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what is a stablecoin

What is a Stablecoin

As the world of cryptocurrency becomes more complex, investors are looking for ways to reduce volatility and protect their assets. One solution that has gained popularity in recent years is stablecoins.

A stablecoin is a digital currency with its value pegged to an asset, such as gold or the US dollar. The stability of the peg ensures that the coin’s value doesn’t fluctuate wildly like other cryptocurrencies, making it a more attractive option for payments and store of value.

Unlike traditional fiat currencies, which are subject to inflationary pressures, stablecoins are designed to maintain their purchasing power over time. This characteristic makes them an appealing choice for investors seeking a hedge against inflation.

In addition, because they are digital, stablecoins can be quickly and easily transferred between parties without the need for a central authority. As a result, they have the potential to revolutionise the way we send and receive money.

Understanding Stablecoins

In contrast to traditional cryptocurrencies like Bitcoin, which can be highly volatile, stablecoins aim to provide price stability and minimise price swings. This feature makes them attractive to investors who want the potential upside of cryptocurrency without the added risk of volatility.

There are several different ways these digital assets can achieve price stability. However, the most common approach is to peg the value of the coin to a fiat currency or other asset. For example, USD-backed stablecoins are pegged 1:1 to the US dollar, meaning that a real-world US dollar is held in reserve for each coin in circulation. This process helps ensure that the stablecoin remains pegged to its target currency, providing much-needed stability in the crypto markets.

Other popular stablecoins include those pegged to gold or even crypto assets like Ethereum. Whatever the method, the goal is always the same: to create a digital asset that investors can use as a reliable store of value and medium of exchange.

As interest in cryptocurrency continues to grow, stablecoins are likely to become an increasingly important part of the digital currency landscape.

How do stablecoins work technically?

The technical mechanism behind stablecoins can vary depending on the type of coin. For example, some stablecoins are backed by a reserve of fiat currency, while a commodity like gold may support others.

  • Fiat Collateralised:

The most common type of stablecoin is the fiat-backed variety. As the name suggests, these coins are pegged to a specific fiat currency, such as the US dollar or Euro. Each coin is backed by a real-world asset held in reserve to maintain the peg. For example, for every USD-backed stablecoin in circulation, a US dollar is stored in a bank account.

If the price of the stablecoin begins to fall, the issuer can buy back coins from the market to maintain the peg. Similarly, if the value of the stablecoin starts to rise, new coins can be issued and sold on the market to bring the price back down.

Fiat-collateralised stablecoins are the most popular type of coin due mainly to their simplicity. However, they are also the most centralised, requiring a trusted third party to hold and manage the reserves.

  • Crypto Collateralised:

Crypto-collateralised stablecoins are coins backed by a reserve of cryptocurrency rather than fiat currency.

This approach has a number of advantages over fiat-collateralised stablecoins. First, it eliminates the need for a central authority to hold and manage the reserve. Second, it provides a hedge against fiat currency collapse, as the value of the cryptocurrency backing the coin is not linked to any single fiat currency.

The main downside of crypto-collateralised stablecoins is that they are subject to the same volatility as the cryptocurrency they are backed by. For example, if the price of Ethereum were to crash, so would the value of Dai.

  • Algorithmic:

Algorithmic stablecoins are a newer type of coin that use complex algorithms to preserve a peg to a specific asset, often USD. The advantage of this type of coin is that it should theoretically be much more resistant to sudden changes in market conditions, as the algorithms can adjust quickly to buy or sell the underlying asset.

This type of stablecoin offers a good middle ground between the security of a fiat-backed coin and the decentralisation of a crypto-collateralised currency.

The downside of this approach is that it is very complex, and there is a risk that the algorithms could fail, leading to a loss of value.

Use cases for stablecoin

Stablecoins have several potential use cases within the cryptocurrency ecosystem and beyond.

