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Types stablecoin

۱-backing physical currency

The most common type of stablecoins is the type with their physical currency bankroll. The physical currency, due to its high acceptance and backed by governments, has already accounted for the most financial transactions. Therefore, the use of this support for stablecoin causes more confidence in users. The physical currency is the national currency of the country that has issued it and it is actually the same paper currency in your wallet and bank account. Examples of physical currencies include USD, EUR, CHF, GBP and JPY. “Stablecoin, backed by physical currency 1: 1, means that 1 dollar stablecoin is equivalent to 1 dollar physical currency. This stablecoin is, in fact, the simplest and most concentrated of its kind.”

Advantages

Simplicity: the structure of this type of backing is easily understandable and understandable.
Stability: physical currencies are a stable asset as the state and the economy of a country support it. So there’s a guarantee that prices don’t fluctuate too much.
Reliable: stablecoins backed by physical currency can be considered the most reliable digital currency for ordinary users.

Disadvantages

Centralized: centralized structure is prone to vulnerability and various risks such as central institution bankruptcy, recession and …
It requires trust in the functioning of the central entity
External audits are required to validate accounts

How to perform transaction

How to transact this category of stablecoins is very simple and exactly the same as physical money. To do this, users must procure stablecoin with a ratio of 1 to 1 from the office and its exporting company. Companies providing these services are usually financial institutions of large countries. In order to transfer the system, you must trust these companies and be aware of their financial resources. After purchasing tokens, the user can use it to buy and sell on existing platforms such as Ethereum.

2-backing goods

This category of stablecoins is supported by commodities, commodities that are convertible to money and are interchangeable for transactions in the same market. The most commonly used commodity for collateral in this type of mode transactions is gold. Precious metals such as gold are often considered a good value reserve as they maintain their value well compared to other assets. For a gold-backed stablecoin, a Quinn represents a certain amount of gold (for example, 1 token equals 1 gram of gold). Physical gold itself is also stored in these types of transactions, usually with a trusted third party. Although this type of stablecoins is not as popular as the previous type, it is a good alternative for those looking tokens with a tangible bankroll and with real value such as precious metals.

Advantages

Its backing is real and tangible assets
Stability: its backing commodity price is relatively stable
Liquidity capability

Disadvantages

Centralized: the existence of a third party is required to guarantee the full functioning of the system
Auditing requires that the process is very time consuming and costly

How to perform transaction

Perhaps by hearing the complexity of the transaction in stablecoins with gold backing and other goods of this type of stablecoins Ferrari. In this system, the user must first buy gold with physical money by entering the trading platforms. The purchased gold will be removed by the interface company and will give the user a stablecoin instead. The smart tokens issued by the financial intermediary will then be entered into the trading network and the possibility of trading with them will be possible. In this process, to avoid common mistakes, the digital card is issued to reduce the percentage of mistakes in it to a minimum. Furthermore, intermediary companies may also be interconnected in several stages.

3 – backing cryptocurrency

These types of stablecoins are supported by other digital currencies, which are usually cryptocurrencies with huge market capitalization such as bitcoin (BTC) or Ethereum (ETH). Typically, these types of stablecoins instead of being only supported by a currency are a combination of their digital fiat currencies. This feature allows better risk distribution as the risk of oscillation of a particular cryptocurrency is much higher than the combined risk of cryptocurrencies. Moreover, stablecoin supported by a particular digital currency does not mean much because cryptocurrencies are highly volatile and can not be considered a good value storeroom.

Advantages

Decentralization
Efficient: its liquidity capability or conversion from one cryptocurrency to another, occurs quickly through blockchain.
Transparency: each transaction is registered in the public blockchain and provides full transparency and tracking capabilities.
No need for external clay account to control transactions

Disadvantages

Volatility: since the asset backing this type of stablecoins is cryptocurrencies, such currencies are inherently much more volatile than other assets such as goods or physical money
Instantaneous dissolution: if the value of cryptocurrencies falls below a certain threshold, this backing can be dissolved instantly
.

How to perform transaction

How to transact stablecoins with cryptocurrencies has a simple transaction system. In this system, the user receives the proportion of Stablecoin after storing his cryptocurrencies on the platform. For this system, there was no intermediary company, and after saving spontaneously, the Kevins are transferred to the user’s e-wallet.

4 – without backing

These types of stablecoins are the only categories that do not use any assets as backing and function like the central bank system. In fact, it uses an agreement mechanism to increase or decrease the supply of tokens, which is the same as the banknote printing process of central banks. As the total demand increases, a new supply for stablecoins is created to return prices to previous stable levels. The main goal is to get as close to ۱ 1 as possible.

Advantages

Decentralized: since any modifications are made on the chain, all data about stablecoins is stored in a secure and transparent ledger.
No need for collateral: no collateral is required to create new stablecoins. Because they are created or destroyed by an algorithm, and the only way to get a stablecoin is through exchange.
Stable: since the value is automatically adjusted based on the supply and demand of the market, the prices remain stable
.

Disadvantages

CompLexity: a law-based system is associated with complex logic

How to perform transaction

The process of working with backing-free stablecoins is also convenient. In this system, the user can receive their coins after the request. To avoid the pressure of demand for price fluctuations, this is done in a very short time. After that, the possibility of trading on the network will be provided for the user.

: What is Cryptousd

These types of stablecoins are the only categories that do not use any assets as backing and function like the central bank system. In fact, it uses an agreement mechanism to increase or decrease the supply of tokens, which is the same as the banknote printing process of central banks. As the total demand increases, a new supply for stablecoins is created to return prices to previous stable levels. The main goal is to get as close to ۱ 1 as possible.

AdvantagesCryptousd

Decentralized: since any modifications are made on the chain, all data about stablecoins is stored in a secure and transparent ledger.
No need for collateral: no collateral is required to create new stablecoins. Because they are created or destroyed by an algorithm, and the only way to get a stablecoin is through exchange.
Stable: since the value is automatically adjusted based on the supply and demand of the market, the prices remain stable

How to perform transaction

The process of working with backing-free stablecoins is also convenient. In this system, the user can receive their coins after the request. To avoid the pressure of demand for price fluctuations, this is done in a very short time. After that, the possibility of trading on the network will be provided for the user.

What was the purpose of designing stablecoin cryptousd

Stablecoins were presented to the market to deal with the inherent volatility of cryptocurrencies. Unlike other digital currencies that the price of stability not possible in this the traders from the fluctuating prices Benefit Benefit. stablecoins against the price of the digital currency from investors protect their