Stablecoins are cryptocurrencies pegged to traditional assets. There are currently 4 main types of stablecoins:

• Fiat Collateralized
• Crypto Collateralized
• Commodity Collateralized
• Non Collateralized - (Algorithmic)

Detailed stablecoin information is available in our comprehensive Guide To Stablecoins.

It depends on the collateral mechanism in place for each type of stablecoin:

• Centralized - Licensed and regulated stablecoins such as TUSD, PAX, & USDC issue or burn an ERC-20 token for every US Dollar that is deposited or withdrawn through their platform. Centralized stablecoins are collateralized by fiat deposits in bank accounts at a 1:1 ratio for every circulating stablecoin.
• Commodity Backed - Values are pegged against the price of physical assets. Digix Gold Token (DGX) for example, enables purchasers to access tokenized gold as an investment.
• Crypto Backed - Stablecoins like DAI use smart contracts to over-collateralize other crypto assets in order to maintain a 1:1 peg.
• Algorithmic - Supply contracts and expands based on mathematical algorithms. Algorithm based stablecoins do not have collateral backing, and function similar to an automated central banking system.

Buy With Cryptocurrency - Stablecoins are listed on all major cryptocurrency exchanges with 24/7 liquidity.

Buy With Fiat - Stablecoins can be purchased with fiat through the following options:

1. Issuance Platforms - Such as TrustToken (TUSD) or Paxos Trust Company (PAX).
2. Licensed Exchanges - Such as Coinbase, Kraken, and Bittrex.

• Securely transfer fiat into crypto assets through licensed and regulated issuance platforms.
• Trade crypto assets against stablecoin pairs on dozens of cryptocurrency exchanges.
• Access to Crypto Loans using stablecoins as collateral.
• Stablecoins can Earn Interest.
• Hedge against market volatility in seconds by trading crypto assets into stablecoins.
• Most stablecoins are ERC-20 compatible, users can store them in personal hardware wallets.

This depends. Purchasing stablecoins with cryptocurrency on a decentralized exchange (or a centralized exchange in which the user has not completed KYC) can be relatively anonymous.

However, users looking to purchase (or redeem) stablecoins with fiat currencies directly from their respective issuers will need to complete the standard KYC (Know Your Customer) and AML requirements.

If anonymity is the priority, Blockfer recommends using DAI - the most decentralized stablecoin currently available.

Stablecoins earn revenue for users by:

• Margin Funding - Many exchanges act as a broker for margin traders looking to access additional trading capital at a premium. Users can loan their stablecoins to these traders with the exchange acting as an intermediary for an agreed upon interest rate.
• Earning Interest - Users can deposit their stablecoins into cryptocurrency interest accounts with companies such as Nexo, Blockfi, and Celisus to earn interest on their balances.

Stablecoins earn revenue for issuers by:

• Fees charged to customers during the process of redeeming stablecoins for fiat and converting fiat into stablecoins.
• Centralized stablecoin issuers will often lend their fiat balance sheets to insured third party institutions and collect interest on the principal.

Yes. Stablecoin owners can:

• Lend their stablecoins to margin traders on exchanges, a process known as Margin Funding.
• Deposit their stablecoins into cryptocurrency Interest Accounts.

More detailed information on this subject: Earning Interest On Your Stablecoins

There are risks with every financial instrument, including fiat currencies. It is important to remember that stablecoins are a new innovation still in the developing stages.

Risks may include:

• Technology - Smart contract failure
• Security - Hacks and theft
• Regulation - Governments
• Issuer Negligence - Insolvency

Stablecoins and other cryptocurrencies are being closely monitored by financial regulators in the United States and around the world. At this time, there is no definite answer to this question.

Yes. Currently Digix Gold (DGX) offers an ERC-20 based token on the Ethereum blockchain. One DGX token is redeemable for one gram of gold.

• Trading
• Entering & Exiting Crypto Markets
• Earning Interest
• Lending & Loans

Yes. Any Ethereum based ERC-20 issued stablecoin can be held in a personal Hardware Wallet. TrueUSD (TUSD), Paxos Standard (PAX), Gemini Dollar (GUSD), USD Coin (USDC), and DAI (DAI) are all ERC-20 compatible.

Blockfer strongly recommends the Ledger Nano S or Trezor hardware wallet for users with considerable stablecoin balances.