How to Create Stablecoin | How To Make Decentralized Stablecoin?

Understanding the process of creating a Stablecoin can be complex until you have the assistance of a detailed guide. You wished and you have it. You are currently reading a guide equipped with all the answers on how to create a Stablecoin, different types, processes, tech stacks, use cases, and how to choose the right Stablecoin development company.

So, without further ado, let's jump right into the details, starting with;

Understanding Stablecoin - The Vital Component of Blockchain System

Stablecoin, a programmable cryptocurrency, primarily aims to ensure price stability. How does it work? Stablecoin is pegged with a stable asset, unlike traditional cryptos such as Bitcoin or Ethereum. Pegging allows Stablecoin to balance a constant value, making it ideal for usual transactions.

Exploring Different Types of Stablecoins

There are four significant types of Stablecoins, let's explore each one!

1. Fiat-Collateralized Stablecoin

These stablecoins peg fiat's value, mostly USD. Fiat collateral is kept in research with the issuer and must present the count of stablecoins in circulation. Please note that fiat collateral is not locked in smart contracts. Hence, it exists off-chain in a bank account. Traders can exchange collateralized stablecoins for other crypto assets.

The following are some fiat-backed stablecoins;

• Gemini Dollar (GUSD)
• USD Coin (USDC)
• Pax Dollar (USDP)
• Tether (USDT)
• Binance USD (BUSD)
• TrueUSD (TUSD)

2. Commodity-Backed Stablecoin

Different interchangeable assets back commodity-backed stablecoins. Doing so increases the stability of the coin value. The most common commodity is gold, along with precious metals. The list of commodities also includes oil and real estate.

In simpler terms, commodity-backed stablecoin owners get the ownership of the tangible assets with real value. Hence, such stablecoins have a larger advantage over any other crypto type. Here are several advantages of commodity-backed stablecoins;

• Higher possibility of value appreciation over time
• Better incentives for the commodity-backed stablecoin owners
• Higher possibility of anybody investing around the world
• Offers new and promising investment opportunities

3. Crypto-Backed Stablecoins

It is quite hard to associate stablecoins with cryptocurrencies. How can cryptocurrencies assure stability after all they are volatile themselves? Practically, crypto-based stablecoins ensure higher decentralization in comparison to fiat-collateralized stablecoins.

Decentralization is the most important trait of the crypto-backed stablecoins, as they improve transparency and security. Additionally, particular crypto-based stablecoins backs various cryptocurrencies for efficient risk distribution and higher liquidity.

4. Algorithmic Stablecoins

Any asset does not back algorithmic or non-collateralized stablecoins. So, what makes them stablecoins is that their value is dynamic because an asset does not back them.

Such stablecoins follow an algorithm and control the stablecoin's supply, also called seigniorage shares. As the demand increases, new stablecoins come into development, reducing the price to normal levels. During the low coin trading, the coins present in the market are purchased, further reducing the supply.

The stability of algorithmic stablecoins depends upon the market supply and demand. Additionally, it is a prerequisite to note that these feature the highest decentralization and independence levels.

Stablecoins for Different Blockchains

You will get answers to what is stablecoin cryptocurrency system. Since not all stablecoins operate on the same blockchain, each has a different platform. Each blockchain has a different role to perform, providing specific advantages for speed, transaction costs, and security.

So, let’s explore stablecoins built on three major blockchain networks: Solana, Ethereum, and Tron.

• Solana Stablecoin: Offers low transaction costs, high throughput, and higher interoperability.
• Ethereum Stablecoin: Security & decentralization, extensive DeFi integration, and smart contract functionality.
• Tron Stablecoin: Fast transactions, low fees, wide adoption in payment systems.

How To Create a Stablecoin in 7 Steps 

The stablecoin development process includes 7 important steps aiming to create stablecoins with utmost efficiency. The process starts with;

1. Identifying Stablecoin Type

As stated above as well, stablecoins are majorly two types - collateralized and uncollateralized. It gets complex to state which type is superior to another. Briefly, if the aim is to get long-term stability, then algorithmic stablecoins become the right choice. Whereas, if short-term stability is the ask, then collateralized solutions are not a brainer.

To get a clear picture and identify the right type, getting answers to the following questions can help-

• How much liquidity do I need from stablecoins?
• What kind of decentralization/independence do I need?
• How many audits can I afford?
• How simple or complex do I want the whole architecture to be?

2. Identify Blockchain Platform and Tech Stack

After ascertaining the stablecoin type, the next task is to identify the platform and blockchain development company, which would further finalize the tech stack required. Before 2018, majority of the stablecoins were running on Ethereum but the trends are changing due to new entrants in the space.

Understanding the pros and cons of all platforms is crucial to making an informed decision. Finalizing the platform would help choose the right tech stack.

