Understanding stablecoin.

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Understanding stablecoin.

Please, I am still trying to understand the types of Stablecoin.


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Simply put, the follow the price of the currency they are attached to. So one unit of such crypto is equal to one unit of the respective peg currency, there are three:
1. Fiat-pegged: they follow the price of fiat currencies. This is good for when you want the stability of fiat on crypto platform. Suppose creating e-commerce stores that accept crypto, and to protect vendors against volatility you can accept fiat-backed stablecoins like USDT that are equal to USD
2. Crypto-pegged: they follow another crypto. This is good for cross-platform use of cryptos. Like WBTC is a coin that tracks BTC but it is on the Ethereum platform. So if you want exposure to BTC but want to limit yourself to only one wallet for instance or easily convert between ETH to BTC, you can use WBTC instead.
3. Algo-pegged: an algorithm determines their price. This is useful for when you want the price to be independent or relatively fixed based on supply and demand. The algorithm plays the part of a central bank which increases or decreases the supply of the currency thereby inflating or deflating the purchasing power of it.

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