The most commonly known stable coin is Tether. It is a cryptocurrency that buys one American Dollar from the market before issuing one tether. This means that when one American Dollar leaves active circulation, one Tether enters active circulation. Thus, the price of Tether has stayed stable over the years. A swing of fewer than 10 cents is unheard of in the crypto world. Except, in cases of stablecoins such as Tether (TICKR: USDT).
It was only a matter of time for people to begin minting coins and pegging it to a FIAT currency. Some even tried to peg it to commodities. It is flawed for the same reason that most Americans blame the Chinese for. A Dirty Float. During the Bretton Woods conference of 1944, the top economists of 44 countries arrived at the same conclusion. Maybe, a fixed-exchange-rate system could bring the world’s economic state to behave.
Coming back to stablecoins, they too claim to have established a fixed-exchange-rate system that enables a simple transition from traditional currencies to cryptocurrencies. Surely, if they build it, they would come!
Even though the top 100 bitcoin wallets hold a vast majority of the bitcoins, the community believes in them because bitcoin is decentralized. Bitcoin is a parallel currency. Bitcoin is not affected by the price of the FIAT currencies. The recent downturn of the crypto-markets has taken us back to 1944. The top economists are contemplating stablecoins as a solution to help us sail through these tumultuous times. Fixed-exchange-rate systems led to an economic depression almost 50 years ago. Stablecoins, if left unchecked will make history repeat and kill the decentralization movement as we know it.