A comprehensive guide on how to create a stablecoin

A stablecoin is a cryptocurrency whose value is tied to the value of a fiat currency or another crypto. Stablecoins have allowed the global market to thrive, and we have seen the demand for stablecoin development skyrocket in the past few years. This is because stablecoins can withstand the volatility associated with emerging market scenarios. As mentioned above, this digital currency has its value tied to a commodity. It has all the advantages of cryptocurrency without extreme volatility. Stablecoins can also be used to make payments that can easily be verified without the intervention of a central financial settlement.

Types of Stablecoins

Fiat-backed Stablecoins

This stablecoin, as the name implies, is pegged into FIAT currencies at a 1:1 ratio. Regular auditing is necessary to ensure that a cryptocurrency like this is always collateralized.

Non-collateralized Stablecoins

These stablecoins are based on an algorithm that takes the difference between the value of money and changes the supply volume to control prices. It is based upon the Seigniorage share system.

Cryptocurrency-backed Stablecoins

To create stablecoins, cryptocurrencies such as Bitcoin ad Ethereum may be used as collateral instead of fiat currencies. These cryptocurrencies compensate for volatility in conventional cryptocurrencies and do not require crypto lateral to be used.

Commodity-collateralized Stablecoins

To create a stablecoin, real-priced commodities such as gold and real estate can be tied to a cryptocurrency. These tangible assets can be used to support your business or save money.

How to Create Stablecoins?

Here are the steps that a stablecoin development company follows to create stablecoins:

• Understand the motivation and expectations behind creating a stablecoin

For stablecoin creation, you must understand your business goals. If stablecoins are a long-term investment for you, then creating collateral or algorithmic stablecoins might be the best option.

You must have the answers to these questions in order to make the best decisions.

1. What are your expectations about liquidity?
2. You can choose the type of decentralization you prefer, such as fiscal, political, or market independence.
3. To ensure stability, you should limit the number of audits you can afford.
4. Choose your favorite stablecoin architecture: simple, complex or both.

These considerations will help you identify which stablecoin is best for you. Now you can proceed to the next step: finding the best platform for launching your stablecoins.

• Find the best platform for launching a stablecoin

Stablecoins were initially launched on Ethereum. However, there are many other options today as the market grows. Tron, EOS and other new entrants to the blockchain market have given way to many stablecoin projects, starting 2019.

It’s worth noting that more than half of all stablecoin projects in 2019-2020 were launched on Ethereum. You can sell and buy stablecoins much more easily because they offer greater interoperability as well as increased transaction bandwidth.

• Take the necessary steps to ensure liquidity

Creating a stablecoin is not the end of the process, and it is important to keep the currency circulating; otherwise, the entire purpose of creating a stablecoin will be lost. You will need to integrate an automated integration program that provides you with the daily currency rates as well as index rates from the Consumer Price Index or Personal Consumption Expenditures. Splitting transaction fees between the stablecoin value or the liquidity reserve is another way to preserve liquidity.

• Give your stablecoins an identity

Your currency is a stablecoin, so you need to design that in a way that highlights the investor’s benefits in your coins. System design is a detailed blueprint outlining how token users can conduct transactions. It is recommended that you create a platform, such as a mobile app or website, that allows users to interact with your token.

• Market launch and integration with the blockchain platform

Now that you have your visuals and designs, it is time to integrate them with a blockchain platform. This is essential to increase the security and safety of your stablecoins. After several rounds of testing, stablecoins can be launched on the main market.

Conclusion

Stablecoins might be the default method of transaction in the future. Therefore, it is worthwhile investing in stablecoins. It is easy to become overwhelmed by the complex process of creating and launching a cryptocurrency. To help you get started, you need a sound technical team, such as an expert stablecoin development company, to guide you on your way to creating stablecoins and stablecoin smart contracts that will bring many benefits to your company.