The core difference between digital currency and stablecoins is that digital currency has high volatility, decentralization, and its value comes from supply and demand and consensus, and is used for investment and payment; stablecoin prices are anchored to fiat currency, have small volatility, are the basis of transaction transit and DeFi, and their value comes from reserve assets. Understanding these differences helps to properly allocate assets and select the right platform for trading.

The difference between digital currency and stablecoins

In the field of digital assets, digital currencies and stablecoins are two completely different but closely related asset classes. Understanding the core differences between them is crucial for investors to develop a reasonable asset allocation strategy. Confusing these two assets can lead to misassessment of risks and benefits.

Cryptocurrency

Digital currency, also known as cryptocurrency, is a type of digital or virtual asset created by new units using crypto technology to conduct secure transactions and controls digital or virtual assets. They are usually decentralized and do not rely on issuance and management of any central agency (such as banks or governments). Bitcoin is a typical representative of digital currency.

• Volatility: The price of digital currencies is extremely volatile and may experience a sharp rise or fall in a short period of time. This volatility brings both potential high returns and high risks.
• Decentralization: Most digital currencies are based on blockchain technology, maintain transaction records through distributed ledgers, and are not controlled by any single entity. This means greater censorship resistance.
• Anonymous/pseudonymity: Transactions are usually pseudonymous, that is, transaction records are verifiable but are not directly related to the real identity. This provides privacy protection for users.
• Source of value: Its value mainly comes from market supply and demand relationships, technological innovation, community consensus and macroeconomic factors. Scarcity and practicality are key drivers.
• Purpose: Mainly used for investment, store of value, international payments and the foundation for building decentralized applications (dApps). Some digital currencies also have specific functionality, such as being fuel for smart contracts.

Stablecoin

A stablecoin is a digital currency designed to minimize price fluctuations by pegging to stable assets such as the US dollar, gold or other fiat currencies. They are designed to solve the problem of excessive volatility in the price of traditional digital currencies, making them more suitable for daily payments and store of value.

• Stability: The core characteristic of a stablecoin is its price stability, which usually maintains an 1:1 anchor relationship with fiat currencies. This makes it a "safe haven" in digital asset trading.
• Centralized/decentralized: The issuance mechanism of stablecoins can be centralized (holding reserves by the issuer) or decentralized (collateralized by algorithms or crypto assets). For example, USDT is a centralized stablecoin and DAI is a decentralized stablecoin.
• Transparency: Many stablecoin projects regularly publish their reserve audit reports to prove the authenticity and adequacy of their anchor assets. This helps build user trust.
• Source of value: The value of a stablecoin comes directly from the assets it anchors. For example, a stablecoin pegged to the US dollar has a value that holds an equal amount of US dollar reserves.
• Purpose: Mainly used for capital transfer in digital currency transactions, cross-border payments, avoiding the risk of digital currency fluctuations, and as a lending and mortgage tool in the decentralized finance (DeFi) ecosystem. They play the role of "digital dollar" in the digital asset world.

How to conduct digital currency transactions (taking spot transactions as an example)

Spot transactions of digital currencies refer to the delivery of digital assets and payment of payments immediately after the buyer and seller have reached a transaction. This is the most direct and commonly used trading method. The following will introduce the specific steps for spot trading on a digital currency exchange in detail.

1. Recharge your account

Before you start trading, you need to top up your funds into your exchange account. Different exchanges and different regions support recharge methods, but the basic principles are similar.

• Enter the recharge page: Log in to your exchange account, and you will usually find entrances such as "recharge", "assets" or "storage" on the homepage or personal center. Click to enter.
• Select a recharge currency: You can choose to recharge fiat currencies (such as USD, Euro, etc.) or digital currencies (such as USDT, BTC, etc.). If you are trading for the first time, it is recommended to top up USDT first, because it is a stablecoin with little volatility and is convenient for subsequent purchase of other digital currencies.
• Choose the recharge method (legal currency): If you choose the recharge of the fiat currency, there are usually options such as bank transfer, credit/debit card payment or third-party payment platforms.
• Get the recharge address (digital currency): If you choose to recharge digital currency, the system will generate a recharge address exclusive to you (for example, BTC address, USDT-ERC20 address, etc.). Be sure to choose the correct network type (for example, USDT has multiple networks such as ERC20, TRC20, etc., and choosing the wrong network may lead to loss of funds).
• Perform a recharge operation: Complete the transfer or payment according to the method you choose. If it is a digital currency recharge, withdraw from your other storage or exchange to the recharge address provided here. Be sure to check the address carefully, and be sure to make a word of the problem.
• Confirm the receipt: After the recharge is completed, wait for the blockchain network to confirm. It usually takes several minutes to hours, depending on the congestion of the network. You can view the recharge progress in the "Assets" or "Funds Record" of the exchange.

