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How to Create A Stablecoin? A Complete Guide

Posted on by Shipra

How to Create A Stablecoin

Do you want to know how digital currencies can maintain a stable value in the highly volatile crypto market? Unlike Bitcoin or Ethereum, which experience wild price fluctuations, stablecoins are designed to offer the best of both worlds– cryptocurrency’s unmatchable efficiency with the stability of fiat money.

By pegging their value to assets like the U.S. dollar, gold, or other reserves, stablecoins have become essential for remittances, DeFi applications, and global transactions. As businesses, financial institutions, and blockchain developers recognize their potential, many are exploring how to create their stablecoin to facilitate secure and flawless digital payments. Solutions like Plasma stablecoin payment platform highlight how businesses can leverage digital assets for faster, borderless transactions.

Whether you’re a startup looking to launch a stable digital currency or a developer interested in tokenization, this guide will provide you with a clear roadmap to creating and deploying your stablecoin. Let’s get started!

Stablecoin across globe

What is Stablecoin?

Now let us understand in-depth what stablecoins are. A stablecoin is a type of cryptocurrency where its value is either fixed or linked to another form of currency, financial instrument, or commodity. Stablecoins are intended to provide a replacement to the extreme volatility of most cryptocurrencies, including Bitcoin, which makes crypto investments less suitable for everyday transactions.

Simply put, Stablecoin is a type of digital money that seeks to mimic traditional and stable currencies. A stablecoin is a cryptocurrency backed by the value of an underlying asset. Many stablecoins are pegged to certain fiat currencies, including the Euro or the US dollar, and may be exchanged on exchanges. Stablecoins may additionally be connected to other assets, such as gold or other cryptocurrencies.

Stablecoins, unlike other cryptocurrencies, are spared from excessive volatility. They make use of the characteristics of cryptocurrencies, such as immutability, transparency, security, quick transactions, digital wallets, privacy, and cheap costs, while maintaining the confidence and stability of fiat currency.

Let’s look at the different types of stablecoins.

What are Two Types of Stablecoins?

Stablecoins are primarily categorized into the following types:

1. Collateralized Stablecoins

Collateralized stablecoins are digital currencies whose values are supported by specific collateral. These can be further classified into:

  • Fiat-backed Stablecoins:

Fiat-backed stablecoins are pegged to the value of fiat currencies. Tether (USDT), the first of its type, popularized the idea of a cryptocurrency backed by reserves equal to the whole market capitalization and correlated with the US dollar. The stablecoin list also includes USD Coin and PAXOS Standard as further examples.

  • Asset-backed Stablecoins:

Asset-backed stablecoins are backed by assets other than cryptocurrency or fiat. The value of actual things such as gold, silver, diamonds, oil, real estate, and many more are linked to these tokens.

  • Crypto-backed Stablecoins:

Stablecoins backed by cryptocurrencies employ methods to maintain their value in the face of changes in the underlying cryptocurrency. An example is the DAI token, a stablecoin crypto backed by Ether and pegged to the US dollar. It maintains its price through the Maker Smart Contract, which creates and destroys MKR tokens in response to changes in ETH’s price.

These stablecoin types represent diverse approaches to ensuring stablecoin prices remain consistent, making them suitable for various stablecoin usage scenarios.

2. Non-collateralized Stablecoins

Also referred to as Seigniorage shares or algorithmic stablecoins, non-collateralized stablecoins embody the core principle of cryptocurrencies: decentralization. Many crypto enthusiasts believe that stablecoins should not be tied to an asset but instead derive their value through algorithms. This belief has led to the rise of non-collateralized stablecoins. The financial strength of non-collateralized stablecoins does not depend on a central authority but rather on a formula based on demand and supply. One example of these AI cryptocurrency coins is Basis, an algorithmic stablecoin that gained significant attention after raising $133 million from Bain Capital Ventures, Polychain Capital, and GV.

