Crypto banking and decentralized finance, explained | Daily Current Affairs 2021

Crypto banking and decentralized finance, explained

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Stablecoins

Stablecoins: According to The Block, a publication dedicated to cryptocurrency, the number of stable coins in circulation globally has jumped from $29 billion in January to $117 billion as of early September.

Note: The development of Bitcoin and thousands of other cryptocurrencies in a little over a decade has changed the definition of money.

What are stablecoins?

  • Cryptocurrency is very volatile, making it less practical for transactions like payments or loans. Prices tend to vary a huge amount in a short span of time.
  • Take for example Bitcoin. Its price goes up or down as much as 15-20% even with a single tweet by billionaire Elon Musk.
  • That’s where stablecoins come in.
  • Stablecoins are cryptocurrencies without volatility.
  • They share a lot of the same powers as other cryptos, but their value is steady, more like a traditional currency, i.e. the US Dollar, Indian Rupee, etc.
  • They are meant to provide the steady value of government-issued money in digital form for blockchain transactions, but they are issued by private entities.
  • Popular dollar-tied tokens include Tether and USD Coin.
  • The first stablecoin, created in 2014, was Tether.

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