A stablecoin, or stable cryptocurrency, refers to an asset pledged to the monetary value of something.
Stablecoins can be pledged to different assets such as an ounce of gold, or a fiat currency such us USD (United States Dollars) - EUR (EURO) - JPY(Japanese Yen), even their price could be bounded to a hotdog.
In short, stablecoins value is backed by entities (those entities could be centralized or decentralized) by holding the assets they represent or other valuable assets that act as collateral. You can find different stablecoins pledged and representing the same asset because of multiples entities and various methods to back their value.
In a volatile market like the cryptocurrency one, stablecoins are the perfect way to keep your assets on crypto (digital currency) without worrying about a price drop. This price stability was convenient for traders and holders when making business on the crypto space.
As we write this, stablecoins had found their way, adding tremendous value not only to every day trader but to a massive amount of institutions and companies. It's now easier to trade goods on the internet than never before. From anywhere, no matter who you are, you can access an electronic and stable peer to peer cash system by just connecting to the internet.
During the Covid-19 pandemic, it was necessary to find a way to send and receive money worldwide. Humanity realized that cash/paper money isn't the most practical and useful way to buy or sell goods. Just ten blocks could be far away enough for a person who cannot reach that distance.
The traditional banking system has proven to fail to accomplish this task as not everyone in the world is "Banked." Not everyone fulfills an "acceptable financial" profile to get a bank account, and not every place in the glove has a decent banking system (or even there is no bank at all).Safe, easy to send, and receive weightless money.
Imagine that you can have one million USD in your pocket and travel around the globe without worrying about someone realizing that you are holding that amount of money.
sending, and receiving it just with an internet connection and your smartphone. Imagine that you can't be robbed as you are the only one that can unlock that electronic wallet. Imagine that sending money is almost instant and without third parties verifying your balance.
Sounds great, right? All this is possible with stablecoins.
While depositing money in your bank gives you a new "virtual" balance when looking at your home banking dashboard, stablecoins are always under your control, and no one can move or use this money while you hold it (unless you want to).