An Insight into Stablecoins: The Price-stabilized Currency
Blockchain possesses the potential to disrupt nearly every industry. Among its myriad use-cases, the blockchain technology is poised to create a new and better global payments system that is decentralized, secure, transparent, fast, and leverages cryptocurrencies as a means of exchange.
However, the value of most cryptocurrencies is subject to daily fluctuations. While these digital currencies aim to fuel more secure transactions, their value is based on speculation. The volatile nature of cryptocurrencies can be comprehended from the fact that many crypto traders became millionaires overnight, only to find out that they lost much of their wealth the next week due to huge price variations.
This is where stablecoins come to play. Stablecoins are gaining rapid traction worldwide since their values are pegged to other assets like US Dollar or gold. This has led to a subsequent increase in the demand for stable coin development services.
What are stablecoins?
Today, the world homes 180 currencies — such as the US Dollar, Euro, Yen, and more — that are recognized by the United Nations. Across the global economy, these currencies are used to purchase goods and services. Despite fluctuating exchange rates, inflation, and other factors, the value of fiat currencies is vulnerable to minimal fluctuations daily. This is why the economies count on these government-issued currencies for operation.
Stablecoins imitate these conventional, stable currencies.
Stablecoins are cryptocurrencies that are collateralized to the value of underlying assets that vary from coin to coin. Many stablecoins are pegged at a 1:1 ratio with fiat currencies, like the US Dollar, Euro, and more. Other stablecoins are pegged to commodities like gold or other cryptocurrencies.
Why use stablecoins?
Stablecoins are immune to price volatility that affects other cryptocurrencies. For example, in 2010, a programmer purchased a pizza for 10,000 Bitcoins, which was approximately equivalent to $30. The same amount of Bitcoins is priced at approximately $80 million at the time of this writing. All this is a result of a drastic change in the price of Bitcoin.
It is due to these price fluctuations that some businesses are skeptical of cryptocurrency as a means of payment. Microsoft started accepting Bitcoin as a payment in 2014 but put a temporary halt on it due to volatility.
Stablecoins, on the contrary, offer the best of both worlds — transparency, immutability, security, fast transactions, privacy and low fees of cryptocurrencies along with price stability of fiat currencies.
Stablecoins have the potential to benefit a multitude of industries and individuals who have to make international payments — from big businesses seeking a more efficient and cheaper way for cross-border payments to migrant workers who want to send money to their families. In both cases, people need not be concerned about sending a speculative asset that might plummet in value the next day or maybe the next hour.
Furthermore, the unbanked population residing in the areas with an uncertain economy can transact using stablecoins. It enables the use of a global currency that is not subject to local laws and regulations.
Stablecoins also benefit the financial services ecosystem. By enabling a secure and stable decentralized system, these digital currencies bring advantages to cross-border P2P lending and financial planning. With stablecoins, the lending platforms can drive reliable P2P transactions, eliminating the need to use a volatile cryptocurrency like Bitcoin.
This can benefit all of the crypto market participants, including investors, traders and blockchain-based enthusiasts. Besides, stablecoins can provide crypto holders with a safe haven in case of market crash, enabling them to instantly convert their cryptocurrencies into stablecoins, without having the need to convert their capital into fiat currency.
Cryptocurrencies are still in their nascent stage, and so are stablecoins. Although stablecoins have a long way to go before they potentially reach maturity, the adoption that they are gaining and thus the increasing demand for stable coin development services cannot be overlooked.
It is not easy to anticipate what the future unveils in the constantly evolving blockchain world; however, stablecoins could help cryptocurrencies gain mainstream adoption. The value and stability that stablecoins offer to businesses and individuals worldwide, by enabling global access to national currencies, could be disruptive.
If you are planning to build a stable coin to tap into the billion-dollar stable crypto market, Antier Solutions can help. We are a well-thought-of stable coin development company, possessing real-world experience in stablecoin development. We offer a host of offerings — from stablecoin development to white paper creation and coin marketing — to help you accomplish your goals and drive your business growth.
Talk to our subject matter experts for consultation or get an obligation-free quote.