How do stablecoins work?

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As the name suggests, a stable coin is a coin that doesn’t fluctuate too much like other cryptocurrencies. In fact, these coins successfully maintain a fixed value in the long run. The reason why these coins don’t fluctuate a lot is that they are pegged to a physical asset.

Stablecoins don’t provide an opportunity to become rich quickly. Therefore, they don’t get as much hype as other cryptocurrencies. Although there are a number of stablecoins in the crypto market (polygon matic crypto), Tether (USDT), USD Coin (USDC), and TerraUSD (UST) are the most common stablecoins people use for different purposes.

Tether (USDT) has a circulating supply of 72 billion units. And it’s the most popular stablecoin used for trading cryptocurrencies. USD Coin (USDC) has a circulating supply of 37 billion coins and it’s best known for its low trading fee. TerraUSD (UST) only has a circulating supply of 3 billion coins because it was launched just a year ago in September 2020. So, it will take some time to establish its reputation.

There’s a misconception among crypto investors that Tether is backed by the U.S government. But the senior investors understand that it’s not the truth. Tether was actually launched by Tether Holdings Ltd in 2014. This organization is responsible for maintaining the physical assets depending on the number of digital coins issued.

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