If you’re familiar with the cryptocurrency market then you would have heard about the term “Stable Coins”. In a previous article we wrote extensively on stable coins being the backbone of the internet of value, Read Here.
With the cryptocurrency market gaining popularity and the world becoming acquainted with crypto assets like Bitcoin, Ethereum, etc different technologies are making their way into the crypto ring. One of the most prominent types of crypto used today is stable coins whose values are pegged to fiat currencies (a legal tender established by the government) such as the U.S Dollars. Three main stable coins widely used are Tether (USDT), USD Coin (USDC), and Binance USD (BUSD) – all with an equivalent to one U.S Dollar.
Now, the question is WHY BUSD? In this article, we’ll learn Why BUSD is the best stable coin, its uses cases, role and why it is gaining so much popularity.
WHAT IS BUSD?
In simple terms, Binance USD (BUSD) is a stable coin that maintains a U.S Dollar peg, in essence;
1 UNIT of BUSD = 1 U.S DOLLARS
So the price of one unit of Binance USD (BUSD) fluctuates directly with the price of the U.S Dollars. It is issued by Paxos and Binance and it is the third-largest stable coin based on market capitalization. Binance USD (BUSD) offers three major characteristics as regards to transactions. It is easily accessible, fast, and flexible.
ADVANTAGES
A key characteristic of Binance USD (BUSD) is that one unit of BUSD is equivalent to one U.S Dollar. Due to its stability as it is pegged to the U.S Dollar, it empowers traders and crypto users the ability to transact while minimizing the risk of volatility. It is no news how volatile cryptocurrency is, and using a stable coin such as Binance USD (BUSD) can significantly hedge against periods of market volatility.
USES
- INVESTORS USE IT AS A HEDGE AGAINST PRICE FLUCTUATIONS IN CRYPTO MARKETS
The cryptocurrency market can be very volatile so in times of this volatility, there is demand for stable assets. By converting assets into fiat or securities, investors can ride out a volatile period.
- TO LOCK IN GAINS
When a person wants to exit an investment and secure profits, Binance USD (BUSD) provides a highly liquid way of doing so without the need to transfer your funds into your bank account from an exchange.
HOW IS BUSD DIFFERENT FROM OTHER STABLE COINS?
Binance USD (BUSD) is an incredibly useful monetary asset that can be used anywhere outside of Binance and it is a popular choice for people looking to stabilize their funds.
It is trusted as a stable, reliable, crypto-financial product due to its adherence to rigorous regulatory standards and the transparency of Paxos in publishing its Monthly Audit Reports. The responsibility of enforcing specific rules and measures on Paxos and Binance with regards to how the stable coin operates, how it is backed, and how it is ultimately collateralized is handled by the Officials of the New York State of Financial Services (NYDFS).
Many other stable coins do not offer these assurances to their users. Therefore, the strict regulatory standards that BUSD adheres to sets a new standard making it one of the best choices when it comes to stable coins.
Furthermore, Binance USD (BUSD) is backed by reserves held in either or both fiat cash and treasury bills. The fiat cash is held in a dedicated omnibus account at insured U.S. banks and the Treasury bills may include repurchased agreements and/or money-market funds. It can be categorized as a Commodity-Based Stable coin.
WHERE CAN ONE GET BUSD?
There are different ways to buy BUSD. You can buy from the secondary market or trade cryptocurrency on exchange or use a debit or credit card to purchase. Or you can swap with another coin or token for Binance USD (BUSD) on the Automated Market Maker (AMM). Alternatively, you can head to Paxos website and convert U.S Dollars directly to BUSD.
IS BUSD SAFE?
Binance USD (BUSD) is approved by the New York State Department of Financial Services (NYDFS) and launched in partnership with Paxos and Binance subject to regular third-party audits and strictly regulated to maintain a 1:1 BUSD to USD ratio. So yes it is safe.
FINAL THOUGHTS
Binance USD acts as both a stable investment and a useful tool for traders and investors. Its regulated status and audited reserves give the coin a high degree of reliability. It is a solid choice of a stable coin to use alongside other projects
Read the following helpful articles for more;
(Blog) “Stable coins being the backbone of the internet of value”
Image Sources; CoinPosters/ Binance / York Changer
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