constantly monitored and audited by the aforementioned companies and by internationally recognized external auditors. This makes it maintain its parity with the dollar permanently.
Despite always being worth one dollar, the “cryptodollar” is not a fiat currency like the US dollar, so it is not subject to any purchase limitations.