Stablecoin is a type of cryptocurrency with "pegged" attributes, generally linked with assets that have a stable price, such as fiat currency and precious metals.

How are stablecoins classified?

1. Stablecoins backed by fiat currency This category of stablecoins is usually pegged to traditional fiat currency, with the fiat collateral stored in a bank account off-chain as a reserve for the on-chain token. Users can convert to the stablecoin at a fixed exchange rate from the fiat currency—examples: $USDC, $BUSD.
2. Stablecoins backed by cryptocurrency. This type of stablecoin involves using cryptocurrency as collateral and issuing the stablecoin at a fixed rate. Due to the high volatility of cryptocurrencies, over-collateralization is typically required. Example: $DAI. Stablecoins backed by cryptocurrency are managed through intelligent contracts for minting and destruction. For instance, DAI is pegged to the US dollar. If you want to mint 100 DAI (worth $100) due to market volatility, you need to provide $150 worth of cryptocurrency as collateral (1.5x collateral). To redeem the collateral, you need to pay back 100 DAI. But if your collateral falls below a certain collateralization ratio or loan-to-value, it will be liquidated.
3. Algorithmic stablecoins are a type of stablecoin created through mathematical definition. Examples: $UST, $FEI. They adjust their supply as needed to maintain a constant value (e.g., 1 USD).

Stablecoins' role in crypto and beyond：

1. The uses of stablecoins within the crypto-asset ecosystem have multiplied in recent years. Initially, stablecoins were mainly used as a relatively safe "parking space" for crypto volatility and as a bridge to trade crypto-assets. But with the rise of decentralized finance (DeFi) applications, stablecoins have gained new uses.
2. Stablecoins provides more deposit and withdrawal channels.
3. Stablecoins provide most of the liquidity in DeFi applications, such as decentralized exchanges and lending protocols.
4. It's good to pay. Stablecoins make cross-border payments faster and cheaper.
5.  High stability. Cryptocurrency volatility is high; stablecoins can effectively curb the volatility so that users can timely lock in gains and stop losses during the investment process.

What are the risks associated with stablecoins?

1. Lack of transparency, Tether ($USDT) and USD Coin ($USDC) have yet to release a full public audit.
2. Unable to guarantee that the stablecoin will maintain a fixed peg with the fiat currency.
3. Currently, the fiat-backed stablecoins in the market are highly centralized, the issuers hold the collateral, and users need to know the whereabouts of the collateral.
4. Stablecoins and algorithmic stablecoins, which are backed by cryptocurrencies, rely on the community. Due to the governance structure of cryptocurrencies, some critical decisions are driven by community consensus, and the accuracy of these decisions is still to be determined.

Which stablecoins are currently available on BingX?

There are presently three stablecoins available on BingX, all of which are fiat-backed stablecoins.

$TUSD, $USDC, $BUSD, $PAXG

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Summary

Stablecoins have a lot of current uses, but they still have the characteristics of cryptocurrencies and therefore have similar risks. Before investing, be sure to consider the risks involved fully.