Steemit Crypto Academy week 6 - Stable coins

in SteemitCryptoAcademy2 months ago (edited)

The Crypto market is a highly volatile market and this is one of the major challenges and set back to the mass adoption of Cryptocurrencies. Crypto cannot be trusted by merchants as a reliable means of exchange for their goods due to their high volatility. Stable coins were introduced in order to bridge up the gap between the fiat world and the Crypto world. These offer a solution to the high volatility challenge in the Crypto market.

Stable coins 002.png

Background image:Pixabay

What are Stable Coins?

Stable coins are a type of cryptocurrencies with a fixed price value, pegged to other more stable assets. They can be pegged to fiat currencies, cryptocurrencies and others on real-world commodities such as Gold.


The relevance of Stable coins


Alleviates Economic uncertainty

Developing countries such as Venezuela, Uganda, Zimbabwe are usually affected by currency devaluation in relation to other highly valuable global currencies like the US dollar. For example, a scenario happened in Zimbabwe where the Zimbabwean dollar lost value due to hyperinflation. For someone to purchase bread, he needed to carry a full basket of Zimbabwean dollars in order to purchase bread. Such scenarios can be converted through the use of Stable coins as a better alternative to the developing countries’ unstable currencies.

Used in Hedging of funds

Crypto traders use stable coins as a way to curb the risk of making losses due to the high volatility in the Crypto market. For example, when the Bitcoin price is assumed to be going to decline in value following the negative news spreading around, the crypto traders immediately withdraw their investments from Bitcoin and resort to safeguard it through buying and holding stable coins like Tether(USDT), hence the term “hedging of funds.”

Price Stability

Stable coins offer a unique aspect of price Stability in the world of digital currencies thus helping in maintaining the people’s purchasing power and trust/reliability in such a currency.

Act as a bridge between the Crypto and Fiat world.

Cryptocurrencies haven’t yet been fully accepted as a means of exchange and store of value by many people on this planet. Many are still locked up /prefer using fiat currencies than Crypto due to the uncertainties in Cryptocurrencies. The stable coins help to bridge that gap between the Crypto space and the fiat world.

Crypto traders and investors don't have to go a long way to cash out their crypto into fiat and then redeposit it in the banks in order to purchase Crypto again. They rather use Stable coins which facilities the easy movement of their funds while making their trade and investment decisions in their time to time Crypto dealings.


Categories/types of stable coins


Stable coins 003.png

Image source

Fiat- Collateralized stable coins

These are stable coins that are backed by Fiat currencies. They are usually pegged to the USD, EUR, for example, Tether (USDT), TrueUSD (TUSD). They rely on a central unity (company) that stores their fiat reserves. Every Stable coin has an equivalence of $1, evenly distributed in a ratio of 1:1.

The amount of tokens in circulation is equivalent to the amount of Fiat reserves that are kept by the Central unity. The central unity that keeps the fiat reserves has to be trusted on the account of maintaining the proper balance of the stable coins’ circulation and its fiat reserves.

Whenever someone cashes out/exchanges their stable coins, the central unity destroys those coins after issuing that person with the fiat currencies from its fiat reserves. In other words, central unity controls the supply of the stable coins ensuring that its fiat reserves stay equated to the tokens in circulation.

Crypto- collateralized stable coins

These are Cryptocurrencies with a fixed value that is backed up by other Crypto assets. These are usually backed up by major Crypto assets including Bitcoin, Ethereum. Cryptocurrencies are highly volatile. In order for this type of Stable coins to achieve stability, they combine 2 cryptocurrencies that act as collateral for that particular stable asset. This category of stable coins is over collateralized.

DAI is one of the best examples of such a type of stable coins which is backed by Ethereum(ETH) and Maker($MKR) through the MakerDAO protocol. In order to be issued with DAI, you have to present a bigger collateral sum of Ether that is locked up and act as a backing for the issued DAI. For example for $200 worth of Ether tokens presented as collateral, I can only be issued with $100 worth of DAI. This is done in order to maintain the stability of DAI.

Commodity collateralized stable coins

These are stable coins that maintain a fixed value regardless of the volatility in the Crypto market. They are backed up by the value of commodities such as precious metals including Gold. They have Gold reserves that act as a backup for the tokens in circulation. Digix (DGX) is the best example of a commodity-backed stable coin whose value is backed up by Gold.

Non – collateralized stable coins

These are stable coins with a fixed value that is ensured through a complex algorithm. Unlike the above-mentioned types of stable coins, these are non Collateralized stable coins. Their price stability is maintained through a complex consensus algorithm that is managed by a central unity(company). The central unity ensures that they control the supply of the tokens in the market in order to ensure the stability of the stable coin. Base coin (Basis) is one of the best examples of such a category of stable coins that are non-collateralized.