  • Hedge against volatility

The most obvious use case for stablecoins is to provide a hedge against the volatility of cryptocurrencies. For example, if you hold Bitcoin and the price drops, you can swap your Bitcoin for a stablecoin and mitigate losses.

This hedge is particularly useful for traders and investors who need to make a quick profit or loss change in response to the market. It also allows you to hold your position without worrying about your asset’s value fluctuating wildly.

  • Stable price-pegging

Another use case for stablecoins is to provide a stable price-pegging mechanism for other assets. For example, if you are selling goods or services denominated in USD but you only accept cryptocurrency, you can use a USD-backed stablecoin to ensure that your prices remain stable.

This stable price-pegging can also be helpful for smart contracts, as it allows you to create contracts that are not affected by sudden changes in the underlying asset price.

  • Blockchain interconnection

Stablecoins can be utilised to interconnect different blockchain networks. For example, if you want to use the Ethereum network but store your assets on the Bitcoin network, you can use a stablecoin pegged to USD to move your assets between the two networks.

This type of interconnection is vital for developing the cryptocurrency ecosystem, as it allows different blockchain networks to interact without the need for a centralised exchange.

  • Earn interest

As stablecoins become more popular, there is an increasing demand for ways to earn interest on them.

There are many ways to earn interest on stablecoins, such as lending them out through a peer-to-peer lending platform or staking them in a proof-of-stake cryptocurrency.

With AQRU, you can enjoy returns of up to 7% interest on your stablecoins by simply holding them in your AQRU account.

How to get stablecoins

At AQRU, we want to make achieving high-yield interest on your stablecoins as easy as possible. Our easy-to-use platform and mobile app make it easy to monitor and manage your account from anywhere, at any time. And with our competitive returns, paid daily and tracked to the second, you can start earning competitive returns on your investment immediately.

We’ve created a step-by-step guide in our dedicated Help Centre to help you get up and running.

So why wait? To get started, simply:

Deposit

deposit

Deposit funds into your new AQRU wallet via bank transfer, credit card or crypto transfer.

Invest

investing in usdc

Invest in stablecoins with confidence and security.

Earn

earn

Sit back and enjoy earning daily interest on your investment.

Advantages of stablecoins

Stablecoins offer several advantages over traditional fiat currencies and other cryptocurrencies:

  • Price stability

Stablecoins aim to maintain a stable price, regardless of the volatility on the broader market. This feature makes them ideal for use cases where price stability is essential, such as payments and smart contracts.

  • Flexibility

Developers can use stablecoins in a variety of different ways, for both cryptocurrency related applications and traditional applications. This flexibility makes stablecoins a versatile tool that can be used in a wide range of situations.

  • Security

Stablecoins are built on blockchain technology, which provides a high level of security and transparency. This quality makes them a safe and secure way to store and transfer value and allows users to track the movements of their assets and ensure that they are being used as intended.

  • Remittance

Stablecoins can be used to send and receive international payments quickly and cheaply. This attribute makes them an ideal tool for remittances, as they can help reduce the costs of sending money abroad.

  • Regulated & audited

Stablecoins are subject to regulatory scrutiny, and third-party organisations often audit them. This process provides users with a high degree of security, ensuring that the assets are managed safely and transparently.

Be aware of the risks/volatility

Despite the advantages of stablecoins, it is crucial to be aware of the risks associated with them:

  • Limited price appreciation

As stablecoins typically maintain a stable price, they may not appreciate in value in the same way as other cryptocurrencies. As a result, they may not be suitable for investors looking to maximise their returns quickly.

  • Loss of capital

There is a risk that you could lose your entire investment if the price of the stablecoin falls sharply. However, you can minimise this risk by building a portfolio of different digital assets rather than investing a large amount of money in a single stablecoin.

  • Regulatory changes

The regulatory environment around stablecoins is constantly changing, which could have a negative impact on their price. Therefore, it is essential to keep up to date with the latest developments in this area to ensure that you are aware of any potential risks.

