What is the difference between USDN stablecoin and legal digital currency
National digital currency, also known as legal digital currency, is a stablecoin. A stablecoin, as the name implies, is an encrypted currency that maintains a stable exchange rate with a target. In the blockchain, there are many kinds of stable coins. Take USDN as an example, it is launched by NGK with anchored dollar, 1USDN=$1, users can use the USDN at any time to exchange with the dollar ratio 1:1. The dollar-anchored stablecoins, in addition to USDN, also include USDT, GUSD, BitUSD and so on.
currency in a bank account can only be called electronic currency, not stable currency. If the U.S. issues a legal digital currency in the future and anchors the current dollar, the legal digital currency could be called a stablecoin. That is to say, stablecoin is not only the electronic currency, it is also a programmable encrypted currency, which is a currency category only after the birth of blockchain technology.
Currency exchange rates between countries around the world have been fluctuating, so how to maintain a stablecoin exchange rate? USDN, mentioned above rely on algorithms to ensure stability. As with the Fed, the exchange rate for the dollar is stabilized by adjusting the supply of USDN. In the field of cryptocurrency, the stablecoin has many uses and is a bridge between the real world and the encrypted field. Encrypted currency price fluctuation is massive, stablecoin acts as the function of value scale, in the process of market decline, also have the function of avoiding risks. The stablecoin market is fundamentally different from other encrypted currency markets. The stablecoin market is the currency market, while the other encrypted currencies are closer to the stock market.
As a member of the stablecoin market, USDN has many advantages, such as strong liquidity, insensitive price and cheap liquidity. USDN as an unsecured digital currency is similar to the central bank’s mode of issuing currency. Unsecured stablecoin has no physical assets or digital currency as collateral, and the user’s consensus and expectations are the basis for maintaining its value. In addition, the supply and demand of unsecured stable coins are determined by specific algorithmic models. When people increase their demand, they issue coins, simulate the management of national currency supply by central banks, and the stability mechanism of the algorithm will automatically increase or reduce the supply of stable coins to maintain the low volatility of stable coins. To this end, we can see that there are essential differences between USDN stablecoin and legal digital currency.
