Stable coins are used to secure assets

What are stablecoins, and why are they used when trading cryptocurrency

Experts have explained why blockchain needs digital coins tied to real tangible assets and their advantage over “conventional” cryptocurrencies.

In the crypto world, there are digital coins, the value of which is tied to a specific physical asset. The first such digital currency, USDT from Tether, appeared in 2015. It is pegged to the value of the US dollar in a 1: 1 ratio. Since then, the number of stablecoins has increased markedly.

Blockchain and the real world

In the real world, people use a measure in fiat currency, but the blockchain does not understand what the euro or the dollar is; it has its own metrics – block sizes, number of transactions, hash rate. Stablecoins were created to bring the blockchain closer to the world of people and make an asset based on it that can be perceived as a unit of measure of value.

In addition to being pegged to fiat currencies, stablecoins can be pegged to precious metals, natural resources, securities, real estate, and other physical assets. Due to this, stablecoins have less volatility.

The investor’s benefit

In the cryptocurrency market, stablecoins act as a buffer. Through them, owners of significant capital can enter the crypto market. It is convenient because you can turn a large amount of money at once into money within the blockchain and trade or invest with it.

There is also the opposite situation when an investor has a lot of cryptocurrency and does not want to lose its characteristics. Then he converts the cryptocurrency into stablecoins and waits out the volatility on the crypto market. Another advantage of stablecoins is that this type of asset can become a temporary alternative to the usual fiat currencies in countries where the national currency’s exchange rate is unstable.

These assets can become a transitional option for settlements in unstable economies, where ordinary fiat money often quickly loses value. According to experts, the popularity of digital assets created based on material wealth will only increase in the future.


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LATOKEN crypto exchange does not provide any investment, tax, legal, or accounting advice. This article is written for informational purposes only. Like other assets, cryptocurrency is subject to market risk. Please do your own research and trade with caution.