S4B Crypto Contest - Season 16

Assalamualaikum, if we talk about stable coins, then it is clear from the name itself that stable means stable which is not fluctuating and stable coin means stable coin which coin is not fluctuating.

Actually these are those coins whose price remains stable and does not fluctuate too much like the coins of our cryptocurrencies keep fluctuating, that is why they are called stable coins. Among these, for example, Tether(USDT) is a stable coin.

Sacrenshort from Trading view

there are various mechanisms through which stable coins operate in order to maintain the stability of their price hence I wanted to share some of them.

1. Fiat-backed stablecoins: These are backed up by fiat money such as the US dollars. Example: USDT.

2. Crypto-backed stablecoins: These are secured with other forms of cryptography from other types of cryptocurrencies. Example: DAI.

3. Algorithmic stablecoins: Their supply is regulated by ways of algorithms.

Stable coins remain stable, due to which we can use them for various purposes. The first one I would like to share with you is trading.

We use it in trading because it provides us stable value, due to which we can buy various coins etc. from them. Like buying Bitcoin with USDT at a low price and selling it at a high price and taking back USDT. In this way we can generate profit.	source

Apart from this, we can also use it for any transaction. We can transfer payment to someone because it remains stable, so we do not have the risk that the rate will increase or decrease.	source

Apart from this, we can also save our money. Like if we have any extra amount, then monthly we can take USDT from that amount and hold it in our Binance wallet. These are all the uses, which I have shared with you.	source

Stablecoins facilitate enhancement of market depth in the market for cryptocurrencies. A trading pair, from the aforementioned definitions, are stable as they minimize market fluctuations hence enabling faster and easier trading. They increase the general market activity level, provide DeFi services for lending and borrowing platforms, and facilitate inexpensive cross-border transactions which in general optimizes money circulation.