✳️ Types of Stablecoin or stable currency:

Stablecoin is a type of cryptocurrency whose value is fixed.

This simple line of definition becomes so important that the G7 group, consisting of the seven largest economies in the world, considered stablecoins a threat to the global economy in a report in 2019. Stablecoins have countless advantages and disadvantages that would take hours and dozens of articles to discuss. Therefore, when it comes to an existing Stablecoin or the claim of launching a new Stablecoin, due to the lack of specific laws and possible threats and opportunities, it requires caution and careful examination by experts from various angles and dimensions.

With this introduction about the importance of Stablecoins, I intend to introduce their types in this article:

1⃣ Stablecoin backed by fiat currency

The most common and technically simplest type of stablecoin. In this type, each unit of stablecoin is equivalent to one unit of its fiat currency. That is, for each unit of that stablecoin that is in circulation, one unit of its backing fiat currency is kept in a specific bank account. For example, Tether is a stablecoin backed by the US dollar. Therefore, for each Tether, one US dollar is kept in the Tether treasury, and whenever a user wants, he can deliver the Tether to the treasury of this stablecoin and cash its dollar equivalent. The validity of this type of Stablecoin requires regular and accurate audits of the financial books and bank accounts of the stablecoin management company. At any moment, the number of stablecoins in circulation should be the same as the fiat currency in the treasury, and there should be no discrepancy. Besides Tether, there are other stablecoins of this type, such as USDC or TUSD and...

2⃣ Commodity-backed stablecoin

A commodity is a product that can be traded with similar products. Gold, oil, basic metals, etc. are considered a commodity. Although commodity-backed stablecoins do not have a fixed value compared to the dollar, their value is always set compared to their support. For example, DGX is a gold-backed stablecoin, and each unit of DGX is always equal to 1 gram of gold, which is kept in a specific treasury in Singapore, and the balance of the treasury and its equality with the number of DGX in circulation is continuously audited. This type of stablecoin, because its backing is a valuable asset, has advantages and disadvantages compared to stablecoins backed by fiat currencies.

3⃣ Stablecoin with cryptocurrency support

This type of stablecoin is similar to the previous ones, with the difference that it is backed by valuable cryptocurrencies in the market, such as Bitcoin, Ethereum, etc. The advantage of this type of stablecoin is that it allows us more transparency and decentralization. Since the support of this type of stablecoins can be traced on blockchain networks, all users can ensure the existence of support and its non-contradiction with stablecoins in circulation at any moment. For example, the stablecoin DAI as a decentralized stablecoin is equivalent to $1, which is backed by Ethereum. The design and maintenance of such stablecoins have their complexities, and mainly due to their dependence on other currencies, they may have serious problems in regulating supply and demand during extreme market fluctuations.

4⃣ Stablecoin without support

In this model of stablecoins, there is no news of any support, either fiat currency, commodity, or cryptocurrency. In this type of Stablecoin, the supply of coins is adjusted according to the demand through an algorithm or smart contract so that the price remains constant. Therefore, in this type, the circulating coin can decrease or increase. For example, when the demand is high or the price has increased, by offering a new coin or auctioning it, they try to reduce the price and keep it stable, and when the demand is low or the price has decreased, by buying and collecting coins in circulation, they increase and fix the price. They keep and all of this can be tracked and checked transparently through the smart contract or its stablecoin blockchain network. This complex mechanism is done using smart contracts to regulate supply and demand in a completely decentralized manner to keep the stablecoin price fixed. What becomes important in the evaluation of these types of stablecoins, which are usually token-like in other blockchain networks, is the evaluation of Smart Contracts and their supply and demand regulation mechanism.

Therefore, a stablecoin that claims to keep the price fixed without support must include functions related to regulating supply and demand in its smart contract, and its transaction history must be clear proof of this, which can be reviewed and evaluated by experts. The supply and demand adjustment mechanism and the possibility of increasing and decreasing the circulating token are very important in this type of stablecoin. No one can keep the price of an unbacked stablecoin fixed without having a supply and demand adjustment mechanism, and this mechanism should be transparently checked both in the white paper and in the smart contract. One of the most powerful projects working in this field was Basecoin or Basis, which was stopped due to regulatory laws in America. The implementation of algorithmic or unbacked stablecoins is technically very complex and requires maximum transparency.

A stablecoin that does not fall into any of the above categories has no technical value and is probably a scam. If you look carefully, what is important about a stablecoin in all categories is the need for transparency. Stablecoins backed by fiat or commodity currency require detailed and continuous auditing, and stablecoins of the type backed by cryptocurrency or algorithm require technical clarification, which can only be achieved by accessing blockchain network data, checking smart contracts, accessing project source code, monitoring network transactions and The history of supply and demand control is done and most importantly technical documents related to supply and demand regulation mechanism are possible.

