Blogs

Power of Stablecoins

Now imagine owning a cryptocurrency that is safe,
low cost and asset backed.
Yes asset backed, looks unreal right but it’s possible
with stablecoins.
As the self explanatory term goes, stablecoins are
cryptocurrencies that stay steady and firm.
These cryptocurrencies are less volatile and hence
safe.
Stablecoins are pegged to real assets like gold,
precious metals, US dollars and other fiat
currencies.
A stablecoin can also be pegged to the real estate
i.e. you can purchase a whole stablecoin reserve by
backing up your restaurant, or your villa.
Pegging cryptocurrency to a real world asset is a
way to control extreme fluctuations in the price.
Stablecoins are long term investments stablecoin
holders can expect a fixed return on them.
Because their goal is to track an asset, stablecoins
are often backed by the specific assets they’re
pegged to.
For example, the organization issuing a stablecoin
typically sets up a reserve at a financial institution
that holds the underlying asset.
So, a stablecoin could hold $100 million in reserve
and issue 100 million coins with a fixed value of
$1 per coin.
If a stablecoin’s owner wants to cash out the coin,
the real money can ultimately be taken from the
reserve.
This structure stands in contrast to most
cryptocurrencies, such as Bitcoin and Ethereum,
which are backed by nothing.
Unlike stablecoins, these other cryptocurrencies
fluctuate greatly, as speculators push their prices
up and down as they trade for profits.
While many stablecoins are backed by hard assets,
others are not.
Instead, these others use technical means such as
destroying some of the coin supply in order to
create scarcity to keep the price of the crypto
coin at the fixed value.
These are called algorithmic stablecoins.
The vision is that stablecoins can enjoy the benefits
of being a cryptocurrency without the associated
extreme volatility, this would go a long way to
helping cryptocurrencies be seen as a viable way to
actually buy something.
If traditional crypto is like investing in a high-risk
stock, stablecoins are like withdrawing cash from
an ATM.
In addition, their stability allows many stablecoins to
be used as a functional currency within a crypto
brokerage.
For example, traders might convert Bitcoin into a
stablecoin such as Tether, rather than into dollars.
Stablecoins are available 24/7, making them more
accessible than cash obtained through the banking
system, which is closed overnight and on weekends.
Ultimately, decentralized currencies pave the way
for a modern financial revolution that will remove
inefficiencies, reduce risk stemming from centralized
parties and change the way we transact.
In that sense, it’s a lot more practical than almost
every altcoin, offering a greater level of
stability to each user.
What are your thoughts on the power of Stablecoins?
Like, Share & Write in the comments below.
#blockchain #technology #innovation

ttyyy
Recommend
Share
Tagged in
Leave a reply