Homework task: Write about any one of the following stable coins;

  • Tether(USDT)
  • Steem backed dollar(SBD)
  • DAI

Rules and Guidelines to follow

  • Post your homework articles in the steemit Crypto academy community.
  • Only steemitexclusive homework posts will be curated.
  • Use an exclusive tag #yohan2on-week6. You can as well tag me @yohan2on so that I can easily find your article.
  • Plagiarism and spinning other users' articles will not be tolerated.
  • Your article should not be less than 300words and it should not exceed a maximum of 1000words.
  • Use copy-right free images and showcase their source.
  • The homework task runs till 21/03/2021
Sort:  

Hello professor @yohan2on I have completed the class here is my home work submission post. Thanks

https://steemit.com/hive-108451/@chimezunem001/steemitcryptoacademy-or-or-my-week-6-home-work-submission-post-for-yohan2on

Dear professor @yohan2on. I am glad to be in attendance of your lecture for the week 6 and it's really a very nice one.

I've worked on the task and I present the link to it below;

https://steemit.com/hive-108451/@fredquantum/steemit-crypto-academy-week-6-task-stable-coins-tether-usdt-or-lecture-by-yohan2on

I submitted it two days ago, kindly look into sir.

Thank you professor.

Hi @yohan2on, I wanna thank you for your classes and your guidance my name is @allbert by the way, and this is my first post in you class.

https://steemit.com/hive-108451/@allbert/crypto-academy-week-6-homework-post-for-yohan2on-stable-coins

Hello professor!
i have attend your lecture which was very useful and informative for me and i have done my homework task you can check it here.

https://steemit.com/hive-108451/@janemorane/steemit-crypto-academy-week-6-stable-coins-or-homework-task-for-yohan2on-or-sbd-stable-coin

Hello dear sir Here is my submission of week 6 homework task.

https://steemit.com/hive-108451/@steemlover63/steemit-cryptoacademy-homework-week-6-for-yohan2on-stable-coins

I hoped that you will surely visit my post and review my task and appreciate my efforts.

Thanks a lot.

Hi Prof! Here's my week 6 article:

https://steemit.com/hive-108451/@deveerei/crypto-academy-week-6-homework-post-for-yohan2on-stablecoin-steem-dollars-sbd

Btw, I want to ask what we can do for the rewards for the week 5 article, it was graded 10 but it was not voted, I read on another comment that you provided a resolution for that kind of dilemma (i.e reposting the article).

Thanks a lot!

Dear professor @yohan2on. I am glad to be in attendance of your lecture for the week 6 and it's really a very nice one.

I've worked on the task and I present the link to it below;

https://steemit.com/hive-108451/@fredquantum/steemit-crypto-academy-week-6-task-stable-coins-tether-usdt-or-lecture-by-yohan2on

Thank you professor.

Hello @yohan2on , I found this tutorial very interesting. In response, I have undertaken an erudite analysis of the tether (USDT). Here, The STEEMIT Crypto Academy Week #6 Homework Submitted to @yohan2on | The Tether (USDT) Stablecoin| @bukkyi4u

Good afternoon, I find this topic great as stable currency is synonym of relief for me! I will read about it to do my homework. Thank you professor

Thank you sir for such an amazing lecture on stable coins, i have really learnt a whole lot.

Thanks for the appreciation. Waiting for your homework article.

Please explain how sbd is a stable coin

That's your homework and I am eagerly waiting for your article about SBD or any other highlighted Stable coins.

Hi,
Dear Professor @yohan2on
You are requested to have a look on my assignment task. Here it is :: https://steemit.com/hive-108451/@eh-shohag/crypto-academy-week-6-homework-post-for-yohan2on

Good day professor @yohan2on, I have since made my homework for week 5 and haven't been verified, please look into my work from the link below.
https://steemit.com/hive-108451/@hadassah26/crypto-academy-week-5-homework-post-for-yohan2on-on-understanding-decentralized-finance-part-2-by-hadassah26-the-coinbase-defi

Good day Professor. Thank you for this amazing lesson for week6. This is my assignment task below:
https://steemit.com/hive-108451/@reminiscence01/homework-task-week6-for-professor-yohan2on-on-stablecoins

Please sir kindly review, my week5 task wasn't curated due to late review despite scoring 9.

@reminiscence01
Sorry about that!!

Kindly re-post your week-5 article that was missed on curation with the tag #yohan2on-week5 and it will then get curated.

Professor sir. I am very grateful to you for all your teachings honestly following your teachings here is like running a degree program in the university I have learnt so much. I had zero knowledge about crypto currency but you have actually taken time even out of your very busy schedules to always make transformation posts here . It's obvious I never participated in any of the contests but I am very glad that you and other professors have been able widen my horizon on crypto currency, mining and other aspect of the crypto industry. Thank you, Thank you and thank you

You are most welcome. Thanks too for the appreciative feedback. I will continue doing my best to gather more crypto information on a number of topics. Just stay tuned and you will surely continue learning new things about this great crypto world.

