The Stablecoin Trinity: Unveiling the Future of Stability in the Crypto Markets
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The stability provided by stablecoins makes them attractive alternatives to traditional fiat currencies, particularly in regions where currency volatility is a concern.
Stablecoins: Game-Changers or Dangerous Speculative Bubbles?
Stablecoins have rapidly gained prominence, serving as vital pillars of liquidity within decentralized finance (DeFi) applications, including decentralized exchanges (DEXes) and lending protocols. These digital assets provide stability, acting as bridges between the crypto and traditional financial realms, offering stability, transparency, and utility to users. In addition to being a medium of exchange, stablecoins are also intrinsically valuable as a store of value.
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The use of stablecoins as a medium of exchange is evident on over 80 percent of major centralized crypto exchanges. Further, stablecoins accounted for 45% of liquidity on DEXes in May 2022, highlighting their significance to the growth of the DeFi market.
However, not all stablecoins are created equal. This article explores the contrasting dynamics between collateralized stablecoins like Tether and USD Coin and algorithmic stablecoins like DAI and TerraUSD. Despite contributing to the stability of the crypto-asset ecosystem, different variants provide different levels of liquidity for decentralized trading.
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