3. Algorithmic Stablecoins

Algorithmic stablecoins may hold reserve assets, but their key strategy for maintaining stablecoins prices is by controlling supply through an algorithm. This algorithm is essentially a computer program that follows a preset formula. This approach is somewhat similar to the way central banks operate, where the currency’s value is maintained without depending on a reserve asset. For instance, the U.S. Federal Reserve sets its monetary policy publicly, based on well-established parameters. The credibility of this policy is reinforced by the fact that the central bank is the issuer and holder of legal tender.

Now that we have covered the basics of stablecoins, including some of the best stablecoin options, we will move on to the next section: why are stablecoins essential?

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Why are Stablecoins Essential?

Stablecoins are essential in the crypto ecosystem because they provide a stable store of value and a reliable medium of exchange. By mitigating the volatility of other cryptocurrencies, they enable seamless transactions, making them particularly valuable in decentralized finance (DeFi) and cross-border payments. Their integration with fiat currencies enhances accessibility, making them a crucial component of the digital financial space.

Stablecoins play a vital role in financial transactions within the crypto-verse for several reasons:

1. Best for Managing Market Volatility

Stablecoins are widely used on crypto exchanges as a low-volatility option for traders. They allow investors to move in and out of trades without relying on fiat, making them essential for risk management.

2. Simplifies Fiat-to-Crypto Conversion

Before trading on crypto exchanges, investors often convert fiat into stablecoins like USDT or USDC. These digital assets maintain a stable value, making them the preferred choice for seamless blockchain transactions.

Related: Stablecoin in DeFi

3. Preferred for Blockchain Transactions

Stablecoins, such as Tether (USDT), are the most traded assets on the blockchain. They facilitate cross-border payments and are commonly used in DeFi protocols to enable efficient transactions.

4. Essential for the DeFi Ecosystem

The DeFi ecosystem heavily relies on stablecoins for liquidity pools and lending services. DeFi lending protocols like Aave and Compound issue stablecoin-based loans, ensuring borrowers and lenders avoid the risks associated with volatile assets like Bitcoin.

What are Some Uses of the Stablecoins?

Uses of the Stablecoins

Stablecoins offer numerous benefits and versatile use cases, making them a valuable asset in the cryptocurrency space. Whether you’re looking to minimize risks or take advantage of specific financial opportunities, stablecoins provide practical solutions. Here are some key ways you can utilize stablecoins:

  • Minimize Volatility

The value of cryptocurrencies like Bitcoin and Ether can fluctuate dramatically, sometimes even within minutes. Stablecoins offer a more reliable alternative for buyers and sellers, ensuring that the value of their tokens remains stable and does not suddenly crash or surge in the future.

  • Trade or Save Assets

Stablecoins can be stored without needing a bank account and are easy to transfer. They can be easily sent across the globe, including to regions where accessing the U.S. Dollar or dealing with an unstable currency is challenging.

  • Earn Interest

Investing in stablecoins can yield interest, often at rates higher than those offered by traditional banks. This makes them an attractive option for those looking to grow their wealth with relatively low risk.

  • Transfer Money Cheaply

Stablecoins allow you to transfer any amount of money with minimal transfer fees, making them a cost-effective option for both small and large transactions.

  • Send Money Internationally

Stablecoins like USDC are an excellent choice for international money transfers due to their fast processing times and low transaction fees, making global financial transactions more accessible and affordable.

Stablecoins are a powerful tool for various financial activities, and their stable value opens up new possibilities for users in the digital economy. Combined with technologies like Retrieval Augmented Generation (RAG), they could further enhance how we interact with and utilize digital assets.

Stablecoins

How are Stablecoins Created?

To create a stablecoin, you need to follow these essential steps:

1. Determine the Type of Stablecoin to Develop

As previously mentioned, stablecoins fall into two major categories: collateralized and non-collateralized. Deciding which type to create can be challenging, as no single kind of stablecoin is inherently superior to the others. If your objective is long-term stability, you may want to consider algorithmic stablecoins. On the other hand, if you’re aiming for short-term stability with a reliable underlying asset, collateralized stablecoins could be the better choice. To identify the type of stablecoin you need, ask yourself the following questions:

  • How much liquidity do I need from my stablecoins?
  • What level of decentralization or independence do I desire?
  • How many audits can I afford to enhance trust and mitigate risks in my stablecoins?
  • How simple or complex should the overall architecture be?

