This is very informative lecture on Stability of Digital currencies. Professor altogether clear major concepts about stable digital currency. I try to answer the all questions. I hope this post will help you more to understand the concept of Stable coin.
Why Stability is important in Digital currencies? Explain in your own Words.
Before we are going to talk about the importance of Stability in digital currencies, we will discuss first that what actually stability is. Stability is derived from the Stable world, It means the thing that can’t move. Stability is world is used for those coins whose price values cannot move. Prices of these coins are stable. Stable coin price values are exactly equal to the feat current that is owned the stable coin. These stable coins are created in the same way as in the way of other cryptocurrencies are created. But the different is that the volatility in Stable coins is about to negligible.
Now, we discuss the importance of stable. As we know that the price values of other cryptocurrencies are changes in every moment. The fluctuation element is present in these digital currencies. It rapidly changes the price. If we want to buy a cryptocurrency then first we need to buy a stable cryptocurrency then from stable cryptocurrency we bought other cryptocurrencies.
If we want to store and save our cryptocurrencies, we need stable coins. Because all other coins are highly volatile. The price is changed after every moment. So, in order to save our funds we need stable coins. Because the price of stable coins are not changes.
Types of Stable Coin
There are few types of stable coins in market. We will discuss these types one by one. These coins are belonging to different categories. All categories are unique and price of all these stable coins are controlled by separate mechanism.
1. Fiat Backed Stablecoin:
This is a type of stable coin is backed by fiat currencies. The value of this stable coin is equal to the fiat currency values. Tether and BUSD is an example of fiat backed stable coins. Its value is equal to the US Dollar.
2 . Commodity Backed Stablecoin
This Stablecoin is backed by commodities like gold and Silver. Investor save their money the form of this coin. It values is changed according to the value of Gold and Silver. Digix is famous Commodity coin whose value is equal to 1 gram of Gold.
3 . Crypto-Backed Stablecoin
This type of coin is owned by the different cryptocurrencies. The values of these coins are controlled by supply and demand. DAI is an example of Crypto-backed Stablecoin.
Do you think CBDCs would be good in the future? Weigh the pros and cons in your own understanding and state your position.
Before going to discuss the future of this digital currency we talk about the concept of this currency. CBDC is an abbreviation of Central Bank Digital Currency. This digital currency that is offered by the Central bank. Its price value is exactly equal to our fiat currency value. But there is no physical existence of this currency. It is electronic currency but not as other cryptocurrencies. Because cryptocurrencies are decentralized and this digital currency is controlled by central bank.
As we know that today’s world is very smart. But There are many deficiencies that are always present that is standing as hurdle in the way of achieving the 100% smartness. This digital currency concept is new in these days. But if this concept is really implemented then it makes the world smarter than before. We can trade in every field in a very fast way.
The things are faster than before. All the elements that are linked with finance are become fast. Sometime we make transaction in fiat currency it takes enough time. But if this system is applied then our transaction are executed within a seconds.
| Advantages | Disadvantages |
|---|---|
| It makes our financial activities fast | CBDC is controlled by Central Bank that why it is decentralized |
| It is backed by the Central authority, if our digital currency faces any problem then the central bank is responsible as fiat currency. This is in favor of user. | This system is less secure then order decentralized currencies |
| Transaction are executed within a moment, no need to wait of transaction processing. | Central authority have our entire financial record, here is element of privacy is lacked. |
| Our assets are placed in our digital wallet. We do not need any bank for saving our assets | This technology is not applied everywhere. It is only applied where the technology is on its peak. People who lives in backward are not able to take benefit from this technology. |
Explain in your own words how Rebase Tokens work. Give an illustration.
Rebase tokens are special type that controlled his price in a unique way. Rebase token achieve stability in different way. It achieves stability by controlling the supply and demand. Now, we will discuss how it work.
Before understanding the working of Rebase token we should understand the supply and demand law. In this law if the demand of particular coin is crease then the price of that particular coin is also increase. In the same time supply decrease. On the other hand, if demand of coin is decreased then the price of coin is also decreased. In the same time the supply of coin is increased.
Using this law, the price stability is achieved by Rebase Token. If the demand of particular coin is increase then price of that coin is also increased. So, to stable the price of that coin they increase the supply of that coin in this way the price bounce back and place at stable point. Further the illustration of rebase token working is shown in figure.
