A Primer On Decentralized Stablecoin Development

Today’s world sees numerous technological advancements happening every day and prominent use cases have led to innovative trends in the industry. Trends like blockchain networks, NFT, decentralization, and the DeFi ecosystem are a few trends that gain more attention each day.

For example, you know there are thousands of crypto coins and tokens in the industry today. Consequently, the most prominent cryptocurrency in the industry is Bitcoin and it provided us with new ways to trade cryptocurrency and make payments using crypto. Because Bitcoin is the first crypto globally, stablecoin, as a result, became one of the first crypto-backed by a physical asset. The evident objective of stablecoin is to increase cross-border payments and earnings. Stablecoins started off relatively early and is now a prominent type of digital currency. Therefore, investors, traders, entrepreneurs, startups, and speculators are now using stablecoin.

Furthermore, using stablecoins is similar to using famous altcoins for transactions. The popularity of stablecoins comes thanks to the impacts and benefits stablecoins provide in the online marketplace. Additionally, many users started using stablecoin for payments and other transactions. The stability and benefits that stablecoin offers are undoubtedly the reason why many prefer using stablecoins and it is also the reason why we see so many stablecoin development services in great demand.

This article guides you through the process of decentralized stablecoin development. The report also covers the benefits of stablecoin products, stablecoin development services, and types of stablecoin development.

Overview of stablecoins

Stablecoin is a new type of cryptocurrency where the coin is pegged to a physical asset like gold and coffee or a fiat currency like US Dollar, Japanese Yen and European Euro. The best thing about stablecoins is that they are regulated crypto and are non-volatile.

Stablecoins experience fewer fluctuations in price compared to regular crypto. Presently, there are more than two hundred stablecoins in the market and some are being very popular with investors. These stablecoins are USTD, TUSD, DAI, and Paxos Standard. Therefore, an investor or crypto enthusiast can purchase stablecoin in any reputed crypto trading marketplace or platform.

Stablecoin working model

The popularity of bitcoin is the reason why many people consider investing in cryptocurrency. There are many ways an investor can invest in crypto, and stablecoin is the safest venture. Stablecoins low volatility makes it an immediate first choice for many investors. The biggest drawback is that it will take significant time to yield a profit. Stablecoins working model involves two processes: the purchase process and the redeem process.

  • Purchase process– This process requires a user to submit a wire to a reputed company with the crypto wallet information. The company verifies the information and sends a signal to the stablecoin with an escrow agreement. Upon ascertaining the funds, the required stablecoins are deposited into the user’s crypto wallet.
  • Redeem process– Redeeming a stablecoin requires the user to complete a KYC and AML process. After completing the KYC and AML, the user can redeem their stablecoins.

Types of stablecoin development

Fiat-collateralized stablecoin development

This stablecoin development service is fully pegged to physical currencies like USD, Yuan, Rupee, or other fiat currencies. The stablecoin operates on a 1:1 ratio. This ratio means that each stablecoin is equal to one unit of fiat currency. Let’s look at Tether as an example: it is wholly pegged 1:1 with the USD. This ratio means that one tether has the same value as a United States Dollar.

Crypto-collateralized stablecoin development

These currencies are pegged to another crypto. Here, everything operates on the blockchain, therefore it creates more transparency than a fiat-collateralized stablecoin. These coins are complex, subject to volatility and lack popularity among the audience. Due to its volatility, the coins are backed by a diverse reserve of crypto that can remain stable. Here, the ratio increases to 1:2 with every crypto-collateralized stablecoin pegged with 1:2 for each stablecoin. The best example of this decentralized stablecoin development is Dai which was created by MakerDAO. Its face value is pegged to the USD, but Ethereum collateralized the coin.

Uncollateralized stablecoin development

This stablecoin utilizes an open-source code. The code is visible and editable to everyone. Imagine creating new crypto and pegging it to the United States Dollar. Now, one crypto is worth one dollar and if the stablecoin value increases, it indicates an increased demand for the stablecoin. The algorithm sees this demand and increases supply by printing more stablecoins. Therefore, these types are commonly known as Algorithmic stablecoins.

Commodity-backed stablecoin development

These stablecoins are backed by physical assets. Assets include gold, real estate, oil, silver, etc. Additionally, the unique feature about these stablecoins is their potential to appreciate alongside the increased value of their underlying asset.

To conclude, every day, we see more developments coming from the crypto world. Stablecoins present an opportunity for investors to join the crypto frenzy and without having to take any significant risks. If you want to start investing but don’t know where to begin, then stablecoins can prove a valid bet. If not, you can turn to a reputed stablecoin development company and launch your stablecoin in no time at all.

Oliver Alan

Blockchain, Crypto, NFT Analyst and Developer

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