Showing posts with label Cryptocurrencies. Show all posts
Showing posts with label Cryptocurrencies. Show all posts

Sunday, April 14, 2019

Digital Currency: Blockchain and Cryptocurrencies

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:

  1. What is the three main features of a fiat currency? Do you think stablecoins satisfy these features
  2. 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?
  3. 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? 
Reference:
TrustToken: Tokenization you can Trust. (n.d.). Retrieved from
Maher, C. (2018, November 06). Why Stablecoins Matter More Than You
Think. Retrieved from