Stablecoins: Definition, Importance, Types and How To Transact Them on Eversend What Are Stablecoins?
Stablecoins are digital currencies designed to maintain a steady value by being pegged to a stable asset, such as gold or the US dollar with the aim to always be $1. They have become an essential tool in the world of crypto trading and payment systems, providing a reliable medium of exchange for customers. With stablecoins, you can transact and invest with confidence, without worrying about sudden price fluctuations. They truly are a game-changer in the world of digital currencies.
Why Stablecoins?
Stablecoins are an essential component of the cryptocurrency trading world, offering numerous benefits to both seasoned professionals and those new in the crypto space. With their inherent stability, derived from being pegged to less volatile assets like fiat currencies or gold, they provide a perfect entry point for beginners looking to enter the exciting world of crypto.
In the world of arbitrage trading, where profits are made by capitalizing on price differences between exchanges, stablecoins serve as a fast and cost-effective means of transferring value. Acting as a bridge between fiat and cryptocurrencies, they streamline the process of profiting in the crypto market. So whether you’re a novice or a pro, stablecoins are a valuable tool to have in your trading arsenal.
For individuals into crypto trading, stablecoins offer a way to navigate the volatility of cryptocurrencies and participate in the market with confidence. By minimizing exposure to price fluctuations, crypto traders use them to hedge against volatility and quickly exit the market during downturns without converting their assets into fiat currency. This feature allows for superior risk management and more strategic trading operations, as traders can seamlessly transition between volatile cryptocurrencies and stable assets without leaving the crypto ecosystem..
In addition to their potential for transforming the trading industry, stablecoins hold great promise for revolutionizing the world of payments. With their stability and the added benefits of blockchain technology, such as enhanced security, transparency, and speed, they are an appealing option for both businesses and individuals alike.
In economies where local currencies are susceptible to rapid devaluation, the use of stablecoins helps in preserving value. Unlike traditional fiat currencies, which can quickly lose purchasing power, stablecoins are pegged to more stable assets like the US dollar, euro, or gold. This pegging mechanism ensures that stablecoins maintain their value over time, providing users with protection against the negative effects of currency devaluation. For businesses operating in such environments, accepting payments in stablecoins can safeguard revenues from the volatility of local currencies. This is especially beneficial for those with international suppliers or customers.
Furthermore, stablecoins have the potential to promote financial inclusion by providing access to digital payments and financial services for unbanked and underbanked populations. With the widespread use of mobile technology and digital wallets, stablecoins can easily be accessed and utilized by a vast population that was previously excluded from the financial system, thus opening up opportunities for economic participation and growth.
Types of Stablecoins.
There are a variety of stablecoins available, each with its own unique method of achieving stability. These include:
- Fiat-Collateralized Stablecoins
These stablecoins are backed by real-world assets, such as traditional currencies like USD or EUR. For every stablecoin in circulation, there is an equivalent amount of the reserve currency held in a bank account. A well-known example is Tether (USDT), which is pegged to the US Dollar.
- Crypto-Collateralized Stablecoins
These stablecoins are backed by other digital currencies. Users can put up a certain amount of digital currency, such as bitcoin, as collateral and receive stablecoins in return. In order to maintain the stablecoin’s value, mechanisms like automatic selling of collateral are in place. A popular example of this type of stablecoin is DAI, which uses cryptocurrency collateral to maintain its value.
- Algorithmic Stablecoins
Algorithmic stablecoins use computer algorithms (smart programs) to maintain a stable value. Unlike other stablecoins, they are not backed by real-world assets, but instead rely on smart rules written into their code to regulate supply and demand. This approach is like having a virtual manager constantly monitoring and adjusting the currency to keep it stable. One example of an algorithmic stablecoin is TerraUSD (UST), which uses a combination of algorithms and smart contracts to keep its value around $1.
How To Transact Stablecoins At Eversend
Stablecoins, just like other crypto assets, have certain processes they follow in the ways they are transferred from one platform to another. All assets are stored via a wallet system, and in moving these assets across platforms, say from X to Y, transfer networks come into play. Some of these transfer networks commonly known in the crypto world are: Binance Smart Chain network (BEP20), Tron network (TRC20), Ethereum network (ERC20), Polygon network, Solana network, etc. It is super important to note that the transfer network preferred for receiving stablecoins into Y must be the same transfer network to use in sending that stablecoins from X.
Eversend, as a cross-border payments platform, offers competitive rates, swift and assured payout without the worry of P2P scams, thus, these qualities give it an edge over other apps as
the best place to receive and sell stablecoins for local currencies in Africa. Below, we outline how you can easily receive (send) stablecoins into Eversend, sell/exchange them to your local currencies and then withdraw the local currencies directly to your bank account and/or momo number.
How To Receive (Send) Stablecoins into Your Eversend Account
- Log in to your Eversend account.
- Click on “More” at the lower part of the right-hand side of the login page and then tap on “Stablecoins”.
- Click on “Invest”, you will see 3 assets, namely: PYUSD, USDC and USDT; click on any of the assets you intend to receive (send) into your Everend account.
- Click on the “Receive” button on the displayed page and select any of the displayed transfer networks that you prefer, copy any of the displayed transfer networks that you prefer. 5. Go to your external crypto exchange platform, login and go to the wallet where you have the stablecoin assets you intend to send, click on “withdraw”, select the exact transfer network you had chosen on your Eversend account, proceed to paste the network address that you copied from your Eversend account, indicate the amount of stablecoins you intend to send and complete the transfer initiation.
- The stablecoins will be received into your Eversend account within minutes.
The steps listed above are the same steps to follow if you want someone to send stablecoins into your Eversend – simply copy your preferred transfer network, give the generated wallet address to the sender and the sender will proceed to initiate a transfer to you using the same transfer network from his/her end.
How To Exchange (Buy and Sell) Stablecoins on Eversend
- Log in to your Eversend account.
- Click on “More” at the lower part of the right-hand side of the login page and then tap on “Stablecoins”.
- Click on “Invest”, you will see 3 assets, namely: PYUSD, USDC and USDT; click on any of the assets you intend to buy and/or sell (exchange).
- Click on “Convert”, select “Buy Tether (stablecoin)” to buy that particular stablecoin using any of the currencies in your Eversend account; select “Sell Tether (stablecoin) to sell that particular stablecoin by exchanging it to any currency of choice in your Eversend account. 5. Once you sell the stablecoins to your local currency, you can simply proceed to initiate withdrawal of the local currency to your personal bank account and/or mobile money number.
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