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What is stable coin?

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So far, stable coin in the blockchain world are mainly divided into two types: one is asset mortgage mode, the other is algorithm bank mode.

The asset mortgage mode is, using sovereign currency such as US dollar and Euro as the anchoring target, issued in accordance with legal tender at a 1:1 ratio. That is to say, every stable coin in circulation should have one dollar (or other anchored target) as an endorsement of credit and can be cashed at any time. In other words, the value of digital currency is linked to an asset with certain value. This equals to encrypted digitization of legal tender. So far, the main representative currencies are USDT, USDC, GUSD, TUSD, PAX, etc,.

The algorithm bank mode uses digital currency or other value targets as collateral and ensures the value of the stable coin by setting different collateral rates. So far, the main representative digital currencies are BitCNY, BitUSD, Dai and so on.

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