Stablecoins attempt to be fiat currencies among cryptos. They can be a medium of exchange, a means of storing value and a unit of account. Unlike other digital coins, stablecoins are tied to some kind of stable asset — such as the United States dollar, euro or even gold. Linking to such assets confirms the coin’s stability and mitigating the volatility of cryptocurrencies
With this type of a token, an equal amount of fiat currency should be stored by the issuing company to back the value of the token. The owner of this token should be able to exchange it for cash at any time.
The “stable” origins
An idea to make cryptocurrencies stable and tie its exchange rate to a traditional asset appeared in 2012, three years after Bitcoin (BTC) first emerged. The project was called Mastercoin, which was later renamed as Omni.
Now, developers tie stablecoins not only to the U.S. dollar, but also to the euro and the Japanese yen. However, some of these currencies have so far not received as much attention as the most recognized stablecoin right now — i.e., Tether. Read More...