Stable currencies are in high demand due to their ability to thrive in international transactions. Blockchain technology and cryptocurrency have been thoroughly researched by many people in various industries such as healthcare, fintech, logistics. Blockchain technology’s decentralized attributes and safety feature allow for seamless transaction regulation and smooth functioning across industries. Industry can use the diverse crypto networks to create stablecoins and reap the benefits of the Blockchain network’s features. Funds are used to access cryptocurrency by investors and traders. These funds, known as stablecoins or cryptocurrencies, are an important component of the Blockchain network.
What is a Stablecoin?
Stablecoins are a cryptocurrency whose price is linked to a tangible asset, such as gold, real estate or US dollars. To stabilize the price and prevent fraud in the cryptocurrency market, a stablecoin is associated with a tangible asset. While there are many cryptocurrency, Ether and Bitcoin have the disadvantages of fluctuating prices. A stablecoin has the advantage of having the currency’s value fixed against the asset. This eliminates the problem of price fluctuation.
Stablecoins (XDC Network) aims to fill the gap between the benefits offered by cryptocurrencies as well as the stability that Fiat currencies provide. Although cryptocurrencies can be used as global currencies, Ether and Bitcoin are not volatile. Bitcoin’s 2017 value increased from USD 1000 up to USD 20000. The stability of the currency is ruined by the periodic rises in its value, making it unsustainable. The trust in the ecosystem of currencies is maintained by decentralized currencies, which reduces the need for a central authority.
Different types Stablecoins
There are several types of stablecoins, as we have already mentioned:
Fiat-Backed
These stablecoins have their value backed up by the specific fiat currency. Fiat-Backed stablecoin tokens keep their value at a ratio 1:1. Tether, for example, is a stablecoin and has its value set at a ratio 1:1 to the USD. In order to ensure the existence a stablecoin that’s fiat-backed, a fiat money is disposed off as collateral. To dispose of a fiat money as collateral, the financial custodian needs to be present and regular auditing done in order for the token to be properly collateralized. For example, the Gemini stablecoin is (GUSDT).
Non-collateralized
Non-collateralized stabilizecoins are those that do not have collateralization. They are the ones that are based upon the fundamental of Seigniorage Shares. The difference between the printing cost and the money’s value is explained by Seigniorage. These coins are subject to the algorithm which alters the supply to regulate its price. These stablecoins are sold when the price is lower that the linked currency. If the value of these tokens is higher than the linked currencies, more tokens will go to the market.
Cryptocurrency-backed
The crypto-backed stable cryptocurrency works exactly the same as the legal currency stable currency. It prohibits the use crypto as collateral, instead of using fiat currencies. For example, Ethereum can be used as collateral to create cryptocurrency-backed stablecoins. These tokens make use of security compromises to offset volatility in the cryptocurrencies being used as collateral. It is clear that stablecoins are not dependent on an encrypted collateral ratio of 1:1.
Commodity-Collateralized
Other types of exchangeable assets like real estate and precious metals can back stablecoins that are backed up by commodities. Gold is one the most commonly guaranteed commodities. Commodity-backed steadycoins have tangible assets with a certain actual value. These commodities are able to appreciate over time, which can make them more appealing for people to use and save these coins. You can now invest in precious metals and real estate worldwide by using commodity-backed stablecoins. In general, such investments are reserved for the wealthy. Stablecoins offer investors the chance to invest in ordinary assets around the globe.
What is XDC Network and what are its benefits?
XDC Network is a hybrid, enterprise-grade blockchain. It is interoperable and has high liquidity. It relies on a Delegated Proof of Stake Consensus. The XDC platform is a hybrid architecture that allows developers and users to build interoperable dApps as well as hybrid relay bridges. XDC Network also allows digitization, tokenization and fast settlements of trade transactions. The hybrid blockchain system combines both the benefits of private and public blockchains. XDC Network, a blockchain that can revolutionize international trade, finance, and supply chain management is called XDC Network. It’s a next generation computing network that can use Blockchain technology to connect global businesses, communities, and individuals. The network runs on its own fuel, namely XDC. Transmitting data securely and transparently can be done by businesses using both private and public blockchain systems.
The XDC protocol can serve as a layer of confirmation and messaging for cross-border and national payments. Financial institutions will recognize XDC tokens for payment settlement. The XDC protocol architecture was designed to allow the use of existing cryptocurrency smart contract layers, the KYC /AML layer, as well as price stability. It supports Guarda wallets, and biometric physical wallets. XDC cryptocurrency is being advertised and investors believe that it can generate huge long-term profits.
Read More: https://www.leewayhertz.com/create-stablecoin-on-xdc-network/
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