To further illustrate this scenario, a typical fiat-backed stablecoin might involve the token issuer holding 100,000 tokens, each worth $1 USD. Token holders can trade these coins, similar to any other cryptocurrency. The major difference is that the holder can also redeem the coins for an equivalent amount of USD at any time. Since USD is fairly stable, users don’t have to worry that their money will lose its value overnight. As a result, according to CoinMarketCap, there is currently 120 billion dollars worth of stablecoins in circulation.
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Source: Cryptocurrency - investing.com