Once you have answers to these questions, you’ll be better equipped to decide which type of stablecoin to build.

2. Select the Blockchain Platform and Technologies for Development

After determining the type of stablecoin you wish to develop, the next step is to choose the appropriate platform to build your stablecoin. Initially, Ethereum was the primary platform for stablecoin development, but this has changed.

Before 2018, the majority of stablecoins operated on Ethereum, but new blockchain platforms have since emerged. Platforms like Tron and EOS are now being utilized for building stablecoins. In 2019, several EOS-based stablecoin projects, such as Carbon (CUSD), Tether, EUSD, and EOSDT, were launched. Many developers opted for EOS over Ethereum due to its benefits:

  • Greater interoperability
  • High scalability and transaction bandwidth

By weighing the pros and cons of each available platform, you can make an informed decision about which one to use. Once you’ve selected the platform and technologies for your stablecoin development, the next step involves maintaining liquidity.

3. Consider Liquidity Maintenance

Without adequate liquidity, the entire stablecoin project could fail. To ensure good liquidity, consider the following steps:

  • Evaluating Inflation and Value: Integrate an automated monitoring system to provide daily currency rates and index rates from the Consumer Price Index and Personal Consumption Expenditures.
  • Transaction Fees: Split transaction fee revenues, with a portion going to the stablecoin partner and the remainder into a liquidity reserve to enhance liquidity.
  • Protection from High Supply: Users should be able to redeem or sell their stablecoins at the current face value minus transaction fees. This prevents sellers from offering their stablecoins at discounted rates in secondary markets.

Related: RWA-Backed Stablecoins

4. Develop a Smart Contract

Creating a smart contract is a crucial step in stablecoin development and a key factor in the success of any crypto business. Smart contracts provide security through digital agreements. To ensure the reliability and authenticity of your stablecoin on a decentralized platform, you must choose the right protocols for smart contract development. Developers will create, test, and launch these smart contracts on the test network using virtual wallets.

5. Design the System’s Visual and Technical Aspects

At this stage, it’s time to design the necessary token. Designing a stablecoin involves understanding how transactions will flow and how the entire system will function. You may also need to design a system that enables users to interact with your token, which could involve creating a website or mobile app. This step requires the design of web or mobile app screens. Our stablecoin experts can also provide technical designs that represent the entire workflow of a stablecoin.

6. Develop, Integrate with a Blockchain Platform, and Launch on the Mainnet

Once the designs are complete, the next step is system development. During this phase, you’ll write the smart contracts required to interact with the stablecoin and launch nodes on the selected blockchain platform. After developing the stablecoin’s features and connecting them to the blockchain backend, you can launch it on the test net. If you’re using Ethereum, there are various test nets available. Have different groups test your product on the test net and provide feedback for improvement. Address any issues identified during testing, and once resolved, you can launch your stablecoin on the mainnet.

To better understand the process of creating a stablecoin, let’s explore an example in detail, considering factors such as Asset-Backed Securities (ABS) vs. Mortgage-Backed Securities (MBS) in the context of collateralized stablecoins.

Example of Creating a Stablecoin

Imagine you need to develop a gold-backed stablecoin on the Ethereum platform, supported by verified physical gold holdings. The gold-backed token would represent the value equivalent to 1 gram of gold. Each token should provide the benefits of physical gold—being liquid, tradable, transferable, and fully backed by verifiable gold assets.

To create such a stablecoin, the owner must possess the underlying assets. For a gold-backed stablecoin, this means you must have physical gold, which can be stored with a custodian. After submitting the gold to the custodian, you must record timestamped details such as the gold’s serial number, custody events, purchase receipt, and the custodian’s digital signatures on a distributed ledger. This process creates proof of ownership for the gold asset.

