Exploring Stablecoins: Connecting the Financial Bridge between Reality and Virtuality

A stablecoin is a type of cryptocurrency that maintains a fixed exchange rate with a specific asset. It is a new category of currency that emerged after the development of blockchain technology, characterized by programmability.

Taking USDT as an example, it is a token pegged to the US dollar at a 1:1 ratio. In addition to USDT, there are various dollar-pegged stablecoins such as TUSD, GUSD, and other stablecoins pegged to different currencies like BitCNY.

It is worth noting that the funds in WeChat and Alipay belong to the category of electronic currency, rather than stablecoins. In the future, if the central bank issues a digital currency pegged to the RMB, it can be considered a type of legal stablecoin.

Stablecoins primarily maintain their stability through three methods:

1. Fiat currency collateral: For example, USDT claims that for every token issued, there is 1 dollar held in reserve.

2. Digital Asset Collateral: For example, BitCNY, users can collateralize BTS to obtain BitCNY, and the system will adjust according to the changes in the value of the collateral.

3. Algorithm Adjustment: Similar to the discontinued Basis project, it attempts to maintain stability by adjusting the supply.

Despite its limited application in daily life, stablecoins play an important role in the cryptocurrency space. They not only serve as a standard for value measurement but also have a hedging function during market turbulence. However, there are also some issues with existing stablecoin models:

• Fiat-collateralized stablecoins may face questions regarding insufficient transparency.
• Collateralized digital assets may trigger a chain reaction due to severe fluctuations in collateral prices.
• The reliability and effectiveness of algorithmic adjustment types are still controversial.

As countries actively research national digital currencies, fiat digital currencies may become a future trend as an official stablecoin. This new form of currency is expected to play an important role in improving financial efficiency and promoting inclusive finance.