Thank you sir

Happy new week Prof. I have gone through the lectures and here is my homework for your review :

https://steemit.com/hive-108451/@promo-nigeria/crypto-academy-week-6-stable-coins-homework-post-submitted-to-yohan2on

Thanks

Hi sir, my home task 5 is not verified yet

Reviewed

@designieplay
I repeat. Can you please re-post your week 5 homework article that was missed on curation and use the same tags.

Good morning sir, having attended the lecture on stable coins here is my Homework :

https://steemit.com/hive-108451/@victorylive/crypto-academy-week-6-stable-coins-homework-post-submitted-to-yohan2on

Thanks

Hi @yohan2on Please you reviewed my week 5 post 2 days ago, it has not been curated... it is almost reaching it max curation window time. Thanks so much

https://steemit.com/hive-108451/@designieplay/crypto-academy-topic-5-understanding-decentralized-finance-part-2-by-yohan2on

My Homework Task week 6:
Homework task: Write about any one of the following stable coi... https://steempeak.com/hive-108451/@mercytos1/crypto-academy-week-6-homework-post-for-yohan2on-or-stable-coins

Hi sir I don't receive verification message till now for homework Task of last week.
https://steemit.com/hive-108451/@suboohi/homework-task-5-given-by-youhan2on-or-or-answered-by-suboohi

Hi Professor

Here is my Homework Task 6

Thank You

Hello professor @yohan2on. It's almost 3 days since I made my task 6 and have submitted it to you here.

Kindly spare some time to pen down your review on it.

https://steemit.com/hive-108451/@fredquantum/steemit-crypto-academy-week-6-task-stable-coins-tether-usdt-or-lecture-by-yohan2on

Thanks in anticipation.

Reviewed. Thanks for your participation.

my assignment number 6, thank you professor for the incredible work you do every day in this academy, I hope you open another season.

https://steemit.com/hive-108451/@gema777/steemit-crypto-academy-week-6-stable-coins-yohan2on

Wonderful lecture sir. And the stablecoins are the best choice if you want to save your money in the form of crypto without loosing its value. Because it is stablized with the other real things such as with gold, usd..etc.

Thank you Sir for the lectures, this is the link to my homework task 6. Thank you.
https://steemit.com/hive-108451/@yuceetoria/homework-task-6-write-about-a-stable-coin-usdt-by-yuceetoria

Buenas tardes profesor @ yohan2on aquí le dejo mi tarea.

Tarea 6

Saludos profesor @yohan2on, esta es mi TAREA 6

Gracias

Hola profesor @yohan2on por aqui le envio mi tarea de la semana 6. Muchas gracias por la clase de esta semana.

https://steemit.com/hive-108451/@pollito22/steemit-crypto-academy-semana-6-monedas-estables-dai

Hello professor @yohan2on, thanks for the class.
This is my homework task submission link below

https://steempeak.com/hive-108451/@grace-p/crypto-academy-week-6-homework-post-for-yohan2on

@yohan2on professor. This is my submission for week-6. Please have a look and review my post. I hope you will like it.

https://steemit.com/hive-108451/@prakhar9675/steem-cryptoacademy-home-work-post-for-yohan2on-week-6

Thanks for this wonderful lecture on stable coins.

Is the price stability of non collaterlized coins because of complex algorithm or because of
supply control?

Why crypto Collateralized coins need 2 more crypos as back up, why not one in huge quantity? Is it so because simultaneous price fluctuation of both is less likely?

Thanks.

Is the price stability of non collaterlized coins because of complex algorithm or because of
supply control?

It's both.

Why crypto Collateralized coins need 2 more crypos as back up, why not one in huge quantity? Is it so because simultaneous price fluctuation of both is less likely?

Crypto is generally volatile. Even relying on one major cryptocurrency like Bitcoin is not enough to back up a coin to ensure its stability. That's why Crypto collateralized coins need 2 Cryptocurrencies to back them and not just one.

Thank you.

Respected Sir, Thank you for an excellent lecture on stable coins. Here is my submission for week 6. Please review it as soon as possible. Thanks

https://steemit.com/hive-108451/@mawattoo8/crypto-academy-week-6-homework-post-for-yohan2on-stable-coins

#Dear Respected Professor @yohan2on, thankyou for this amazing and informative lecture, this is my homework:
https://steemit.com/hive-108451/@shahab1998/crypto-academy-week-6-homework-post-for-yohan2on

Buenas noches profesor @ yohan2on aquí le dejo mi tarea.

pulse aquí

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