WIN Guide
What are stablecoins and how do they work?
A beginner’s guide to stablecoins and how to buy them
Cryptocurrencies are somewhat of a new phenomenon — they offer a new way of doing things that can be incredibly beneficial. However, one issue that has arisen with cryptocurrencies is their volatility — the prices can change drastically in a short amount of time. This is where stablecoins shine: their prices are not volatile. This creates a unique position for these tokens and their use cases. On a similar note, they are much easier to understand, obtain and use for those new to the Web3 space. In this article, we will discuss what stablecoins are, the three categories of stablecoins, how they work and why they’re useful.
What are stablecoins?
Stablecoins are cryptocurrencies that aim to maintain a stable value, even when the prices of other cryptocurrencies are fluctuating. This stability is usually achieved by pegging the stablecoins value to another asset, such as a fiat currency or a commodity.
Types of stablecoins
There are three main categories of stablecoins: fiat-collateralized stablecoins, crypto-collateralized stablecoins and non-collateralized stablecoins.
Fiat-collateralized stablecoins are backed by a reserve of fiat currency, such as the US dollar. Some of the more popular fiat-collateralized stablecoins are Tether (USDT) and USD Coin (USDC) which are pegged to the US dollar.
Crypto-collateralized stablecoins are backed by a reserve of cryptocurrency, such as Ethereum. The most popular crypto-collateralized stablecoin is DAI, which is pegged to the US dollar.
Non-collateralized stablecoins are not backed by any asset. Instead, they use algorithms to maintain a stable value. The most popular non-collateralized stablecoin is Basis.
Uses of stablecoins
Stablecoins are useful because they allow people to store value in a cryptocurrency without having to worry about volatility. Through this function, trading non-stablecoin tokens become much easier and with less hassle than with fiat. Exchanging stablecoins for other tokens is faster than exchanging tokens and fiat currencies and cheaper.
Stablecoins + WIN
With win.so, stablecoins are a lot more than just tokens used for exchange. They are a vital part of our platform as the tokens are used to pay for the bookings that guests create. Using stablecoins allows for less volatility regarding the token’s value but also avoids the 1–3% intermediary fee that traditional payment processors add to any payment made.
How to purchase or “swap” them?
As of 22 Nov ’22, the WIN team is currently working on a way for travellers to use various payment types within the platform itself. But for now, the following are options which we wholly recommend.
If you want to use fiat to get stablecoins:
- No KYC
- Minimal commission
- Smart KYC
- Transparent fees
If you want to use other tokens to get stablecoins
- An aggregator for various swaps and exchanges
- Gives an overview of available swaps for a given pair of tokens
Note: We are not affiliated or partnered with any of these organisations — we simply see their amazing value and utility in the Web3 space and want to share them
Risks of stablecoins
There are some risks associated with stablecoins. For example, if a stablecoin is not backed by a physical asset, it could lose value if the company behind it fails. Additionally, stablecoins that are pegged to fiat currency could be impacted by inflation.
Thus, people need to investigate and research tokens if they plan to hold them over a longer period.
Conclusion
Overall, stablecoins are a helpful way to store value in cryptocurrency and facilitate trade. They come with some risks, but as the industry matures, these risks are likely to decrease.
Interested to see how they work? Visit win.so and use stablecoins to book your next adventure!
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