If the demand of particular coin is decrease then price of that coin is also decreased. So, to stable the price of that coin they decrease the supply of that coin in this way the price bounce back and place at stable point. In this way rebase coin is working and achieved stability in his price.
Go to the https://www.ampleforth.org/dashboard/. Check the necessary parameters and calculate the rebase %. What else can you find on the page?
In this question we will calculation the Rebase value of AMPL coin. It is very famous Rebase coin that control his price by controlling the supply and demand. Its price value is about to 1$. It is Rebase within 24 hours’ time period. If the price of AMPL is increase in 24 hours then it increase the supply then the price value become stable. Same case with if price decreased.
Now we calculate the rebase of this coin. First, we need to visit the site of AMPL. In the dashboard page we need to note the oracle price and Target price. After noting the these values we need to put these values in a formula that is used for calculating rebase.
Rebase %= {[(Oracle Rate-Target price) / Target price ] x 100}/10
Oracle Rate= $1.003
Target Price= $1.061
Now putting these values in formula.
Rebase %= {[(1.003-1.061) / 1.061] x 100}/10
Rebase %= {[-0.058 / 1.061] x 100}/10
Rebase %= {-0.0547 x 100}/10
Rebase %= {-0.0547 x 100}/10
Rebase %= -5.466/10
Rebase = -0.54%
What else can you find on this page?
- We can find the time of next Rebase that is 16 hours 40 minutes and 21 seconds.
- We can find out the circulating supply 112.395m and Total Supply 119.44m
- The price chart of AMPL is found on this page.
- Chart of supply is also found on this page.
These are the elements that I can find on this page.
Trade some tokens for at least $15 worth of USDT on Binance and explain your steps. (Give necessary Screenshots of the transaction).
I like to trade on Binance. Here I chose TRX/USDT pair for trading. This is ~15$ trade that I do on Binance. Need to follow the following steps to trade on Binance.
- Open the Binance application
- Click the Trade Button in the homepage.
- After that click on the above pair selection area as shown in figure.
- Search for TRX/USDT pair.
- Click on the TRX/USDT pair.
- Enter the Value of USDT that is 14.99859, I received 153 TRX at the price of 0.09804$.
- Enter the value Click on the Buy TRX button as you can see in the figure.
In this way you can trade on Binance.
Here is an evidence of Buy Trade you see in the figure.
Transfer the USDT to another wallet with the Tron Network. From the transaction, what are the pros of the stablecoin over fiat money transactions? (Give Screenshot of the transaction).
For making the transaction from one exchange to another you need a deposit address of other wallet. Here I chose to my "A" application wallet that is affiliated with Amazon.
- I copy the deposit address of USDT.
- Open the Binance and go to you spot wallet.
- Click on Withdraw Button and then click on the USDT.
- In next window first, you need to enter the deposit address of USDT.
- Select the TRC20 Tron Network as requirement.
- I want to transfer 21 USDT to my other wallet.
- Enter the values click on the Withdraw Button.
Here is an evidence of Transaction. 20 USDT are transferred and 1USDT is charged in the form of fees.
On the other side you see the Screenshot of My other wallet. I have 5.01$.
After Transferring the 20$ my Balance is 25.01$ as you see in the figure.
In this way we can transfer our funds from one exchange wallet to other wallet.
Advantages of Stablecoin over Fiat currency
- Transaction speed is very fast.
- It is very secure than Fiat currency transaction
- Transaction fess of Stable coin is less than fiat currency transaction. For instance, If we make transaction 20,000 rupees in my native fiat currency 20 rupees is charged per 1000. In this way 200 rupees is charged over 20,000. On the other side if we make transaction is digital stable coin of 20,000 USDT then only 1 USDT is charge. That is equal to current 175 Rupees only.
Stability is digital currencies is very important. We can not store our digital asset without Stablecoin. Stablecoins are also digital cryptocurrencies who price is equal to our fiat currency values. Most of stable coins are backed by USD fiat currency.
CBDC system is offers digital currency that’s price values equal to fiat currency value. If this system is applied, the future of world is enter in more modern place. Everything that is attached to financial activities are become very fast.
Rebase token hold his price by controlling the supply and demand. Demand increase price is also increase and supply is decreased to stable the coin. AMPL is coin that control his price in this unique. Overall this lecture is very informative. I learned many things about types of coins. Thank you professor.
