Rise of Stablecoins: Are They the Future of Crypto?
Today, over 150 stablecoins have been successfully launched. Among them is Tether (USDT), which is the world’s largest stablecoin with a daily trading volume of over $70 billion. Stablecoins have received considerable media and regulatory attention in recent years. This has left many wondering whether stablecoins are the future of crypto. Below, we will explore the rise of stablecoins. You should understand their impact on the cryptocurrency ecosystem, especially for the future.
What Are Stablecoins?
Stablecoins are digital or online-based assets whose value is pegged or attached to a traditional fiat currency. Their value can also be tied to other stable assets like commodities (gold). Stablecoins were introduced into the financial landscape to maintain a stable price. They aim to provide an alternative to the high volatility that comes with other digital tokens like Bitcoin. Note that highly volatile cryptos like Bitcoin see their value fluctuating over a short period. Such tokens become less suitable for daily transactions.
Benefits of Stablecoins
Stablecoins have transformed local and international payments. This is especially in countries with weak currencies (where they can be an alternative to the USD). They are also adopted by many due to the following reasons.
Easily Accessible to All Crypto Users
Stablecoin has made online payments more easier and accessible. It doesn't matter where you are located since there is no need for extensive documentation. This is unlike traditional payments, which require many processes. With stablecoin payments, you only need an internet-powered desktop and mobile device. With increased efficiency, many are encouraged to engage in the global economy. As a result, there is an increased growth and development in various economies.
Speedy Transactions
Another benefit of stablecoins is that they have encouraged quick payments. Businesses and consumers can now make payments and purchases using stablecoins like USDT. The best part is that the payments are almost instantaneous. What else can you need, especially when transferring payments internationally? Stablecoins have eliminated the need for traditional banking methods, which sometimes take up to 2 days to complete transactions.
Besides quick payments, stablecoins facilitate quick trades. Investors can now easily purchase, sell, and transfer them. You can also use them to make deposits at your broker’s platform.
More Stable Than Other Cryptocurrencies
Stability in a digital token is what many investors look for. Stablecoins save the day by working just like fiat currencies. As earlier mentioned, they are less volatile than other cryptocurrencies like Bitcoin and Ethereum. This means that investors can take advantage of them during periods of high market volatility.
Encourages Secure Payments
Stablecoins’ blockchain technology is more transparent and secure compared to those that support other cryptocurrencies. Investors now do not need to worry about scammers and fraudulent activities like money laundering. With this system, all transactions are recorded and stored in an online public ledger. This is whether you make domestic or international payments.
They are Cheap
Traditional transactions are usually costly and time-consuming. However, the onset of stablecoins has brought about cheaper alternatives. This is primarily because payments are made directly between the sender and the receiver via a decentralised blockchain network. Plus, investors get to avoid currency conversion rates and third-party charges that come with bank transfers.
Stablecoins vs. Central Bank Digital Currencies (CBDCs)
As mentioned earlier, stablecoins are pegged or attached to fiat currencies. Their high adoption among investors and businesses has brought about conversions on whether they are similar to central bank digital currencies (CBDCs). Well, to settle the dust, stablecoins are digital tokens issued by private companies. On the other hand, CBDCs are provided by central banks, and they aim to digitise the fiat currencies of a country.
Simply put, CBDCs are more focused on a particular region. They aim to streamline transactions for citizens in that area. They also bring digital assets directly into monetary policy. They can build on the trust of governing bodies rather than private companies. CBDCs focus on domestic transactions, while stablecoins are more globally adopted.
Are Stablecoins the Future of Crypto?
Stablecoins are an excellent addition to the financial landscape. They offer many benefits that streamline transactions and investment among global investors. However, they also come with a few pitfalls, such as regulatory uncertainty. The good news is that blockchain technology continues to evolve. The Stablecoin regulatory framework is also changing. This means that the tokens will keep experiencing growth not only in the near future but also in years to come.
