We all know that Cryptocurrencies can be volatile in value, one day the value could be high, the next day it could be low. This has led to the hoarding of Cryptocurrencies, currency in whatever form is supposed to be used in transactions, and its value should be reasonably stable and predicated; this is not the case with cryptocurrency. Fiat money or government-regulated currencies do not suffer from this problem but cannot be spent anonymously like cryptocurrency. How then do you combine the positive features of these currencies? This is what a stable coin attempts to do.
Stable Coin Explained
A stable coin is an innovation in the cryptocurrency sphere, it is a type of coin that tries to stabilize its value unlike other Cryptocurrencies, it does this by having reserve assets to back it up. They are becoming more popular in recent times as they are said to solve the problems of Cryptocurrencies and fiat currencies by providing stability and anonymity.
Cryptocurrencies like bitcoin are highly volatile with its value fluctuating wildly always, you cannot definitely predict what your Bitcoin would be worth tomorrow. This makes it unwise for the public to use this type of currency every day like other government regulated currencies. If you cannot be sure of a currency’s purchasing power day to day over a long period then you cannot use it as money. This is why Cryptocurrencies are treated more like assets. A stable coin tries to solve this issue.