✳️ Types of Stablecoin or stable currency:

Stablecoin is a type of cryptocurrency whose value is fixed.

This simple line of definition becomes so important that the G7 group, consisting of the seven largest economies in the world, considered stablecoins a threat to the global economy in a report in 2019. Stablecoins have countless advantages and disadvantages that would take hours and dozens of articles to discuss. Therefore, when it comes to an existing Stablecoin or the claim of launching a new Stablecoin, due to the lack of specific laws and possible threats and opportunities, it requires caution and careful examination by experts from various angles and dimensions.

With this introduction about the importance of Stablecoins, I intend to introduce their types in this article:

1⃣ Stablecoin backed by fiat currency

The most common and technically simplest type of stablecoin. In this type, each unit of stablecoin is equivalent to one unit of its fiat currency. That is, for each unit of that stablecoin that is in circulation, one unit of its backing fiat currency is kept in a specific bank account. For example, Tether is a stablecoin backed by the US dollar. Therefore, for each Tether, one US dollar is kept in the Tether treasury, and whenever a user wants, he can deliver the Tether to the treasury of this stablecoin and cash its dollar equivalent. The validity of this type of Stablecoin requires regular and accurate audits of the financial books and bank accounts of the stablecoin management company. At any moment, the number of stablecoins in circulation should be the same as the fiat currency in the treasury, and there should be no discrepancy. Besides Tether, there are other stablecoins of this type, such as USDC or TUSD and...

2⃣ Commodity-backed stablecoin

A commodity is a product that can be traded with similar products. Gold, oil, basic metals, etc. are considered a commodity. Although commodity-backed stablecoins do not have a fixed value compared to the dollar, their value is always set compared to their support. For example, DGX is a gold-backed stablecoin, and each unit of DGX is always equal to 1 gram of gold, which is kept in a specific treasury in Singapore, and the balance of the treasury and its equality with the number of DGX in circulation is continuously audited. This type of stablecoin, because its backing is a valuable asset, has advantages and disadvantages compared to stablecoins backed by fiat currencies.

3⃣ Stablecoin with cryptocurrency support

This type of stablecoin is similar to the previous ones, with the difference that it is backed by valuable cryptocurrencies in the market, such as Bitcoin, Ethereum, etc. The advantage of this type of stablecoin is that it allows us more transparency and decentralization. Since the support of this type of stablecoins can be traced on blockchain networks, all users can ensure the existence of support and its non-contradiction with stablecoins in circulation at any moment. For example, the stablecoin DAI as a decentralized stablecoin is equivalent to $1, which is backed by Ethereum. The design and maintenance of such stablecoins have their complexities, and mainly due to their dependence on other currencies, they may have serious problems in regulating supply and demand during extreme market fluctuations.

4⃣ Stablecoin without support

In this model of stablecoins, there is no news of any support, either fiat currency, commodity, or cryptocurrency. In this type of Stablecoin, the supply of coins is adjusted according to the demand through an algorithm or smart contract so that the price remains constant. Therefore, in this type, the circulating coin can decrease or increase. For example, when the demand is high or the price has increased, by offering a new coin or auctioning it, they try to reduce the price and keep it stable, and when the demand is low or the price has decreased, by buying and collecting coins in circulation, they increase and fix the price. They keep and all of this can be tracked and checked transparently through the smart contract or its stablecoin blockchain network. This complex mechanism is done using smart contracts to regulate supply and demand in a completely decentralized manner to keep the stablecoin price fixed. What becomes important in the evaluation of these types of stablecoins, which are usually token-like in other blockchain networks, is the evaluation of Smart Contracts and their supply and demand regulation mechanism.

Therefore, a stablecoin that claims to keep the price fixed without support must include functions related to regulating supply and demand in its smart contract, and its transaction history must be clear proof of this, which can be reviewed and evaluated by experts. The supply and demand adjustment mechanism and the possibility of increasing and decreasing the circulating token are very important in this type of stablecoin. No one can keep the price of an unbacked stablecoin fixed without having a supply and demand adjustment mechanism, and this mechanism should be transparently checked both in the white paper and in the smart contract. One of the most powerful projects working in this field was Basecoin or Basis, which was stopped due to regulatory laws in America. The implementation of algorithmic or unbacked stablecoins is technically very complex and requires maximum transparency.

A stablecoin that does not fall into any of the above categories has no technical value and is probably a scam. If you look carefully, what is important about a stablecoin in all categories is the need for transparency. Stablecoins backed by fiat or commodity currency require detailed and continuous auditing, and stablecoins of the type backed by cryptocurrency or algorithm require technical clarification, which can only be achieved by accessing blockchain network data, checking smart contracts, accessing project source code, monitoring network transactions and The history of supply and demand control is done and most importantly technical documents related to supply and demand regulation mechanism are possible.