The Stablecoins: What Is It and Why Is It So Popular Now?
Cryptocurrencies and increased volatility are almost synonymous. The digital coins market can easily fall or grow up in price by 10% -15% in a day. But along with unstable coins in the industry there are also so-called stablecoins, which will be discussed in this article. Content (please, click the topic to scroll down to it) 1. What is the stablecoins? 2. The list of the most famous stablecoins 3. Advantages and disadvantages 4. Further prospects 5. Conclusion The main idea of cryptocurrencies is creation of the absolutely decentralized payment instrument, which will not have any relations with usual valuable assets. But at this stage of cryptocurrencies development it is not possible to completely abandon fiat yet. In any case, currency of digital coins is counted in dollars, euros and other fiat currencies for convenience. In order to popularize cryptocurrencies, it is necessary to create a bridge between traditional and digital financial sectors. Therefore, in 2015, for the first time, the best qualities of cryptocurrency and fiat money were combined, and so the stablecoins appeared. The first stable cryptocurrency was Tether, it is still the most popular stable digital coin. Tether is backed up by the US dollar. This coin takes 8th place in the global Coinmarketcap rating , with total capitalization almost $2.5 billion. But it is worth noting, that there are already enough of such stablecoins on the market. Each of them is reinforced by a certain physical asset:
- other fiat currencies (the euro, the pound, the yen, etc.);
- the gold and other precious metals;
- the minerals;
- the property;
- Holders of such coins can use all benefits of the digital economy, and at the same time be relatively calm about their capital`s safety. As a rule, cryptocurrency exchanges do not work with fiat currencies. And with stablecoins help it is possible to operate with dollar (or any other currency) right on an exchange. It substantially simplifies a digital coins trading process.
- Thus people, who have no confidence in banks, can secure their capital without contact with traditional financial structures.
- Stablecoins can be effectively used in trade and business, because their price does not change with time. A seller can safely accept $1,000 in coin equivalent, since its value will not fall down, even in conditions of market fluctuations.
- Such coins are absolutely useless as an investment asset. After all, 1,000 coins purchased for 1,000 dollars today, will cost the same 1,000 dollars in a few years (and it is, at best, if the project does not close).
- Pegging to the value of a particular physical product does not protect against fluctuation of the asset itself.
- There is a risk of freezing company's reserve accounts, which will lead to impossibility of fulfilling debt obligations to tokens holders.
- Stablecoins can be stolen at once in two ways (digital and physical).
- Storing of a physical asset entails additional expenses, which often fall on its owner’s shoulders.