Altcoins: what are they and which coins are worth paying attention to?

Cryptocurrencies are known for their high volatility, but there are exceptions. Stablecoins are digital assets that are pegged to a stable currency, such as the dollar. They are designed to provide a more predictable value and protect savings from sudden market fluctuations.

In this article, we will explain in a simple way what stablecoins are and why they are a valuable asset worth considering.

Why traditional currencies are no longer enough

Imagine traveling to another city and needing to transfer money to buy a house. If you transfer money through traditional banks, you may encounter several problems. First, the translation period is long. Second, possible assignments. But most importantly, you are at risk due to exchange rate fluctuations.

Now it is worth returning to the question of why stablecoins are needed and what they are in simple terms. It is a financial instrument that is not subject to exchange rate fluctuations like fiat money and does not raise concerns about changes in exchange rates like cryptocurrencies. These digital assets offer stability because their value is directly linked to the value of a trusted currency, such as the US dollar. It is stable despite inflation, and cryptocurrencies such as USDT help users protect their money from volatility. This means that if the dollar is worth 1, a dollar-based stablecoin will always be worth 1 dollar, regardless of what happens in the market.

Stablecoins allow users to transact and protect themselves from inflation without having to worry about large price fluctuations. They have become especially popular in cryptocurrency ecosystems, where high volatility can be a serious problem for traders and investors.

What types of stablecoins exist, and how do they differ?

There are three main categories:

1. Backed by fiat currencies. An example is USDT (Tether), which is pegged to the US dollar. The value of each token is always equal to one dollar.
2. Backed by cryptocurrencies. Simply put, these stablecoins are assets backed by cryptocurrencies (ether or bitcoin). One of the most notable representatives of this type is DAI. The advantage of this approach is that the risks associated with fiat currency inflation are reduced while maintaining a peg to a stable price.
3. Algorithmic stablecoins. They are not backed by any assets, but are stabilized by algorithms that regulate the number of coins in circulation based on demand. An example is Ampleforth (AMPL), which uses complex mechanisms to balance value.

How stablecoins work: We explain in a simple way and with examples what happens in such a process.

A stablecoin is a cryptocurrency with a guaranteed price. Since the assets are pegged to fiat currencies, their value will not fluctuate as much as Bitcoin or Ethereum. For example, if Bitcoin suddenly drops in value by 10% in one day, the stablecoin will remain stable.

How does this work? When USDT is pegged to the dollar, its value is adjusted to always remain at 1 USD. If the price of a token drops below the threshold, new stablecoins are automatically added to the market to bring the price back to the right level. If the price rises, the tokens are burned to reduce the supply and bring the price back to the dollar level. Constant adjustment maintains stability.

Stablecoin and USDT: What is the Connection?

USDT (Tether) is one of the most popular stablecoins that, simply put, is backed by the US dollar. Each token is pegged to the real value of the dollar, making it a useful tool for crypto transactions.

If you want to transfer money or exchange money safely without the risk of losing money due to exchange rate fluctuations, you can use USDT. Stablecoins have become indispensable for traders and investors because they minimize the risk associated with volatility. For example, during periods when the cryptocurrency market is down, many investors move their holdings to Tether to protect their funds from the downturn.

What are the risks of using stablecoins, and should I be afraid of them?

Like any financial instrument, digital assets are not without risk. First, there is the possibility of depreciation. Stablecoins are pegged to fiat currencies and their stability depends on the economic situation. If the US dollar loses value significantly, currencies pegged to the dollar will also lose value.

Second, there is a legal risk. In some countries, governments impose restrictions on the use of cryptocurrencies, including stablecoins, or even ban their use altogether. In Russia, for example, possible measures to regulate cryptocurrencies are already being discussed to prevent circumvention of the law.

Another risk associated with stablecoins is their potential volatility. Although tokens are pegged to fiat money, they are subject to price fluctuations depending on various factors.

Stablecoins and Russian law: what you need to know

This is a rather complicated topic. In Russia, cryptocurrencies are currently not adequately regulated. Although in recent years there has been discussion about the possibility of adopting new laws that would legalize the use of cryptocurrencies in financial transactions.

Currently, the Russian authorities do not officially recognize stablecoins as a legal form of payment, but many entrepreneurs and individuals are increasingly using them to make payments in crypto transactions.

Where and how stablecoins can be used in real life

The use of stablecoins is becoming increasingly popular in various sectors. For example, cryptocurrency exchanges are actively using them to minimize exchange rate fluctuations during the transaction process. Assets are also used to make payments in online games and on various platforms, such as Amazon and eBay, where cryptocurrencies are accepted.

In addition, financial instruments are increasingly used for transfers between countries, due to their low costs and instant settlement. In Venezuela, Turkey and other countries where traditional currencies are losing value, stablecoins are becoming a way to save money and make payments.

Stablecoins as an alternative to traditional currencies

The future of digital money looks promising. They are now starting to take a significant position in cryptocurrency systems and their use could have a major impact on the financial markets. Simply put, stablecoins are more reliable instruments that can become an important part of the global financial ecosystem, even in everyday transactions, as they help avoid the inflationary risks inherent in traditional currencies.

In the coming years, we expect to see coins increasingly used for everyday payments as an alternative to bank cards and e-wallets. In Russia, for example, the introduction of digital assets at the state level is already being discussed, which will give new impetus to the use of stablecoins in various sectors of the economy, from trade to services. Predictions indicate that this technology will become an integral part of the global financial infrastructure in the future.

