Cryptocurrency has been in this world for over a decade, but still, it has not been able to reach typical commerce. One of the main reasons is its unpredictability that is often its value is driven by natural speculation. Many of the crypto investors have turned into millionaires within nights but only to lose all of their wealth a few weeks after.
Cryptocurrencies have also shown the volatility and unreliability of popular cryptocurrencies including Bitcoin especially when it comes to making transactions and payments for services and goods.
Explaining Stablecoins
Stablecoin is a type of digital money and is quite similar to traditional currencies. A stablecoin is usually a cryptocurrency that is collateralized employing the cost of an essential resource. Many stablecoins are pegged at a 1-to-1 ratio with some particular fiat or our traditional currencies like the US dollar or the Euro.
These fiat currencies are easily traded through exchanges and similar platforms. Many other stablecoins are pegged to various types of assets, for instance, valuable metals like gold or sometimes other cryptocurrencies too.
Stablecoins are created to have a cost that is more fixed and stable than other usual cryptocurrencies. The prime idea of the creation of stablecoins is that these coins can be a cryptocurrency but without the extreme unpredictability in their nature. This will change the perspective of people of cryptocurrencies being unstable. This way cryptocurrencies will be seen as a viable way to buy something in actuality.
We all know that there are still hundreds of businesses that are not interested in accepting a form of payment that might sink all the wealth the very next day. If the usual crypto is like investing in a risky stock then stablecoins are like withdrawing the cash from the ATM.
Stablecoins in Demand
Stable coin demand is rising and falling, that is from October 2020 to October 2021, the total stablecoins assets raised by approximately 495%, as per the reports of Block. At present, there are over 200 stablecoins in the world, forming a market worth around $130B. Also, two USD-backed stablecoins, The Paxos Standard (PAX) and Gemini Dollar (GUSD) have received approval and are being synchronized by the New York State Department of Financial Services.
Should We Use Stablecoins?
Stablecoins are not like other cryptocurrencies that have extreme cost unpredictability. Today just because of the volatile nature of cryptocurrencies, many firms and businesses are being skeptical. Initially, Microsoft started accepting Bitcoin for payments in the year 2014, but its instability and unpredictability made them put a temporary halt on it in 2018. Many online gaming platforms also had to do the same.
On the other hand, stablecoins intends to gain the probable merits of cryptocurrencies for instance transparency, security, invariableness, and decentralized control. Stablecoins aims to provide all of that without losing the assurances and permanency that come with using fiat currencies. In the early times, the crypto holders used stablecoins as a haven when the market used to decline or crash. When the prices of Bitcoin used to drop, the holders would convert their bitcoins to a stablecoin within a few minutes protecting them from huge losses.
Stablecoins are showing potential and promise in other incipient applications. These coins can also be used in financial services networks.
Categories of Stablecoins
Stablecoins are divided into four main categories.
- Flat-Collateralized Stablecoins
- Commodity-Collateralized Stablecoins
- Crypto-Collateralized Stablecoins
- Non-Collateralized Stablecoins
Stablecoins, a Day-To-Day Currency
Well-structured and designed stablecoins have the potential to be utilized as other usual currencies for trade and commerce. In Southern Korea, the customers are allowed to pay for their morning coffee with Chai. In the same way, crypto cards can also be used as a network for stablecoins to enter usual spending. Stablecoins are very convenient overseas too as they are available on applications for transfers.
Conclusion
In a world where it is impossible to foretell what the future holds in the continuously changing world of blockchains, stablecoins are the key to bringing cryptocurrencies more into mainstream commerce. Each type of stablecoin comes with its unique functions and benefits. The value and stability these stablecoins could provide to huge businesses and firms can bring about a huge difference in trade and commerce. The usual cryptocurrencies are available for trading on Bitcoin trading software and other platforms. You can visit site to create a free trading account.