Gold-backed tokens can only be minted once the gold is submitted to the custodian. As soon as the timestamped custody events are recorded on the blockchain, smart contracts are triggered to mint tokens. These minted tokens are then added to your organization’s holdings and can be issued to users.

To ensure your token is compliant, you can integrate third-party AML/KYC APIs to onboard reliable and authentic users.

Developing the entire stablecoin infrastructure requires both front-end and back-end components. The front end could be native iOS/Android apps or web apps, while the back end would be built on a blockchain platform. One platform used for tokenizing, minting, and burning tokens is the Alphapoint Blockchain Network.

Here are some third-party integrations that can be incorporated into the system:

  • Coinbase Wallet:
    You can use Coinbase Wallet or another third-party wallet to store and transfer stablecoins.
  • Stock Exchange API:
    A specific stock exchange API can fetch real-time gold values from an exchange where your physical gold assets are stored. This allows users to access the current value of their assets.
  • Bank Merchant Account APIs:
    Bank merchant account APIs can be integrated to enable various payment methods for purchasing gold-backed tokens.

It’s crucial to highlight that our team has the expertise required to build a fully compliant and tradable stablecoin. This process showcases how you can create a stablecoin, specifically a gold-backed one, within the list of stablecoins available today. Understanding the ICO working and the stablecoin price dynamics is also essential when planning such a project.

The Bottom Line

In conclusion, creating a stablecoin involves a series of strategic steps, from choosing the right type of stablecoin and blockchain platform to developing smart contracts and ensuring liquidity. Whether you are aiming to create a gold-backed stablecoin or another asset-backed cryptocurrency, the process requires careful planning and execution to ensure stability, security, and compliance. This guide has outlined the essential aspects you need to consider to successfully develop a stablecoin that can meet market demands and offer value to users.

However, building a stablecoin comes with challenges such as maintaining liquidity, ensuring compliance with regulatory standards, and integrating secure third-party services like wallets and payment gateways. SoluLab, as a leading Stablecoin development company, has the expertise to navigate these complexities. We offer end-to-end solutions tailored to your stablecoin development needs, from conceptualization to deployment on the blockchain Technology. To discuss how we can help you bring your stablecoin project to life, contact us today.

FAQs

1. How are stablecoins different from bitcoins?

The supply and demand in the market influence the value of bitcoin, which causes significant volatility. Stablecoins, on the other hand, are designed to minimize price fluctuation by maintaining a constant value, usually linked to a fiat currency and various assets that are stable. 

2. Which currency is backed by gold?

With the advantages of the blockchain, investors can acquire investment-grade real gold at a reasonable price with PXAG. One solid ounce of gold is backing for each Pax Gold (PAXG) token, and it is kept in London’s LBMA vaults. 

3. What is the price of creating a stablecoin?

The sort of stablecoin that is built has a significant impact on the cost of manufacturing. In general, creating asset-backed collateralized stablecoins is easier and less costly, the approximate cost ranges from $10,000 to $12,000 USD. 

4. Why should I buy a stablecoin?

They happen to provide security as well as worth that other cryptocurrencies do not, stablecoins are essential to the cryptocurrency ecosystem. Stablecoins use a variety of techniques, including decentralized governance, collateralization, and algorithms to maintain a constant value. 

5. How does SoluLab provide solutions for the challenges associated with stablecoin development? 

Developing stablecoins has several difficulties, including integrating safe third-party services, keeping liquidity, and guaranteeing regulatory compliance. As a crypto development company, SoluLab is providing all-inclusive solutions to tackle these issues, from creating safe smart contracts to complying with all legal regulations.  

What are Stablecoins: How They Work, and Types

Posted on by Shipra

What is Stablecoin

Stablecoins are emerging as the major player in the cryptocurrency space, acting as the point of interaction between digital assets and traditional finance systems. According to recent news from Bernstein, monthly settlement volumes have tripled over the past year to reach $1.14 trillion, as well as the total quantity of stablecoins has also increased to an unprecedented level of $170 billion. Stablecoins are currently the largest holder of US treasury bonds, demonstrating their significance in the dynamics. 

