I don’t get it — stablecoins are supposed to always be worth $1, right? So why does it matter if the price of ETH goes up or down? If I’m just using stablecoins to buy and sell things (because they’re stable), then ETH’s price shouldn’t affect my stablecoin at all. Why do people keep saying ‘if ETH drops, your stablecoin is in danger’? Isn’t it always $1 no matter what?- If I don’t mint stablecoins using ETH as collateral, then even if ETH’s price drops, it won’t affect me or the system. But if I do mint stablecoins by locking ETH, and then ETH’s price falls, the system becomes unstable — so to fix that, we use liquidation to restore stability. Is that right?
- Understand how collateral, Mint and Burn works .
Not all stablecoins are created the same way.- If I put in $4000 worth of ETH, why can’t I just mint $4000 worth of stablecoins? That’s fair, right?
HOW STABLECOINS ARE USED IN DEFI ?