How to Build a Stablecoin

For the past several years, Bitcoin and other crypto-assets have been in the spotlight. Entrepreneurs and organizations, on the other hand, are unable to use Bitcoin and other cryptocurrencies as a medium of value transfer due to the extreme volatility of the crypto market. This is where Stablecoins come into play. They allow end-users to benefit from the benefits of crypto assets without exposing them to excessive price volatility.

Being one of the best Blockchain development solutions providers, we have listed down the important points to know about Stablecoin development. So, let’s get started.

What Is A Stablecoin?

Stablecoin is a type of digital currency that tries to mimic traditional, stable currencies. Stablecoins are digital currencies that are backed by the value of an underlying asset.

Many stable coins are backed by fiat currencies that can be exchanged on exchanges in a 1:1 ratio, such as the Euro or the US dollar. Stablecoins can be tied to a variety of assets, including precious metals such as gold or even other cryptocurrencies.

When compared to other cryptocurrencies, Stablecoins do not have the same difficulties with excessive volatility. They make use of the advantages of cryptocurrencies, such as immutability, transparency, security, quick transactions, digital wallets, privacy, and cheap costs, without sacrificing the confidence and stability that fiat currency provides.

Features Of A Stablecoin:

• A tangible item or fiat money backs Stablecoins.

• The stablecoin owner holds the direct equivalent of the asset or fiat currency.

• Strong, dependable, and politically unaligned

• There is no deterioration in the value of the token over time.

Advantages Of Stablecoins:

Stablecoins’ popularity, and consequently the demand for stablecoin development companies, has risen as a result of the following advantages.

1. Volatility is zero :

The mechanics of a stablecoin concept is based on value stability. As a result, in the event of under/overvaluation, the value is automatically maintained, ensuring that the stablecoin does not experience excessive volatility.

2. Liquidity :

Stablecoins are backed by tangible assets like gold or oil, as well as fiat currencies such as US dollars, Euros, and other currencies. It is simple to liquidate both tangible assets and fiat money. It is rather simple to liquidate the Stablecoins. As a result, they serve as a link between distributed ledger technology (DLT) marketplaces and traditional financial systems.

3. Transparency in transactions:

A blockchain is used to create Stablecoins. As a result, everyone on the network may see the transactions. Stablecoins that undergo frequent audits to provide consumers with complete transparency into the mechanism by which they are supported are also available.

4. Transactions that are completed more quickly:

Stablecoins and their infrastructure make financial transactions go more quickly. With a stablecoin, financial settlements that take hours with regular banking may be done in minutes.

Steps To Develop A Stablecoin:

1. Determine the type of stablecoin that will be created :

There are two types of Stablecoins: collateralized and non-collateralized Stablecoins. As a result, it’s impossible to conclude if one sort of stablecoin is better than another. If you want to ensure long-term stability, algorithmic stablecoin is the way to go.

2. Determine the platform and technologies that will be necessary to create a stablecoin :

After you’ve narrowed down the sort of stablecoin you want to construct, you’ll need to choose a platform on which to build it. Originally, Ethereum was the sole platform for stablecoin development, however, that is no longer true. In 2016, there were around 11 Stablecoins on the market, with ten more added in 2017. However, there are more than 70 Stablecoins in use now, with another 140 under development.

3. Creating a Whitepaper :

A whitepaper informs investors about the project’s concept. As a result, it must be technically thorough and concise. The idea, the technology, the tokenomics, and other aspects must be communicated to the consumers. It must essentially assist investors in making an informed selection.

4. Development of Tokens :

The token must be produced based on the category of stablecoin chosen. The most critical factor to consider is what the token is backed by. If the token is backed by fiat currency, fiat deposits must be established. Gold deposits must be protected with a vault service provider if the token is backed by gold.

5. Token Marketing :

To maximize the reach of Stablecoins, an effective marketing strategy must be devised. Emails, social media, and other avenues might be used to contact possible investors or influencers.

Some of the third party integrations that may be implemented into the system are as follows:

1. Coinbase Wallet :

Stablecoins may be stored and transferred using the Coinbase wallet or any other third-party wallet.

2. API for the Stock Exchange :

To get a real-time gold value from an exchange if you have a physical gold asset, you may utilize any stock exchange API. This API allows users to see the current value of their assets.

3. APIs for Bank Merchant Accounts :

Various payment options for buying gold-backed tokens can be enabled by integrating bank merchant account APIs.

How Can You Make Money Through Stablecoins?

A stable coin strategy provides a lucrative revenue stream. The operators can make money by doing the following:

1. Fees for transactions :

Users are charged fees by the operators when they redeem currency for their stablecoin holdings. Fees are also levied when transferring fiat currency to Stablecoins.

2. Earnings from interest :

Issuers of centralized Stablecoins have the option of lending their fiat balance sheets. The balance sheets are usually loaned out to insured third-party institutions, and stablecoin issuers get interested in the principal. Companies that specialize in stablecoin development can assist in the integration of such systems.

3. Funding on the Margin :

Margin traders can borrow Stablecoins from users. There are several exchanges that function as a middleman to connect users with margin traders. For lending their Stablecoins, users are paid an agreed-upon interest rate.

Conclusions:

The goal of cryptocurrencies has always been to create a digital asset that is less volatile and more liquid. Stablecoins are regarded as the holy grail of the crypto sector since they permit frictionless transactions not only between stakeholders trading with cryptocurrencies but also between parties who may need to transit between crypto and fiat currencies.

We hope that this article has given you some insight into how to make a stablecoin. We, at Monkhub Innovation, are the top Stablecoin development service provider in the USA and India. Our team of Stablecoin developers can also help you with every step of the development process, from brainstorming to designing and building a token.