With this article, you will dive into the definition of what a stablecoin is, its workings, and the reasons behind its growing significance in the financial sector. You will also find out the benefits it offers and how it links conventional finance and the rapidly expanding realm of digital assets.

What are Stable Coins?

A stablecoin is a form of digital currency whose value is dependent on the value of another kind of money, goods, or financial instrument. The extreme fluctuation of the most well-known cryptocurrencies such as Bitcoin (BTC), has rendered cryptocurrency investments less appropriate for use in day-to-day transactions, stablecoins seek to address this issue.

This implies that this is one of the blockchain solutions, that is one-to-one tethered to, say the US dollar ought to always be equal to $1, at least that’s the aim. As a means of exchange, stablecoins are more beneficial than erratic currencies. Stablecoins can be linked to the value of a commodity like gold or a currency like the US dollar. To achieve price stability, stablecoins can hold reserve funds as collateral or use mathematical formulas that are meant to regulate supply. 

What Makes Stable Coins Special?

Since typical cryptocurrencies have short-term as well as long-term instability, usual consumers consider them extremely risky. Stability is needed before cryptocurrency can act as an actual method of directly replacing conventional fiat currency. Volatility is a big threat that can put at risk the buying power of a certain currency. As for stablecoins, you can apply digital currency while having no concerns about situations when its rates will drastically increase or decrease. The following is a list of features that make it special:

  • Less Volatility 

From this perspective, the volatility of actors’ expectations appears to be either non-existent or negligible. You only have to glance at Bitcoin, the world’s first cryptocurrency, to see how volatile these things are. It is seen that the fee of Bitcoin has emerged from the ground and experienced a string of highs and lows since its delivery. For example, Bitcoin at some point early this year nearly hit $64,000, but before the year was over, it was trading below $30,000. It had risen to about $35000 in January 2022 before going down to $68000 in November 2021.

  • Cross-Border Transfers and Payment

Cross-border transactions carried out in the stablecoin surpass in their speed, cost, and efficiency factors the Western Union or SWIFT methods. Besides the high costs, the existing operations take days to process a single foreign payment. That is a real lot of extra weight and processing costs for payments which stablecoins could potentially get rid of. Recently, millions of dollars were transferred across the border of China and Russia using the Tether stablecoin.

Meanwhile, Hedera agreed with Standard Bank Group, the largest bank by assets in Africa in 2021. Hedera has a distributed public ledger and it enables convenient international transactions while offering absolute transparency to all parties. Financially backed stablecoins are considered by the public as a nobler species in comparison with other cryptocurrencies. The market price fluctuations for stablecoins are not as high as for traditional popular cryptocurrencies such as Ether or Bitcoin.

Check Out Our Blog Post: Stablecoin Development in Real Estate Transactions

  • Protecting the Investors in Cryptocurrencies

In addition, stablecoins assist in removing the volatility of crop-to-currency trading and protect investors from the unpredictable fluctuation of the market. In a bearish market, traders using Bitcoin, Ethereum or any other cryptocurrencies can easily convert their holdings quickly to stablecoin. Thus, traders can diversify their cryptocurrency portfolio, and use stablecoins to enter or leave the markets without conversion into fiat.

Real-World Use Cases of Stable Coins

Real-World Use Cases of Stablecoin

To have a better understanding of the concept of stablecoins, here are the various real-world examples of stablecoins:

1. On-ramps/Off-ramps

Off-ramps are the platforms where you can convert your digital currencies to fiat money while on-ramps are the platforms where you can purchase cryptocurrency to enable you to join the system. Stablecoins therefore play an anchor role in transitioning from this new system termed DeFi to the traditional one known as TradFi. While fiat money can be used to buy any digital asset, there are more stablecoins as DeFi platforms and protocols ensure the stability of these assets.