Earn more on the stablecoins you buy, hold or transfer!

Are you looking to invest in stablecoins? Then, look no further than AQRU. Our platform offers competitive returns, compounded daily and tracked to the second – so you can stay on top of the market. And with our user-friendly interface, it’s easy to get started.

Enter an amount into our crypto interest calculator below and discover how much your money could be earning.

Stablecoins
USDC Maple USDC Maple Not currently accepting new deposits +7%
USDC USDC No lock-in period +3%
Crypto staples
Bitcoin Bitcoin No lock-in period +1%
Ethereum Ethereum No lock-in period +1%
Maple ETH Maple ETH Not currently accepting new deposits +5%
Start Earning Today

This calculator is for informational purposes only.

Frequently Asked Questions

With AQRU, you can earn competitive returns on your stablecoin investment immediately.

Why should I invest in stablecoins?

When it comes to cryptocurrency, there are a lot of different options out there. But if you’re looking for a typically more stable investment, stablecoins are the way to go. As their name suggests, stablecoins are designed to maintain a stable price, making them a useful asset class for investors who want to preserve the value of their investment. There are several compelling reasons to invest in stablecoins, including:

  • They can be backed by assets or fiat currencies, meaning they have a lower risk of volatility than other cryptocurrencies.
  • They can be subject to regulatory scrutiny, providing users with a high degree of security.
  • Many stablecoins offer higher interest rates than traditional investments.
What are the interest rates available on stablecoins?

Here at AQRU, we believe that everyone should have access to great interest rates. That’s why we offer some of the highest returns in the industry on our stablecoins. With our user-friendly platform, you can earn up to 7% APY on your investment, compounded daily and tracked to the second. So whether you’re saving for a rainy day or investing for the future, AQRU is here to help you make the most of your money. We’re proud to offer a fair, transparent, and secure platform that puts you in control of your finances.

How does AQRU generate such high rates of return?

Boost your earning potential when you invest in stablecoins with AQRU. With our intuitive interface and cutting-edge technology, we provide our users with a simple way to earn competitive returns on their investments.

To achieve our consistently high rates of return, we lend funds to retail and institutional borrowers. These loans are usually over-collateralised, meaning assets worth more than the loan itself are held as security. This strategy allows us to protect our investors’ money if a borrower cannot repay their loan. We use the interest earned from these loans to generate a return for our investors.

Participating in decentralised exchanges is another way we generate high returns for our users. Funds we deposit into these exchanges are insured against hacking so that customers can invest with peace of mind.

What's the minimum amount I need to start a stablecoin investment?

We want as many people as possible to benefit from our platform, so we have a minimum investment amount of just €100. This low entry barrier means that everyone can start earning great interest rates on their stablecoins, regardless of how much they have to invest.

Is AQRU secure?

At AQRU, it’s important that you feel safe when using our service. That’s why we go to great lengths to ensure that your data is safe and sound. For example, we use two-factor authentication to protect your account, advanced encryption to safeguard your data, and Multi-sig wallets to keep your funds secure.

In addition, our insurance policy covers the value of your investment against hacking-related losses, so you can rest assured that your assets are in good hands.

Do you charge any fees?

We believe that you deserve to know exactly what you’re paying for. That’s why we’re completely transparent with our pricing and don’t charge any hidden fees. We want you to be confident that you’re getting the best value for your money without any surprises. We don’t charge for depositing or transferring funds into your AQRU wallet; even withdrawing your funds in fiat is entirely free. We charge a flat fee of $20 for crypto withdrawals (and only $10 for Bitcoin).

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Make money from stablecoins with AQRU

If you’re ready to take your investing to the next level, AQRU is the perfect platform. With our high-interest rates, cutting-edge technology, and user-friendly app, we make it easy for you to earn significant returns on your investment. Whether you’re a seasoned investor or just getting started, AQRU has the tools and resources you need to succeed.

Sign up today and start earning the returns you deserve!

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