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What is stablecoin? What is its function?

Stablecoins are digital assets designed to mimic the exchange rate of fiat currencies such as the dollar or euro. They allow the user to quickly and easily exchange stable currencies anywhere in the world.

As a medium of exchange, cryptocurrencies are technologically more convenient. However, fluctuations in their value ultimately made them an extremely risky investment opportunity as well as an inconvenient means of making payments. By the time the transaction is completed, the value of the sent coins may differ significantly from the original.

In turn, stablecoin does not have such a problem. This type of asset tracks insignificant price movements and changes in the value of the underlying asset or the fiat currency that they emulate. As such, stablecoins act as a safe haven asset amid volatile markets.

There are several types of stablecoins, each of which has a different peg of its units to fiat currency.