2. Remittances

Stable blockchain technology allow for payment and settlement between people within a short period. Smart contracts can also be used to automatically perform microtransactions eliminating any intermediary involvement.

Stablecoins are also very liquid and easier to go for fiat through multiple platforms of exchanges. Instead, some customers purchase real-world items using a cryptocurrency debit card.

3. Liquidity in the Market

Stablecoins are also used to create market-making for cryptocurrency dealers. In exchanges, stablecoins can be used either as one of the base currencies in a trading pair. They allowed traders to take on and get out of positions quickly, without the portfolio being susceptible to any unnecessary hazards. Stablecoins allow traders to have a stablecoin portfolio to sit on so that the moment they see another great chance, they do not have to go through the fiat off-ramp process. Furthermore, the value of stablecoins can be shipped across the globe, which means new markets will become available for users. 

4. Savings 

The most mundane use case, but one that is still quite normal, is the storage of funds in a format identical to savings. Stablecoins were designed for the very reason that has been mentioned, that is, for their stability. Due to the absence of a lock-in or vesting period, users can easily post money in and out of wallets for saving and spending intuitively Wallets may be utilized as large-yield deposit accounts by non-investing users. Accounts held with interest are relatively low for savings accounts, with the FDIC putting the average at approximately 1.28%. It appears, however, that stablecoins de-peg and lose value with no government insurance or government support, subsequently, as much as 8% APY can be paid.

How Do Stable Coins Maintain Their Value?

A subset of cryptocurrencies known as stablecoins aims to keep their market value constant by tying them to an outside benchmark. This could be a commodity like gold, another financial instrument, or a fiat currency like the US dollar. Providing an alternative to the extreme volatility of well-known cryptocurrencies like Bitcoin (BTC), which may render these digital assets less appropriate for everyday transactions, is the main objective of stablecoins.

  • Asset Backing: A large number of stablecoins are 1:1 backed by real assets such as commodities or fiat money. For example, an equal value of US dollars is held in reserve for each stablecoin that is created. This supports not only an increase in investors’ confidence but also acts as a safety net to keep the stablecoin’s value steady. 
  • Algorithmic Controls: To dynamically manage their supply, certain stablecoins make use of smart contracts and complex algorithms. A stablecoin’s value might automatically increase to boost demand and raise the price when deviates. 

Stablecoin development services

Types of Stable Coins

Here is a detailed breakdown of the types of stablecoins:

  • Fiat-Backed Stablecoins

Fiat-collateralized stablecoins are the most common type of stablecoins, that are intended to replicate the value of conventional currencies like dollars and euros. Its issuers claim they hold sufficient liquid assets that they employ to back up their stablecoin on the blockchain. In the ideal world, should be greater than or equal to the amount of the stablecoin in circulation, which is kept in cash or currency equivalents such as treasuries. Facebook is accompanying its stablecoin called ‘Globalcoin’ with fiat money as an example of fiat-backed fiat-crypto currencies such as USDC from Circle and USDT from Tether.

Fiat-backed stablecoins play a significant role in trade, remittances, and lending and borrowing processes in the decentralized finance market. However, these have more risks due to their centralization, the raw and risky assets that the stablecoins can hold, and the absence of audit from a third party. 

  • Crypto-Backed StableCoins

Stablecoins that are backed by an underlying crypto asset are so-called because the crypto assets are used to support them. But because cryptocurrencies are highly volatile, to ensure stability, most crypto-collateralized stablecoins must be overcollateralized to some extent. For instance, to create $100 of stablecoins, one has to invest $150 of cryptocurrency if the CRR needed is 150 percent. Currently, the largest cryptocurrency-backed stablecoin is MakerDAO’s DAI which has already been labelled as the best example of a blockchain-based stablecoin.

Stablecoins anchored to cryptocurrencies are fully decentralized and trustless but are not immune to certain risks. By being backed by collateral, it can be seen that their peg is vulnerable to being broken, and if the values go down, the stablecoins will be automatically redeemed into their respective collateral.

