What are tokens exactly minted for?

[whiteshadow0011]

well i am through with the erc20 and erc721 part, and i have a rough idea of what tokens are, you just get them for some eth you give to the contract( correct me on this if i am wrong)........now i am on the stablecoin part, here i see that again you give ETH and get some stable coin, like tokens.....does that mean stablecoins are just tokens like collaterals for eth, and what is their use

[EngrPips]

Tokens are digital currencies that are essentially smart contracts. Tokens can be used as a collateral but not all tokens are used as a collateral of some sort, some token are used as a voting power in a governance system while some are primarily built for purchasing power so that we can have something like $ but not the paper one an on chain one which we can spend and trade with on the blockchain.

Think of tokens as digital money, and when you want to think about their essence, you can see them being useful for anything real money is useful for.

[whiteshadow0011]

so like before all these collaterals, we had eth which was collateral for USD and now we have a collateral for Eth itself, i mean if we pay for them in the form of eth.......
Alright tell me which is more stable a StableCoin or ETH?

[EngrPips]

so like before all these collaterals, we had eth which was collateral for USD and now we have a collateral for Eth itself, i mean if we pay for them in the form of eth....... Alright tell me which is more stable a StableCoin or ETH?

I don't know why the only thing you see about tokens and eth is being collateral. Do you only use your paper dollars as collateral, and don't you use them to purchase stuff and pay for services?

Please explain to me how ETH was a collateral for USD. A StableCoin is created to be stable, while ETH, by nature, is unstable.

[whiteshadow0011]

well i just assumed that eth is a collateral for usd, isn't eth used to do anything we can do with the usd, like buy services and all(same as stablecoin).....Again i just assumed that, so just correct me if i am wrong.

[EngrPips]

well i just assumed that eth is a collateral for usd, isn't eth used to do anything we can do with the usd, like buy services and all(same as stablecoin).....Again i just assumed that, so just correct me if i am wrong.

I think substitute doesn't equal collateral. But maybe I am wrong.

[whiteshadow0011]

Oh that's alright, I have one more question, can stable coins be bought using usd and not just eth, if yes then does that mean one gives some amount of usd to a contract and then gets the stable coins or is there some other process, that probably doesn't include smart contracts.