A “stablecoin” is a type of cryptocurrency whose value is tied to an outside asset, such as the U.S. dollar or gold, to stabilize the coin’s price.

They came about as a solution to one key drawback in the crypto space: prices are unpredictable and have a tendency to fluctuate, sometimes wildly.

Stablecoins act as a catalyst to facilitate the use of cryptocurrencies for functions inherent in mainstream finance. Through marrying highly secure, permission-less and immutable blockchain networks with the stability of real-world currencies comes a plethora of use-cases. From the trading of goods and services over blockchain networks, to cross-border payments, hedging against currency devaluation, crypto derivatives, establishing credit, taking out loans, crypto interest and much more. Such applications would not be possible if the transacting digital currency remains volatile.

The most popular use case for stablecoins presently is their ability to breakdown the barriers preventing regulated access to the dollar and as a means of providing much needed liquidity to DeFi applications such as decentralised exchanges (DEXes) and lending protocols.

FIAT collateralized stablecoins use a set amount of a standard fiat currency, like the U.S. dollar, as collateral to then issue stablecoins. Other forms of collateral can include precious metals like gold and silver, as well as commodities like oil.

The stablecoins listed on OVEX are FIAT-Collateralized. FIAT is the government-issued currency we are all used to using on a day-to-day basis, such as Rands, Dollars and Euros.

FIAT collateralized stablecoins use a particular amount of a standard FIAT currency (like the US Dollar) as collateral to issue stablecoins. The number of stablecoins issued is usually 1:1 with the collateral behind the issuance. Their value is then pegged to that of the underlying FIAT currency. This method of FIAT collateralization requires a custodian (like Circle for USDC) to hold the fiat currency (collateral) and guarantee the issuance as well redemption of the stablecoin tokens.

Renowned stablecoins such as Tether (USDT) and USD Coin (USDC) are popular stablecoins that have a value equivalent to that of a single U.S. dollar, and are backed by solid dollar deposits.

OVEX supports both USDT and USDC on its exchange. What’s more, OVEX offers Interest Accounts that can earn up to 10% annualised interest on these coins. This is a great place to park cryptocurrency profits in a stable digital asset - generating interest otherwise unattainable in legacy savings accounts.

OVEX offers a number of stablecoins on its platform. At the time of writing OVEX stablecoin offerings include:

  • Tether (USDT)
  • USD Coin (USDC)