  • Algorithmic StableCoins

In terms of stability, computational stablecoins rely on incentives and computational procedures for the stabilization of the rates. Fiat-backed stablecoins are secured by collateral in the form of fiat money while cryptographic asset-backed stablecoins are over-collateralized. On the other hand, it is common that algorithmic stablecoins work with comparatively smaller collateral. This implies that they do not have much value that is related to the possession of some amount of capital.

The largest part of the stability in the algorithmic stablecoins comes mostly from the market demand. Often, the entire system may crumble if demand goes below a given threshold. That is exactly what happened the previous year, TerraUSD stablecoin fell below $1 resulting in a massive de-pegging event. This was due to immense selling, and a combination of the overall Terra ecosystem’s loss to unhealthy fluctuations that saw Luna, the Terra blockchain system’s governance token lose its value. Within a period of just a few months, the Terra-Luna crash took out nearly $40 billion in value for investors.

Related: Asset-Backed Stablecoins

How do Stablecoins Work?

Stablecoins are perfect for regular transactions as they provide stability, which also lessens the volatility of other cryptocurrencies. Here is a breakdown of how exactly do these stablecoins work:

  • Typically, before a stablecoin can be used, it will have been through a few processes. 
  • It is noteworthy that different companies can be involved in various stages of carryout. 
  • A stablecoin is first distributed by a firm. The corporation also maintains the same dollar value in a nation’s currency for each stablecoin it emits. This is how the business establishes a relationship between the stable coin value and the value of an item. 
  • The stablecoin is then circulated to the whole public through another kind of infrastructure known as a ledger. This holds the record of transactions involving a particular stablecoin so that it is used as evidence. Furthermore, it subsets the value of stablecoins for users. 
  • Based on the stable assets held by the issuer, a stablecoin value is created, which is introduced onto the ledger. This means that a coin holder can easily and lucratively trade the stablecoins in for other currencies, such as the current bank balance.  
  • Finally, one more different business is a digital wallet that is compatible with various necessary hardware and applications in the smartphone. This wallet enables the owner of the stablecoin to transact the coins: send and receive them. Through it, people can get to their coins.
  • Investing is another way through which users can hopefully earn a profit on their stablecoins. They can do that by going to what is commonly referred to as an “exchange website.”

Read Blog: How to Create A Stablecoin?

Best Stable Coin to Buy in 2025

Here is a list of come of the best stablecoins that you should read about before buying stablecoins in 2025:

1. Tether

Tether Launched in 2014, Tether is amongst the initial stablecoins, which till now is the most popular. Altogether, according to the market capitalization, it belongs to the most valuable cryptocurrencies in general.

The primary use case for the USDT is to quickly transfer the money between different exchanges to capture the arbitrage where the price of the cryptocurrency is different in two exchanges and traders can make a profit out of it. However, it has been used in different contexts: Further, the business developers of Chinese importers residing in Russia have moved millions of US dollars worth of goods across the border through USDT and circumvented the Chinese IB Controls.

2. USD Coin

The Center Consortium was launched in 2018, and through it, Coinbase and Circle, a cryptocurrency startup, simultaneously launched a stablecoin named USD Coin.

Like Tether before the change in its collateral to the range of assets, the USD Coin is effectively backed by the US dollar. Since the USDC protocol is open-source, any person or company can make use of it to develop the products.

Circle back on July 8, 2021, said it would go public by joining Concord Acquisition Corp. in a $4.5 billion deal. This is the statement made a month after Circle inked a $440 million funding round with other market giants like FTX, Fidelity Management, and Research Company, and Digital Currency Group, the owner of CoinDesk.

3. Dai

Dai is an Ethereum-based stablecoin that utilizes the MakerDAO protocol to operate. Dai was launched in 2015 and is supported by ether, the Ethereum national currency, and pegged to the US dollar.

