Stablecoins 101

[dkbit98]

It's probably a safe assumption that the word "stable" in "stablecoin" means stable against the US dollar, not necessarily stable value in general. But I do agree that bitcoin is the "safest" hold, the one that's far more guaranteed to not be taken away from you; short-mid term volatility aside.

There are stable coins pegged to other fiat currencies and not just us dollar, for example Tether has it's own version of EURT traded on Bitfinex (read Tether exchange) and Uniswap, other stable coins are even backed by Gold (yes, including Tether Gold), and other real world assets are also used.
When I look at long term chart for any fiat currency including dollar I am only seeing that it is only losing it's value and situation is getting much worse in last few years.
Bitcoin chart on the other hand, looks a lot like reversed dollar chart and we are going up long term.  

  VS  

[The Sceptical Chymist]

Of course, you have to buy stablecoin first, but then when you have it you get a big advantage because you completely bypass the banking system and stablecoin allows you to do almost instant transactions. Let's say I have the option to buy stablecoins at my local crypto exchange directly for cash or through a bank account, which is almost instantaneous - and then I can send that stablecoin to any crypto exchange in the world.

OK, that explanation actually makes sense--especially when combined with the quote from Coinbase about how long it takes to transfer money to them if you're not a US resident.  So buying a stablecoin on a local exchange and then using it as a proxy for fiat on the exchange you really want to use makes the trading process a whole lot faster.

Why didn't anyone just say that?  I get the feeling some members here are just shitposting about stablecoins or that there's more to the story as to why they're so useful.  I offered merits to anyone who could explain to me what their major advantage is, and so far only you, Lucius, have given me some insight into my question.  The offer of merits still stands if someone can provide me with a dumbed-down explanation of why coins like USDT protect you from volatility (though your answer might be the best one).

[Lucius]

So buying a stablecoin on a local exchange and then using it as a proxy for fiat on the exchange you really want to use makes the trading process a whole lot faster.

That's right, it really makes sense to use this tactic to save time, and when your money is literally trapped for 3-5 days (or even longer) you realize you have to look for an alternative.

Why didn't anyone just say that?  I get the feeling some members here are just shitposting about stablecoins or that there's more to the story as to why they're so useful.  I offered merits to anyone who could explain to me what their major advantage is, and so far only you, Lucius, have given me some insight into my question.  The offer of merits still stands if someone can provide me with a dumbed-down explanation of why coins like USDT protect you from volatility (though your answer might be the best one).

As for me, you were pretty clear with your question so I can't say why no one offered an answer. I will try to answer the second question when it comes to protecting against volatility.

If you have $100 and 100 USDT on a crypto exchange, the difference between these two deposits is that you can transfer stablecoin very quickly and cheaply - in terms of volatility, there is no difference, because USDT is pegged with USD - except that such stablecoin can be frozen even when stored in a non-custodial wallet.

The way to protect yourself from volatility with the help of stablecoins is that you can sell your BTC for USDT if you think its price will fall - and that is something that a lot of people practice and I have often read such comments on the forum. Of course, a similar thing is achieved if you sell crypto for fiat, but here we return to the fact that people want something that allows them to dispose of their funds very efficiently and quickly - and this is exactly the reason why stablecoins have become very popular.

[kryptqnick]

I use local exchanges, and the transaction is processed within 15 minutes from the first network confirmation, and the confirmation often comes within 10 minutes if the fee is at the priority level. Within this time, the price changes a little, but the amount is usually insignificant in my experience. I don't use stablecoins because they're a bomb that can explode at any point because there's no real value behind them, and it can lead to catastrophic consequences if enough panic happens. The prices can be fixed in fiat for convenience, and I don't see how adding a stablecoin into the equation is making things easier.

[The Sceptical Chymist]

As for me, you were pretty clear with your question so I can't say why no one offered an answer. I will try to answer the second question when it comes to protecting against volatility.

Wait a sec....I knew that already (I swear!) even though in my last post I asked for an explanation as to how stablecoins protect against volatility, because I was always aware that their main function was to act as a cash substitute on an exchange. 

I guess what I didn't understand was the question you previously answered, and I appreciate it.  I'm clear on everything now, since you explained how stablecoins make it much easier to get a cash equivalent to an exchange like Coinbase much quicker than actual cash.  As I said, that wasn't something I'd considered since I didn't know it was a problem for people.

[DrBeer]

Just a heads up: one important factor of centralized stablecoins is that they can be locked even when held in non-custodial wallets. Some people think that because something is a "cryptocurrency" and if you held something in your own wallet automatically means that it's permissionless. Really not the case with the USDT, USDC, and such.

PSA: Most Stablecoins Can Be Frozen, Even in Your Own Wallets https://bitcointalk.org/index.php?topic=5204055

A very important note! Before the story with the blocking, I honestly did not even know that they had such a "subtle" feature that could "unexpectedly fire" with the tokens of an absolutely honest owner who does not suspect anything. He may simply become a victim of an error, or an unreasoned decision of the owner of the token (smart contract). The saddest thing is that there is essentially no opposition and no solutions ...
Although the concept of stablecoins is very practical, there is no other more convenient means, in the crypto world, for fixing at least a profit or a loss. Withdrawal to fiat is associated with additional costs and risks.

[amishmanish]

--snip--
The way to protect yourself from volatility with the help of stablecoins is that you can sell your BTC for USDT if you think its price will fall - and that is something that a lot of people practice and I have often read such comments on the forum. Of course, a similar thing is achieved if you sell crypto for fiat, but here we return to the fact that people want something that allows them to dispose of their funds very efficiently and quickly - and this is exactly the reason why stablecoins have become very popular.

Stablecoins are mainly for traders who have their portfolios managed based on the USD equivalent value, rather than their native currencies. It really just helps you to sell high and buy back low, while making it easier to track the gains.

Secondly, the explosion of coins on multiple chains means that their trading pairs are available only with these centralized stablecoins (which are accessible cross-chain due to the central nature). I am not sure if this has been a good thing though. Earlier, most trading pairs on major exchanges were pegged only to BTC or ETH. This meant that most newbies came in through BTC (acquired in a privacy centric manner), and the shitcoin jugglery was done chiefly to increase your BTC holdings.

Now with different chains and the USD pegged stablecoins, all roads now seem to be leading to Rome, at least when it comes to the Alt-coins on other chains like Polkadot, Solana etc.