Stable Coins
Explore the intersection of decentralized and centralized finance through cryptocurrency, focusing on the stable coins like Tether and USD Coin.
This article is part of previous DeFi post (What is DeFi? (Decentralized Finance) ), I recommend to you if you have not read DeFi article, please first read it and then continue with this article.
So initially, before further proceeding it is essential to comprehend the connection of decentralized finance to centralize finance means cryptocurrency, matched to a real-world asset. So let’s take here an example, both USDT and USD coins in the crypto world are famous as a stable coin due to their price linked with the United States dollar. Take a little bit intention here, while you buy 01 for 01$, a new USD coin is issued when you withdraw, 01 USD coin is burned. Hence, the value of this coin is constantly cost single united states dollar.
Currently, the role of this is to have a trustworthy manner to buy and sell specific digital currency (here means coins) without consuming to buy and sell them, as an alternative we be capable of hardly trade them. Let’s took an example of why this might be advantageous, if you bought one BNB coin at 500, now it’s one thousand dollars and you see the bull run is at it’s top and wish to sell due to the highest profit on investment. Without stable coins you must sell your BNB coin at a centralized exchange like Bitget, ByBit or Binance and in return you will receive some united states dollars. Presently, off course they’re standard to take a cut of that transaction because they require a fee and they’re going to take it, similarly makes you to pay tax on slightly profits that you earn from the trading or selling.
Coin base and Gemini will be pilfering that you earn it, so you cannot really acquire around it. The next step would be to wait for Coin base or Binance to give them into your bank and then withdraw them from your bank where you create your account for the purpose of withdraw money. Well, after a few weeks BNB coin drops to 250 and you wish to buy more & take benefit from the dip market and deposit 1000 into the exchange account. Then it takes some time for the transaction to clear because you must wait and then buy BNB coin and hold them well. Again in the bull run BNB coin rises again to 500 and you wish to take profit again during this bull run and sell your BNB coin at centralized exchange, again it takes some days for clearance and transaction into your bank account along with processing fees. See in this example there’s a high proportion of fees, taxes, and consumptions of more time.
So, currently we use a stable coin like USDT, you bought one BNB coin at five hundred dollars and it raises to one thousand dollars, so you decided to trade your one BNB coin for 1000 USDT and you just hold it. A month later, similar to the previous example as you purchase from the dip market again and sell at high cost to take benefit.