Steemit Crypto Academy Week 6 // Stable Coins (2) // Homework submitted to @yohan2on

Good day Prof. @yohan2on, having gone through your lectures this week, this are my opinion.

Stablecoins is a word we use everyday, especially those in the cryptocurrency market. It is simply a coins that is the same value as the normal USD dollars or any other government approved currency. Meaning the ratio of a stablecoin to the normal fiat USD currency is 1:1.

The votality of cryptocurrency won't make it accepted by most merchant, if not for the introduction of a stablecoins, there are series of Stablecoins out there as mentioned in your lectures. For some stable coins, price correction is made possible by a smart contract and other mechanisms.

As directed in the lecture home work, let see how Steem backed dollar operate as a stable coin abbreviated as Sbd.

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What is Steem stacked Dollar (SBD)
SBD as used in Steemit is one of the currencies created by the Steemit blockchain. It is intended to peg its value with the value of fait USD, (meaning 1 SBD = 1 USD). In other to take of fluctuations, Steemit is usually processed in Steem dollars (SBD),which can be traded in exchanges. It can be held (not for long though), traded and changed into fiat currencies like other stable coins.

Furthermore, the idea behind the Steem dollars is to aviod volatile exchange rate of the platform internal currency.

SBD, I would say are non-collaterized stable coins as they have no fixed but are controlled by a complex algorithm which either shrink or expand the supply votality in order to match demand, thereby shifting votality to a non-collaterized assest. This complex algorithm or mathematics is managed by a central body or unit, which inturn maintains the flow if the coins in circulation thereby ensuring stability of the stable coin.

This style of stable coin is also known as the Seigniorage Style, to a great extent, Issuance of SBD does not backed by a collateral when compared to other style or categories of the stable coin.

Steem on the other hand is very volatile, it price keeps fluctuating like every other cryptocurrencies, so in other to maintain a price which can be as stable as the dollar, sbd was introduced to back up this fluctuating price of steem.

What then are the Advantages of non-collatrized (Seigniorage) style of stable coin
With Steem backed dollar has been considered as a form of a non-collatrized stablecoin, what then are the advantages and disadvantages?

Advantages
1)No collateral is needed for this style of stable coin
2)It's transparent and can be audited
3)Money insurance is dependent on Steemit

Disadvantages
1)Complex algorithm makes analysis difficult
2)It is fully decentralized unlike the other categories of stablecoins.
3)It requires more and continous growth, otherwise it cannot control its peg price.

Conclusion
Stablecoins are the reason why cryptocurrency adoption is increasing greatly. It help secures traders in cases of high price fluctuations, since it's peg 1:1 level with the fiat government approved Currency.

Thank you sir.