In the cryptocurrency market it is necessary to know many of the terms used to help us to be always in context of the technical explanations and statistics, in this article we bring some basic terms to continue contributing in this wide world.
What are stablecoins?
They are cryptocurrencies that are anchored to a fiat currency, either dollar, euro or material goods such as gold, silver, oil or real estate, there are also cases in which they are associated to another currency. The main motivation to create a stablecoin is to try to give stability to investors in times of volatility.
Stablecoins are differentiated by groups:
First Group
Collateralized or backed
,
which are associated with another external security these may be representing in a 'fiat' currency either the dollar, euro, and any other international currency
.
Such like: Tether (USDT),Gemini Dollar (GUSD), USD Coin (USDC),True USD (TUSD), DAI (MakerDAO) among others.
Backed in another currency or assets:
basically this type of currencies are leveraged to another currency, which has its value backed in the collateralized group, so to acquire such currency you are not directly buying the stable currency but the collateralized, users must leave on deposit more than necessary usually a 1:2 ratio, ie double. This mechanism is called "overcollateralization" and implies leaving an excess deposit in exchange for some type of financing to reduce the risk. In this way, users could "hedge" against the possible fall in the value of this cryptocurrency.
Such like: Dai, the value of which is backed by ETH,TerraUSD (UST)
Backed by other assets (gold, real estate, etc.):
In these models the cryptocurrency maintains its value stable by "anchoring" it to the price of an asset.
Such like: AABBG,Pax Gold (PAXG),CACHE gold (CGT)
Second group:
Algorithm-controlled
They are those that use only algorithms to avoid price fluctuations. In these models, it is the blockchain itself that controls the volatility of the coins through algorithms, These algorithms work in a decentralized way through smart contracts and their fundamental objective is to keep the token attached to the dollar by controlling its stability, they work on the basis of supply and demand, increasing or decreasing the supply of money in the blockchain.
Such like: Terra (LUNA),Ampleforth (AMPL).
Public and private stablecoins
Private stablecoins are those issued by commercial companies and public stablecoins are issued by central banks.
To date, private companies have been the pioneers in the development of stablecoins. This is due to the barriers faced by central banks seeking to offer digital fiat currencies. Users will be able to use an app to convert their fiat deposits into MUFG coins. They can then be used to make payments in stores and restaurants and can be transferred to other users' accounts.
An example of the development of stablecoins in the private sphere is the launch of a U.S. dollar stablecoin by Circle. This is a payments company backed by Goldman Sachs, with support from Coinbase. Circle USDC, runs on the Ethereum blockchain and is intended to be used by customers for payments and transactions within the cryptocurrency space.
Stable cryptocurrencies, also called stablecoin and stable tokens, are a solution to control abrupt price changes. They serve to allow users to protect themselves in times when the price of cryptocurrencies is in a downward price phase. A parity is established with fiat currencies with the intention of establishing a mechanism that provides stability within cryptocurrencies. Each one seeks its own mechanism, some backed by fiat money, others by cryptocurrencies, some by commodities and others are simply algorithms.
All have positive and negative aspects. Those backed by fiat money and commodities force us to trust and rely on the good faith of third parties. On the other hand, we have those based on cryptocurrencies and algorithms, which eliminate the part of trust in third parties and the good faith of third parties. Especially those based on fiat money and commodities, we will have to see how they deal with attacks from regulators and the emergence of CBDCs.
What are AltCoins?
Unlike the first crypto world currency Bitcoin (BTC), the term AltCoins means alternative currencies and end up being any cryptocurrency other than this one. There are many alternative currencies and I dare say that almost weekly an infinite number of tokens are created to finance different projects which generates a very dynamic list.
What do alternative cryptocurrencies or altcoins offer?
Innovation, utility, decentralization, transparency.
What do altcoins bring to the Bitcoin ecosystem?
All these projects have different approaches, but they bring diversity and growth to the parent currency. Since most of them are related or interact with it.
Innovation is achieved with competition. If there is no one questioning a product or a model, it is being taken as the best or the best that can be offered and not looking to improve it.
The fact that there are so many cryptocurrencies and so many projects do nothing but benefit from each other. We must bear in mind that there are many that do not add value, they are simply a simple copy of the code and the idea, applying cosmetic elements. This is where the greatest contribution of altcoins to the Bitcoin and cryptographic ecosystem in general lies.
Negative points of altcoins:
Speculation.
Short life cycles due to not having a consolidated development team or communities.
Duplicity:There are many projects that are almost the same as others with slight cosmetic changes and have the sole purpose of being a speculative tool and get rich quick tool.
List of some altcoins and projects that I personally find interesting.
Ether (ETH):
Ether is the currency of Etherium, a decentralized computing platform. This computing platform allows running applications on this distributed network, transactions are powered by Ether and manage smart contracts.
Solana (SOL):
Like any other blockchain, Solana has a native cryptocurrency called SOL that functions as a utility token. The SOL token is required for payment of transaction fees and for deploying and interacting with smart contracts.
Binance Coin (BNB):
It is the official cryptocurrency of the cryptoexchange, Binance. This coin was born to support transactions within this same platform. In fact, you could buy this coin to pay the commissions derived from buying other cryptocurrencies and get a big discount. Binance developers try to increase the importance of their token through blockchain-related projects that can be funded by the users themselves with Binance Coins.
Cardano (ADA):
Cardano is the representation of the so-called 3rd generation of the blockchain, which tries to solve the scalability problems of 2nd generation blockchains such Etherium.
Tehter (USDT):
This is a stablecoin. This means that all such currencies in circulation are backed by an equivalent amount of traditional fiat currencies, such as the dollar or the euro. It was designed to build a bridge between fiat currencies and cryptocurrencies and offer stability, transparency and minimal transaction fees to users.
Polkadot (DOT):
We could define it as a blockchain protocol that tries to connect the different existing blockchains to a universal blockchain.
Ripple (XRP):
Ripple's main goal is to connect banks, payment providers and digital asset exchanges, enabling faster and more cost-effective global payments. Like Bitcoin, Ripple is a fully secure and encrypted system whose transaction information is public, but not the payment information. It is a confidential system where the sender and receiver are the only ones who have the information and the code that decrypts it.
Uniswap (UNI):
It is a complex software that runs on the Ethereum blockchain and allows decentralized "swaps" (exchanges). It works with the help of unicorns. In Uniswap, traders can exchange Ethereum tokens without trusting their funds to anyone.
Litecoin (LTC):
It is an alternative to Bitcoin. It has a higher limit than Bitcoin and there are currently about 60 million Litecoin in circulation.
Chainlink (LINK):
Chainlink has become one of the most widely used projects in the cryptocurrency arena. It is a decentralized oracle service capable of bringing external data to Ethereum smart contracts. In other words, it connects blockchains to the real world.
