It all began with Tether (USDT) as the most commonly known stablecoin, issued months ago as the first dollar-pegged stablecoin. Today, there are a few more stablecoins circulating on the market and constantly making the headlines in our crypto news section.
The concept of a stablecoin is relatively simple. As a dollar-pegged stablecoin, this altcoin buys one American Dollar from the market before issuing one token on its network, for example. This means that when an American Dollar leaves the active circulation, one Tether enters it.
This is why the price of stablecoins is relatively stable over years, and why a swing of fewer than 10 cents is something that should worry everyone out there. If you weren’t reading the latest crypto news, this is what Tether’s recent price fluctuations looked like.
The only problem with stablecoins is exactly their peg. For instance, Tether just took a 4% tumble and fell to $0.92 despite having USD in the bank to back up the token. While everyone predicted that stablecoins would have established a fixed-exchange-rate system that enables simple transitions from fiat currencies to cryptocurrencies, they also introduced the market to some technical issues.
In the end, it is safe to say that stablecoins need to be better organized. They are not decentralized, they can cause inflation and they decrease the tax base – which is why people need to be abreast when buying them (or perhaps better buy asset-backed tokens as an alternative).
In the end, many experts believe that stablecoins could cause centralization. Instead of being bridges to decentralization, they are only putting things in a never-ending circle.
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