Stablecoins (as the name suggests) are digital assets designed to maintain a consistent price. They are a store of value like the money you’d traditionally keep in a savings account and not a speculative investment. They are stable in nature which typically comes from the backing of some alternative value (often pegged to a fiat currency like the US dollar or collateralized against commodities like gold). In most cases they are being backed by a reserve of USD because this is the world reserve currency that is most widely used in trading markets.
In other words, a stablecoin uses a fiat currency like the US dollar, the Euro or the Yen, which backs each cryptocoin in circulation. It’s a currency that is global, but is not tied to a central bank and has low volatility. Being tied to the dollar or gold for instance, doesn’t automatically mean there’s zero volatility and its value will fluctuate as much as the value of its collateral asset, so if gold goes up in value, so will the coin and the same goes for USD, but the value of USD is with a low market volatility in general, hence the name “stable”.
One of the main factors driving merchants away from accepting Bitcoin is the price volatility. Often there are days with more than 7%-10% price drop or increase in market value which is the main reason why several major players have dropped Bitcoin as an accepted method of…
