Decentralized stablecoins are algorithmic coins that are not issued by a custodian. They include crypto-collateralized stablecoins such as DAI. Smart contracts are used to manage collateral and issue or destroy these tokens. Therefore, decentralized stablecoins are resistant to censorship and counterparty risk. Therefore, they are well suited for DeFi use and appear to be a required feature of stablecoins going forward.
We take USDT as an example to introduce to netizens how to make profits from stablecoins. You have to make money by issuing coins, otherwise why would you create a USDT out of thin air? Enough support? There are many benefits to issuing USDT, which can be said to be good or evil.
Given that USDT is a perfect pool for storing funds, money becomes tokens and will have the inertia to stay in the Bitfinex exchange. This is indeed the case. Bitfinex is the leader in spot trading, friends. It is not difficult to think about the clues. When the U.S. dollar comes, liquidity will come, and exchange fees will naturally come. Bitfinex can of course make money by relying on USDT.
Of course, Tether can also rely on the volatility of USDT to make money. Although USDT is known as a stable currency, in fact, the premium in various currency markets is still very obvious, especially when the market comes, there will often be a fluctuation of 0.5% to 2%. The greater the market fluctuations, the greater the price fluctuation deviation. The bigger! When injecting USDT into the market, these fluctuations can bring considerable benefits to Tether.
Other stablecoins such as GUSD and PAX are more government regulated and more closely tied to fiat currencies than USDT. They seem unlikely to break away from their anchors, and the ways in which they make money are largely similar.
The importance of stablecoins lies in their ability to enable seamless transactions between cryptocurrencies and traditional assets. For example, combining Bitcoin or Ethereum with fiat currencies. This stablecoin acts as a bridge between the volatility of cryptocurrencies and the stability of real-world assets. By trading with stablecoins, you can manage your trades on a cryptocurrency exchange without having to use U.S. dollars directly. This way, you avoid fees that you may incur on different exchanges.
Suppose you hold some Solana and Ethereum and want to use your Ethereum to buy more Solana. To achieve this, you can exchange your Ethereum for a U.S. dollar-valued stablecoin, such as USDT, and then use the stablecoin to purchase more Solana. Considering that Solana and Ethereum run on different blockchains and are independent of each other, by using stablecoins as an intermediary, you can save fees during transactions while maintaining the value of your cryptocurrency in the event of large price fluctuations. of stability.
“It’s sometimes difficult to convert Solana to Ethereum because they exist on different levels and are two separate projects. But stablecoins become the common thread between them,” Yang said.
While crypto traders sometimes use stablecoins for more advanced investments such as staking and lending, most beginners use them to avoid transaction fees. Many cryptocurrency exchanges do not charge fees when converting USD to stablecoins. For example, Coinbase charges no fees for transfers between USD Coin and U.S. dollars.
Another use for stablecoins is international remittances, or sending money across borders, although this can be risky as there is little official regulation. Because stablecoins are a form of private funding—that is, money backed by companies rather than governments—there is a real risk that stablecoins are not as stable as they are advertised, especially during difficult economic times. There are also security and fraud issues. Essentially, if you deposit money into a stablecoin, there is no guarantee that you will get it back.
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