The certainty of the value of legal currency provides a guarantee of value retention for stablecoin users. In this way, unfavorable market fluctuations will not rise, and will not cause loss of value.
The value of such stablecoins is based on the value of the backing currency, which is held by a third-party supervised financial entity. In this case, trust in the custodian of reserve assets is crucial to the stability of stablecoin prices. Legally supported stablecoins can be traded on exchanges and can be redeemed from the issuer. The cost of maintaining the stability of stablecoins is equal to the cost of maintaining reserve reserves, as well as the cost of legal compliance, maintaining licenses, and the business infrastructure required by auditors and regulators.
The technical implementation of this type of stable currency is more complex and diversified than the implementation of legal mortgage stable currency. Due to errors in the smart contract code, this type of stable currency brings greater risk of utilization. Through network sharing on the chain, it is not subject to third-party regulations and can create decentralized solutions. The potential problem with this kind of stablecoin is the change in the value of the collateral and the reliance on supplementary tools.