Unlike other stablecoins, the MakerDAO is to issue decentralized dai with no trusted third party in possession of system governance. It is actually, this has been done by Ethereum smart contracts, which are essentially unchangeable sets of rules.

StableCoin Regulations 

Regulations are nonetheless keeping a close eye on stablecoins because of their explosive growth and potential impact on the larger financial system. Global regulatory agencies are closely monitoring stablecoins as their market grows to make sure they abide by financial rules and regulations. Protecting investors and preserving the equilibrium of the banking system are the goals of this investigation. 

  • Consumer Protection: Protecting investors is a key goal of stablecoin regulations. Regulators aim to make sure that users are aware of all the hazards involved with stablecoins, including problems with redemption rights and liquidity. 
  • Interoperability Standards: To guarantee a smooth integration process across many platforms and countries, governments are pushing for interoperability standards as stablecoins become widely used. 
  •  Market Stability: Authorities are worried about how stablecoins can affect the overall market. Any notable shifts in the value of stablecoins, given their expanding importance in trades and liquid provision, might have implications. 

Read Also: RWA-Backed Stablecoins

Benefits of Stable Coins

Stablecoins have many uses cut across different aspects both in the pro-cryptocurrency space and the deeper financial system. Here are a few of the main advantages:

  • Price stability: Stablecoins can be used for making transactions because they have stable prices, and thus eliminate the high risks that are associated with the cryptocurrencies.
  • Integration with DeFi: This also means that when applied in DeFi app applications such as yield farming, lending, borrowing, and others, the steady assets can act as a steady form of medium of exchange.
  • Liquidity: They also do away neutral with cumbersome and costly conversions to fiat currencies hence enabling traders to open and close positions as desired.

Are Stable Coins any Similar to Cash?

Stablecoins, as the name suggests, are Crypto coins that are pegged against real tangible assets, such as the dollar, or commodities like gold. E-holdables performed well as a store of value and are more like money in terms of stability than volatile cryptocurrencies. They facilitate efficient and cheap international monetary transactions; users can transfer money without fluctuating as is the case with other cryptos. Unlike regular money, backed by the authorities’ words, stablecoins are not safe and sometimes plunge into a loss of the peg function, even if their purpose is to serve as reliable money replacements.

Partner with Us

How is Partnering With SoluLab Changing the Dynamics?

SoluLab can be the ideal partner for you when it comes to exploring the realms of blockchain and stablecoins. Our dedicated developers ability to provide creative solutions can be seen with our developments in crypto mining, NFTY, and DLCC which are customized to your personal needs and requirements. 

We assist clients in maximizing profits in a competitive marketplace with our exceptional cryptocurrency mining systems.  Our NFTY platform allows investors to work for their profits safely and securely creating a thriving market. Furthermore, we support financial inclusiveness by dismantling conventional barriers through our involvement with distributed lending and credit solutions. 

Reach out to SoluLab a stablecoin development company right away to learn the techniques for developing your business and improving your stablecoin initiatives.

FAQs

1. What is a PayPal stablecoin?

Stablecoins such as PayPal USD, are digital currencies that are supported by US treasuries, dollar deposits, and other comparable forms of cash. On PayPal one PYUSD can be bought or sold for one USD. 

 2. What is crypto backed by?

The crypto issuer backs crypto to guarantee its value, there is no alternative asset backing fiat currencies, bitcoin, or gold. Due to its sound money characteristics, Bitcoin retains its value even in the absence of support. 

3. What are two types of stablecoins?

Stablecoins are classified into four main categories based on the collateral structure they use fiat-backed, crypto-backed, community-backed, and algorithmic stablecoins. 

4. What is stablecoin and how does it work?

Stablecoin is a sort of cryptocurrency meant to maintain a stable value, usually tied to a cash currency like USD. It functions as a store of value and a means of supporting its value through the reserves of an actual asset. 

5. How is SoluLab assisting crypto companies?

Solulab provides development services for cryptocurrency exchanges that can help you take advantage of different blockchain networks and take you a step closer to stablecoins for delivering safe and effective solutions.