Stability in Digital Currencies- Steemit Crypto Academy- S4W5- Homework Post for @awesononso.


Greetings crypto enthusiast.

The professor @awesononso dished out a full package and it really made an impact. We really appreciate your efforts Prof and based on the knowledge I gained I present my assignment.

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Explain why Stability is important in Digital currencies. 

Digital currencies from the on set were created with the attributes of volatility, as cryptocurrency continue to take it's place around the globe, the necessity for stable coins became very important as a result of too much instability in the price of crypto assets. As a result of this instability, stable coins came into existence. Stablecoins acts as a bridge or link between fiat currencies and cryptocurrencies.
Stable coins are referred to as digital currencies whose market value are been propelled by a real world asset for example U.S Dollar. In other words stable coins are defined as cryptocurrencies whose market value are said to be pegged to another asset. Stable coins are designed to experience little or no fluctuation, that is to say they only experience the kind of instability or fluctuation seen in real world currencies, which have price fluctuation but are smaller than the type of fluctuation experienced in Bitcoin, Ethereum and other cryptocurrencies. A popular example of a stable coin is USDT.

why Stability is important in Digital currencies includes:

  • Absence of loss: Most crypto traders in cases where price starts to go down swap their asset or token for USDT or other stable coins so as to avoid the loss incurred by the reduction in the price of the asset. In the case of stable coins there is existence of little or no volatility.
  • The stability of these coins makes them real stores of value: They are used as stores of value or systems/units of account. They can also be used in cases where unstable cryptocurrencies may be less recommendable.
  • Stability brings about more traders: If cryptocurrencies were said to be stable, more people would have dived into it but as it's not and most persons are scared of losses so they find it uninteresting.
  • Stable currencies can be traded without any worry of losing your invested capital. These and many more reasons Stability is vital in digital currencies.

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Do you think CBDCs would be good in the future? Weigh the pros and cons in your own understanding and state your position.

CBDCs this is an acronym for Central Bank Digital Currencies. They are designed to serve as a representation of a country's currency digitally. We are made to understand that the value of each CBDCs will be equal to the value of the country's currency. For example As Nigeria is building it's digital currency, that is 1 e-naira will be equal to 1 naira.
CBDCs are centralized. They are been governed by the government of that particular country. The government of the nation will oversee every operations of the currency.

let's explore the pros and cons;

The Pros of CBDCs

  • Security
    The stress of carrying much funds to the market for shopping or purchasing of goods will be eased. Someone can just pay from his/her wallet. As result of this the rate of losses through robbery is avoided as a wallet can only be accessed when they have your private keys.
  • No existence of Third party: You don't need a bank account to operate with the CBDCs as it is a digital currency. You can control your assets from home using your wallet.
  • it is legal.
    Since it is backed up by the government of that country, it will be supported by the law and can be used anywhere within the country.

The Cons of CBDCs

  • A good device to use: Without a good device you cannot get access to your wallet which makes getting a good device very vital.
  • It is Centralized: As it is issued by the central Bank of the country, the central bank and government of that country will oversee every operations carried out using the currency, this brings about a centralized nature.
  • Lack of privacy: As a result of this CBDCs been centralized, there will be existence of little or no privacy at all as the central bank oversees every operations of the currency.

    • Furthermore from the pros and cons discussed above, my position will be that CBDCs will be good in the future as the pros overweigh the cons. The risk of carrying huge amount of money to rowdy markets will be reduced. The only problem to be encountered is that privacy cannot be enjoyed on CBDCs.
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    Explain in your own words how Rebase Tokens work. Give an illustration.

    A token is said to be a rebase token when it's circulating supply changes as a result of price instability. A rebase token is also regarded as an elastic supply token because it circulating supply keeps adapting/changing automatically due to change in price. Both Rebase tokens and stable coins are always targeting a price.

    How Rebase token works.