2. Find a trading pair

After the funds arrive, you need to find the digital currency pair you want to trade. A trading pair consists of two digital currencies, such as BTC/USDT, which means you can buy Bitcoin with USDT, or sell Bitcoin for USDT.

• Enter the trading interface: Usually there will be entrances such as "Trade", "Market" or "Coin Trading" in the exchange's navigation bar or home page. Click to enter.
• Search for trading pairs: Enter the currency symbol you want to trade in in the search box of the trading interface, such as "BTC" or "ETH". The system will display all relevant transaction pairs, such as BTC/USDT, BTC/ETH, etc.
• Select a target trading pair: Choose a suitable trading pair according to your needs. For example, if you want to buy Bitcoin with USDT, choose BTC/USDT.

3. Place a transaction order

In the trading interface, you will see the order book, K-line chart, and the order input area. The order input area is where you issue a buying and selling order. Common order types include market orders, limit orders and stop loss orders.

• Market Order: Buy or sell immediately at the best price in the current market. Suitable for situations where you want a quick deal.
• Limit Order: You set a price you want to buy or sell. Orders will only be completed when the market price reaches or is better than the price you set. Applicable to situations where you want to close at a specific price.
• Stop-Loss Order: An order that automatically triggers market or limit order when the price reaches the preset stop loss price. Used to control risks and avoid greater losses.
• Select an order type: Select the order type you need in the Order input area. For beginners, it is recommended to start with a limit order to better control the transaction price.
• Enter the number of transactions: Enter the number of digital currencies you wish to buy or sell. The system will automatically calculate the amount you need to pay or receive based on the current price or your limit price.
• Confirm order: Carefully check the order information, including currency, quantity, price (if it is a limit order) and total amount. After confirming that, click the "Buy" or "Sell" buttons.
• Waiting for transaction: If it is a market order, the transaction will usually be completed immediately. If it is a limit order, your order will enter the order book and wait for the market price to reach your set value. You can view order status in Current Order or Historical Order.

4. Manage your assets

Once the transaction is completed, your digital assets will be displayed in your exchange storage. You can view your asset portfolio, earnings at any time, and decide on subsequent operations.

• View Assets: On the Assets, Storage, or Funds page, you can view all digital currencies you hold and their quantity and current valuation.
• Withdrawal of digital currency: If you want to mention the digital currency to another personal storage or another exchange, you need to click the "withdrawal" button, enter the withdrawal address, quantity, and complete security verification. Be sure to re-confirm the accuracy of the withdrawal address. Once the withdrawal is completed, the assets are usually unable to be retrieved.
• Regular review: It is recommended to review your trading history and asset performance regularly to better adjust your investment strategy.

Ranking and characteristics of mainstream digital currency exchanges

The following will introduce you to the most popular digital currency exchanges on the market and have a huge user base, with their security, liquidity and trading experience leading the industry. Choosing a suitable exchange means you will have a smoother trading experience and more reliable funding guarantees.

1. Binance

• Binance is the world's largest digital currency exchange.
• Provides a wide range of trading pairs and high liquidity.
• Supports recharge and withdrawal of multiple legal currencies.
• It has a complete ecosystem, including Launchpad, financial products, etc.
• The user-friendly interface is suitable for beginners and professional investors.

2. OKX (Ou Yi)

• OKX is the world's leading digital asset trading platform.
• Provide diversified trading products such as spot, contracts, and options.
• With advanced trading engine and strong matching capabilities.
• Pay attention to user asset security and risk control system.
• Provide rich web3 applications and technical support.

3. Huobi (Huobi)

• Huobi is a world-renowned digital asset service provider.
• Provides a variety of trading services such as spot, leverage, and contracts.
• It has a huge user base and a good market reputation.
• Continue to deepen the global market and provide localized services.
• Pay attention to compliance operations and user rights protection.

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