Did you know there’s a type of cryptocurrency that isn't volatile and in some instances can generate double-digit returns? Well, allow me to introduce you to Stablecoin. Stablecoins are a type of crypto that’s an alternative interest-bearing asset like real estate but without the headache of dealing with tenants.
In the U.S., savings accounts earn less than 1% interest, but Stablecoin’s like USDN for example currently average a rate of return of 10-15% a year paid daily which is covered in the CryptoTutors eLearning course Make Money While You Sleep. Think about it like this, for example with a 10% interest rate in one year, with $20 you’d earn $2, with $1000 you’d earn $100, and with $10,000 you’d earn $1000 on interest alone while sleeping!
The question remains, what makes stablecoin stable? Let’s unpack that.
Stablecoin is a type of cryptocurrency whose value is tied to an outside asset, such as the US dollar. Gold, or another crypto to stabilize the price.
Fiat Collateralized Stablecoins
This means that to issue a certain number of tokens of a given cryptocurrency, the issuer must offer dollar reserves worth the same amount as collateral. Examples would be Gemini Dollar, USDCoin & TrueUSD.
Crypto-Collateralized Stablecoins
The value of crypto-collateralized stablecoins is pegged to that of other cryptocurrencies. An example would be DAI, Celo, USDN (learn the steps to buy USDN here) where you can generate less than or equal to 15% interest.
Crypto collateralized stablecoins are also decentralized which means there is no single entity controlling your funds.
Non-collateralized (algorithmic) Stablecoins
Non-collateralized stablecoins are those that do not involve the use of any reserve asset. Instead, their stability is derived from a working mechanism such as that of a central bank.
Being asset-backed enables stablecoins to maintain their prices and avoid excess volatility like Bitcoin. Compared to more traditional crypto, the volatility of stablecoins is much lower because the price is directly dependent on the rate of the real asset. This creates new opportunities in the development of the cryptocurrency industry and digital assets at large. In the grand scheme, stablecoins have a real chance to be used as a global currency that can’t be subject to traditional market disasters, and why we, at Crypto Tutors, wanted to make sure this asset class was on your radar!