    So as to gain full knowledge of how the Rebase token works, one needs to have a good knowledge on how both supply and demand relates to the price of the asset, we all know that when demand is high there is an increase in price and on the other hand when there's excess supply and less demands the price drops and so Rebase tokens keep adjusting as change in price takes place.

    • For example:

    The target price of a Rebase token is $4 and the price increases to a $4.5 this Rebase token will spontaneously adapt by increasing it's circulating supply as the law of economics made it clear that when there's excess supply price of an asset drops just so as to maintain the target price of $4. This can be seen as the positive rebase.
    Probably the price deflates to $3.6 the Rebase token adapt and reduce it's level of supply so that demand will increase and once demand is higher than supply the price will rise and maintain track towards the target price of $4. This can be seen as the negative Rebase.

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    Go to the https://www.ampleforth.org/dashboard/. Check the necessary parameters and calculate the rebase %. What else can you find on the page?

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    The rebase% is calculated using the formula giving below:

    Rebase% = {[(Oracle Rate - Price Target) ÷ Price Target] x 100} ÷ 10
    After visiting the site I got my values as seen below:

    • price target = $1.061
    • Oracle rate = $1.104
      So we have the calculation below:
      {[1.104 - 1.061) ÷ 1.061] x 100} ÷ 10
      = {[0.043÷1.061] x 100} ÷ 10
      = {0.041 x 100} ÷ 10
      = 4.1 ÷ 10
      = 0.41 %
      Therefore rebase % = 0.41%

    Other things I could find on the site includes:

    • The next rebase time.

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    • The circulating supply for Ampleforth.

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    • price chart of Ampleforth.

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    • Last but not the least supply chart.
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    Trade some tokens for at least $15 worth of USDT on Binance and explain your steps. (Give necessary Screenshots of the transaction).

    I traded 0.0003 worth of BTC which amounted to over 19 USDT.

    • First of all I logged into my Binance account and tapped on trade as seen in the screenshot below.

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    • As it is market order it was filled immediately as seen below. I acted as a market taker.

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    TRANSFER THE USDT TO ANOTHER WALLET WITH THE TRON NETWORK. FROM THE TRANSACTION, WHAT'S ARE THE PROS OF THE STABLE COIN OVER FIAT MONEY TRANSACTIONS? (GIVE SCREENSHOT OF THE TRANSACTION.

    • First things first, I went to my kucoin account and copied my USDT wallet address as required and headed back to Binance wallet.

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    • I clicked on spot and as it opened I clicked on USDT as it is the coin I want to transact.

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    • Afterwards I clicked on withdrawal and filled in the form which includes my wallet address and the amount of USDT I will like to withdraw.

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    • I confirmed my withdrawal.

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    • I checked my USDT balance.

    Pros of stable coins.

    After I carried out the transaction, the following was advantages of stable coins over fiat money was observed;

    • lesser charges: the charges were quite low, I transferred 19 USDT and I was charged just 1 USDT as transaction fee.
    • Speed: Transactions with stable coins are carried out immediately. I received my USDT on the other account almost immediately after carrying out the transaction.

    Conclusion

    Stability of cryptocurrencies would go a long way just as it is discussed in the lecture reasons why stability is important shows it all. I still appreciate the professor for dishing out this package.
    CC:
    @awesononso
    @steemblog


Comments 1


Hello @offia66,
Thank you for taking interest in this class. Your grades are as follows:

Criteria Calculation
Presentation/Use of Markdowns 0.7/2
Compliance with Topic 1.5/2
Quality of Analysis & Calculations 1.2/2
Clarity of Language 1.8/2
Originality & Expression 1.7/2
Total 6.9/10

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Feedback and Suggestions
  • You should really improve on your arrangement and markdown use.
  • Your explanation and illustration in question 3 can be improved.
  • You should also present your images better.
  • The entire work should be improved in content.

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Thanks again as we anticipate your participation in the next class.

11.10.2021 13:27
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