It is often a fairly common confusion in the crypto ecosystem to think that Bitcoin (BTC) and stablecoin are the same. There are fundamental differences between them and that’s why we are going to explain it to you today.
The difference between bitcoin and stablecoin
What is Bitcoin (BTC)?
Bitcoin is the first cryptocurrency to feature a decentralized form of digital money that doesn’t require a financial intermediary. Accordingly, no government or company issues BTC.
A fundamental characteristic of Bitcoin is that its price is determined by everyone who participates in its buying and selling process. As a result, the price of BTC is determined by the law of supply and demand.
In this way, Bitcoin’s value is based on the trust of its users, its usefulness and popularity.
What is a stablecoin?
Stable coins are born as an option given the brutal volatility in the crypto market. Therefore, a stablecoin is a cryptocurrency that is backed up by assets in reserve.
This means that for every stablecoin in circulation, the equivalent should be saved in dollars. That is exactly why stablecoins manage to ensure price stability.
Therefore stablecoins achieve stability through backup or through algorithmic buying and selling mechanisms.
Bitcoin vs. Stable coins
Knowing the difference between Bitcoin and Stablecoin is important to start in the crypto ecosystem. For this reason, CryptoTrend has some of the main differences:
- Price: As mentioned above, Bitcoin’s price is determined by the buy and sell interaction in the market. While stablecoins are supposed to mimic the value of fiat currencies like the dollar or the euro.
- Uses: Bitcoin’s volatility can be a blessing for some, but a problem for others. For this reason, Bitcoin is mainly used for trading, exchanging or as a payment method. While stablecoins can be used as a store of value.
- Offer: Stable coins don’t necessarily have a limited supply, as is the case with Bitcoin and other cryptos.
- Centralized vs. Decentralized: Stable coins that want to keep the 1: 1 ratio with a fiat currency are usually centralized. While Bitcoin is completely decentralized.