Let’s summarize

The answer to the question “what is a stablecoin?” It can be the following: Simply put, it is a cryptocurrency whose value is linked to a stable currency, which guarantees its reliability and protection from sudden fluctuations. Unlike traditional money, instant transfers and low fees are possible, which makes them convenient for international transactions. The emergence of stablecoins not only broadens the horizons of financial technologies, but also helps to overcome many problems inherent in modern economic systems.

Investing in gold is an age-old way of preserving and increasing capital. Thanks to digital technologies, it is now possible to adapt it to modern realities. Stablecoins with a gold hedge combine the stability of the precious metal with the convenience of cryptocurrencies. Unlike volatile digital assets such as Bitcoin, these instruments have a reliable anchor in the form of physical gold. In times of economic crisis and inflation, they are especially important for preserving funds.

What are gold-backed stablecoins?

Gold stablecoins are a synthesis of traditional precious metals and digital technologies. To understand their value, it is necessary to understand the key characteristics and operating principles of such assets.

Gold-backed stablecoins are cryptocurrencies backed by physical gold. Each token is equivalent to a certain amount of precious material stored in specialised storage facilities. This allows you to stabilise the value of digital assets and avoid sharp exchange rate fluctuations, which are characteristic of most cryptocurrencies.

Details:

1. Fixed price. A stablecoin is equivalent to a certain amount of gold, e.g. 1 gram or 1 troy ounce. This makes them resistant to volatility and provides a reliable tool for preserving capital.
2. Physical backing. Behind each token is real gold, stored in certified vaults. Major platforms such as Bitrue offer storage guarantees and the ability to verify collateral via the blockchain.
3. Transparency and verification. Regular audits confirm the availability of physical media. This increases user confidence and reduces the risk of fraud.
4. Digital accessibility. Investors can store gold assets digitally without having to store physical gold or coins. Transfers take place via the blockchain, making them fast and cheap.
5. Ease of change. Stablecoins can be easily exchanged for other digital assets or fiat currency on crypto exchanges.

Advantages of gold-backed stablecoins

The advantages of gold stablecoins make them an attractive tool for investors and traders. Let’s take a look at how they protect capital and offer ease of use.

Protection against inflation and market instability

Gold stablecoins offer protection against inflation and financial crises. Unlike traditional crypto-currencies, their value is linked to a real value that has a long history of stability. This makes them a reliable means of preserving capital in times of economic instability.

High liquidity on platforms

Trading in gold stablecoins is actively supported on major cryptocurrency trading platforms such as Bitrue and Binance. This allows investors to easily enter and exit transactions and exchange stablecoins for other crypto assets or fiat money.

Ease of international transactions

Transferring gold stablecoins is fast and with minimal fees. Traditional bank transfers are time-consuming and expensive, while digital assets allow people to bypass borders and bureaucratic restrictions.

Easy to store and use.

Storing stablecoins with gold coverage does not require vaults or special conditions. All storage takes place digitally in secure wallets, allowing easy access to your investments.

Popular gold stablecoins

There are several well-known gold-backed stablecoins on the market. Each of them has its own features, benefits and methods of application:

1. Tether Gold is one of the most popular stablecoins of its kind. Each XAUt token is equivalent to one troy ounce of gold (31.1 grams). The tokens are issued by Tether, also known as the USDT stablecoin. The collateral is held in Swiss vaults and users can request a physical delivery of the gold.
2. PAXG is another popular gold stablecoin that is kept in vaults in London. Each token has a unique identifier, allowing its origin to be traced. PAXG has high liquidity and is available for trading on many exchanges.
3. Digix Gold (DGX) is linked to one gram of gold. The token is fully backed by bullion stored in certified vaults in Singapore. Investors can exchange tokens for physical gold bars.

How do you choose a gold-backed stablecoin?

Making the right decision requires careful analysis of many factors. Let’s take a look at the main aspects to consider when making a decision.

Reputation and reliability of the issuer

The first step in choosing a stablecoin is to check the reputation of the issuing company. Reliable projects undergo regular audits and provide gold storage reports. For example, Tether and Paxos have a transparent audit system, which increases trust among users.

Storage conditions for gold

Physical security should be stored in certified, high-security storage facilities. Pay attention to the location of storage facilities and the ability to verify asset availability. Vaults in Switzerland, London and Singapore are considered a benchmark in terms of security.

Commissions and fees

Check storage, withdrawal and transaction fees. Some projects charge low rates but charge fees for shipping physical gold. Consider all costs before buying.

Liquidity on trading platforms

Choosing stablecoin with high liquidity on popular crypto trading platforms makes it easier to exchange assets for fiat money or other crypto currencies.

Risks of gold stablecoins

Every investment vehicle has its own risks:

1. Fraud and unscrupulous issuers. Even with high blockchain transparency, there is a risk of fraud. Some projects may not be backed by real gold. Always check periodic audits and read reviews on the project.
2. Changes in the gold price. The exchange rate of gold stablecoins depends on the gold price on the global market. Although gold is considered a stable investment, its value can fluctuate depending on economic conditions.
3. Technical risks. Using blockchain carries risks of technical failures and cyber attacks. By securing digital wallets and using trusted platforms, you can minimise these risks.

Conclusion

Stablecoins linked to gold provide a reliable tool to protect funds from inflation and economic shocks. These tokens combine the stability of gold and the convenience of digital assets, giving investors a wide range of options. By choosing a reliable issuer, understanding the storage conditions and analysing the risks, you can ensure safe and effective investments.