3. Liquidity Maintenance

Liquidity is important; if lost, then the complete theme of building a stablecoin would be jeopardized. There are several measures that can help to ensure adequate liquidity;

• Inflation and Value Evaluation: Integrating an automated monitoring system is important as it offers daily currency rates and index rates from the Consumer Price Index.
• Transaction Fees: Splitting the transaction fee improves liquidity, as one reserve is kept with a stablecoin partner and the other goes into a liquidity reserve.
• High Supply Protection: There must be a provision for the users to redeem or sell stablecoin at the current face value without the transaction fee. It eliminates sellers' incentives for marketing the stablecoins at discounted rates.

4. Smart Contract Development

A prime step in the complete process, smart contract development plays a crucial role in deciding the success of stablecoin. Smart contracts are essential for increasing security using digital agreements. It is important to decide the protocols to be used in smart contract development and ensure stablecoin's authenticity and stability.

A smart contract has three major tasks to perform and increase its functionality;

• Token issuance and redemption
• Collateral management
• Algorithmic mechanism for price stability

5. Testing and Deploying Smart Contracts

Testing and deploying smart contracts is the next immediate step after developing them. It is essential to test the smart contract, assess its performance, and look for any loopholes. Testing ensures that smart contracts work as planned.

After testing, Smart contracts are deployed on the blockchain network. Deployment begins the functioning of the smart contract on the blockchain. The associated parties can manage the smart contract after implementation.

6. System's Visual and Technical Aspects

It is time to design the token with due understanding of transactional flow and system operations. The system design will enable users to interact with the token. Users often want to integrate a specific website or application with the coin.

Visual and technical design ensure that the web mobile app screens are design-friendly. Our stablecoin experts provide technical designs to represent the stablecoin's complete workflow.

7. Platform Development & Testing

The development team then proceeds to develop a platform including user interface and applications. The team writes smart contracts and launch nodes on the blockchain platform. After this, the developers connect the features with the blockchain’s backend and proceed for testing.

Testing comes in between development and deployment. The testers use various testing methods such as user testing to ensure that there are no potential errors and loopholes.

The Right Tech Stack for Creating Stablecoin

Use Cases of Stablecoins

Stablecoins fulfill a lot of applications, from investment to remittance.

1. Cross-Border Payments

Stablecoins enable provisions for sending money to another country, quick and cheap. Unlike conventional methods, which require days to process such transactions, stablecoins aid in transferring funds as quickly as possible. Hence, stablecoins have become an ideal choice for businesses that conduct frequent international transactions.

2. Trade and Investment

It is a fast-paced crypto market and security is essential. That’s where stablecoins comes in, providing higher security and value scalability. Every scenario is beneficial for the user, they don’t lose money in situations where price drops. Also, stablecoins are easy-to-trade and help the user to swap between multiple cryptos with an easy manner.

3. Decentralized Finance (DeFi)

DeFi facilitates yield farming and lending without requiring an actual bank. Stablecoins play an integral role in ensuring the same. Stablecoins’ value remains balanced, in every scenario, making it a key component for earning money or borrowing from DeFi.

4. Online Gaming and Digital Markets

Stablecoins are applicable in online gaming and digital markets as more such initiatives have started to accept stablecoins. Why? Stablecoins facilitate buying games or in-game accessories in the most effortless manner possible.

Stablecoins offer a reliable method for online payments with the sole aim of improving the comprehensive user experience.

5. Remittance

Stablecoins have transformed the way remittance works as these are a great alternative to quick and cheaper than the conventional methods. Stablecoins turns out to be a suitable choice for the users working abroad and they need to send money without having to pay unnecessary charges.

6. Micropayments

Usually, transferring money incurs charges even for small amounts. On the contrary, stablecoins do not charge a significant fee for the minute money transfers. This becomes great for the users who want to create and sell digital content, opening up new revenue opportunities.

End Note

With significant innovations, the future of stablecoins is bright, offering more stability. Stablecoins eliminate volatility and increase speed and security. Considering these offerings, stablecoin adoption grew exponentially in various blockchain-based financial services.

Stability is the most crucial factor; stablecoins will open new initiatives for quick and mainstream adoption of digital assets in daily life. A blockchain development company requires 

Frequently Asked Questions on How to Create Stablecoin

How to create a Stablecoin on blockchain?

Creating a Stablecoin on blockchain starts with defining the stablecoin type, choosing the blockchain platform, designing tokenomics, UI/UX design, smart contract development, feature development, testing, and deployment. It is not as easy as it sounds; it is better to connect with a reliable Stablecoin development service for effective results.

What are the benefits of stablecoins?

Stablecoins have a lot of benefits to offer; they maintain price stability, ensure low-cost and quick transitions, enhance accessibility, security, and transparency. Better connect with a professional development service for a brighter future of stablecoin cryptocurrency.

How to create a stablecoin?

It requires a standardized process to create a stablecoin with higher stability and less volatility. The process starts with identifying the stablecoin type and ends with deploying it on the platforms. Again, it is necessary to get the assistance of a professional stablecoin development service.

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