By Yang Liu, Qianru Li
Blockchain has been on the hot topic of discussion in recent
years. The basics of the blockchain technology can be explained as a block is
created every time a new transaction occurs, and this block is connected and
chained to the blocks which are created before and after it. For a transaction
to appear, every user on the blockchain has to give consent in order for the
transaction to be approved. Once the transaction occurs, the record will be
stored on the blockchain, and no one can alter or delete the record, even if
the personnel has the highest access level.
Cryptocurrencies are currencies that are launched using the
blockchain technology; a classic example is Bitcoin. Cryptocurrencies have the
safety feature and the hidden identity feature by using the blockchain
technology. This means that it is almost impossible for frauds to alter, add,
or delete records of cryptocurrency and all the transactions of cryptocurrency
are anonymous. The anonymous feature might provide chances for potential money
laundering and other illegal financial transactions. Therefore the future of
cryptocurrencies might be subject to more regulations.
Stablecoin, as it is suggested by the name, is a type of
cryptocurrency that maintains stability. Stablecoins take out the need for a
middle man between a user and a financial service such as the bank and is safer
as it is issued on the blockchain. There are three types of stablecoins
categorized in accordance with their collateralization method, including
fiat-currency collateralized stablecoin, non-collateralized stablecoin, and
hybrid collateralized stablecoin.
1. Fiat-currency
collateralized stablecoin: this type of stablecoins use fiat currency to back
up the coins. This type of stablecoin claim to maintain a 1 to 1 peg to the
fiat currency.
2.
Non-collateralized stablecoin: this type of stablecoin does not have any
collateralization but rather use algorithmic calculation method to maintains
the stability of the coin.
3. Hybrid
collateralized stablecoin: this stablecoin use a hybrid of the two above
approaches.
Many stablecoins on
the market now claim to maintain a 1 to 1 peg to a certain fiat currency. For
example, TrueUSD is collateralized by USD, and the launching company claims
that it maintains a 1 to 1 peg to USD.
From some time past, people are enthusiasm for
Cryptocurrencies. However, most people do not exactly know what it is.
Understanding the relationship between blockchain and Cryptocurrencies could
help buyers clearly comprehend the entire operation and better choose
Cryptocurrencies when to purchase them. Here are several questions about
Cryptocurrencies and Stablecoins, comment below and discuss your idea.
Questions:
Reference:- What is the three main features of a fiat currency? Do you think stablecoins satisfy these features
- Have you purchased any cryptocurrencies? If yes, what is the name and trading symbol of that cryptocurrency? How has your experience with it been like?
- What do you think the future of stablecoins will be? Will they be out of the eyes of the public as time pass by or will they be more and more popular to people?
TrustToken: Tokenization you can Trust. (n.d.). Retrieved
from
Maher, C. (2018, November 06). Why Stablecoins Matter More
Than You
Think. Retrieved from
