Cryptocurrency exchanges are making efforts to reduce the price volatility that has taken over the currencies. A growing number of major cryptocurrency exchanges are creating special stablecoin protocols to help the case. Crypto markets are free falling and have plunged 80 percent from their all-time high. Due to the crypto price volatility rages, exchanges are increasingly turning to stablecoins to protect their assets.
What is Stablecoin?
Stablecoin is a cryptocurrency designed to minimize the price volatility. Stablecoins are used as stores of value or units of account. The value of a stablecoin can be pegged to fiat currencies, or to exchange traded commodities. Stablecoin can be both centralized as well as decentralized.
The mechanics of a stablecoin are simple enough: a steward holds funds in a bank account corresponding to tokens they sell to users. The issue with stablecoin is the amount of trust the investment requires is huge. But the advantages can’t be denied: no long deposit processes from exchanges to bank accounts. The ability to secure funds in a dollar-denominated currency when not trading them, essentially stabilizing them.
Some stablecoin projects are straightforward. Tether, for example, holds its value because it has $1 USD for every 1 USD Tether (allegedly). While other stablecoin projects are more advanced. Advanced stablecoin projects use trading algorithms to manage supply and demand. The algorithms carefully balance supply and demand to ensure prices remain stable at all times.
Binance and Huobi
Major crypto trading platform Binance recently announced its endeavor into creating a new unified stablecoin market. Binance is currently the top exchange by volume – doing nearly twice the 24-hour volume of its nearest competitor. has announced that it is creating a new unified stablecoin market.
“Binance has renamed the USDT Market (USDT) to now be a combined Stablecoin Market (USDⓈ). This is to support more trading pairs with different stablecoins offered as a base pair. […] Please note that USDⓈ is not a new stablecoin: it is the symbol of Binance’s new stablecoin market.”
USDT will now be listed on Binance as USDⓈ – Binance deciding to use the Unicode symbol for an encircled S to denote a stablecoin. As per the exchange’s blog, it is building a base pair that would include all the stablecoins.
Huobi, a Singapore based exchange, too announced there outset to launch an all-in-one stablecoin program carrying a ticker named HUSD. HUSD represents four distinctive stablecoins: Paxos Standard (PAX), Circle USD (CUSD), TrueUSD (TUSD), and Gemini Dollar (GUSD).
Unlike a general stablecoin, whose value is pegged to an existing asset – potentially Gold or US Dollar, a stablecoin system is pegged to the performance of stablecoins themselves. For instance, an exchange can create its stable private token to represent the total stablecoins on its platforms. At most, such durable tokens spread risks across different stablecoins. So even if one of them loses the peg it promised, others can take over as quickly as possible.