The role of steylbcoins in the cryptocurrency market, ways to use stable tokens

In 2017-2018, time on the cryptocurrency market, more and more steakbloins appear : Stasis, LBXPeg, Candy, Paxos Standard, Gemini Dollar, USD Coin, CarbonUSD, nUSD, Stronghold USD …

And this is not to mention such well-known stable cryptocurrencies such as Tether (USDT) and TrueUSD (TUSD). The idea of stable cryptocurrencies looks attractive, but how can they be used in reality? Consider four options.

Safe haven for investors

During the 2017 boom, individual investors were the most visible group in the cryptocurrency market. They bought bitcoins , and market mania allowed them to earn good money. The participation of institutional investors has recently increased, and small buyers still play an important role.

In the end, all investors want one thing: to get income. And by income is not meant paper profit – they want to get money that you can store, spend or reinvest.

For now, investors are forced to convert tokens into fiat currencies. Otherwise, they subject their capital to excessive volatility, typical of even the largest and most popular digital coins, such as Bitcoin and ether .

This method has two key disadvantages :

Low efficiency

The conversion of digital currencies into ordinary ones takes several days, is costly and usually requires the participation of intermediaries such as banks. On many cryptocurrency exchanges, there are no pairs with ordinary currencies at all, so investors have to transfer their tokens to platforms supporting Fiat.

Permanent conversion

This approach creates an almost constant need for the mutual conversion of digital and conventional currencies. Cryptocurrency markets turn into a realm of speculative investment, where people come only for the sake of quick winnings, and not for any real purpose – an image that completely overlooks the mass of practical applications of the blockchain and cryptocurrencies.

Stablecoins can solve both of these problems by offering a digital asset that is protected from market volatility. Investors will be able to take profits by buying stable coins in anticipation of the next transaction, while remaining within the digital space.

Movement of funds in the cryptocurrency ecosystem

Exchanges and exchangers are not the only platforms where cryptocurrencies are in demand or useful. As the industry grows, the need for cryptocurrencies will grow for purposes that go beyond investment, for example, to pay for services provided by various decentralized applications (dApps)

In this case, market volatility takes on even greater significance. Investors are psychologically prepared for rising or falling asset prices and are protected from negative movements by hedging portfolios. In contrast, participants in decentralized platforms – news portals, games or social networks – are not protected from market fluctuations and need a stable means of payment.

Imagine that next week you need to pay $ 100 for the services of a decentralized platform. You transfer to your account on these $ 100, but after a week, its cost drops to $ 60. At best, this will greatly complicate the work with the platform; at worst, you completely refuse it.

Again, stable coins can be the way out, offering stable digital units of account. Users can easily transfer money between different platforms in a cryptoeconomy, contributing to the development of the ecosystem as a whole.

Daily payments

Enthusiasts dream that one day cryptocurrency will come into our everyday life and they can pay for everyday purchases such as coffee, groceries or clothing. It’s still far from making this dream come true, but it’s worth noting that the emergence of stable coins is an important step forward.

For the economy to work effectively, it needs a reliable unit of account. People should know that tomorrow goods and services will cost about the same as yesterday.

Bitcoin and other large cryptocurrencies with their rich history of rapid ups and downs are not suitable for this. Their volatility creates one of the most significant obstacles to the widespread use of cryptocurrencies as a daily means of payment (although there are others: low bandwidth or the need to create an appropriate infrastructure for transactions with minimal costs).

On the other hand, stablebcoins are specifically designed to maintain a stable price. If a certain thing costs 1 TUSD or 1 EURS today, it will probably cost the same tomorrow.

Stability for all

Access to reliable and stable currencies. About this function steyblekoinov say infrequently, but it is not inferior in importance to others. Residents of developed countries are accustomed to the stability of national currencies, which provide relatively reliable storage of the purchasing power of capital. The search for alternatives is a curious adventure for them rather than an urgent need.

However, in many developing countries things are different. Here people are helpless in the face of bad economic policies and the devaluation of the national currency. An excellent example is Turkey. It is no coincidence that in August, when the lira collapsed, the volume of Bitcoin trade in local markets increased significantly.

However, in this situation, accessing Bitcoin is not the best solution. It protects capital from a weak monetary policy, but remains subject to extreme market volatility.

Stablecoins are a more reliable alternative for residents of countries with weak economies. They provide the necessary stability. It may be difficult for citizens of these countries to buy dollars, but with reliable access to the Internet, they can purchase US dollar-linked steylcoins, such as TrueUSD. These coins may not have all the functionality of the US dollar, but they still provide reliable storage of purchasing power, surpassing bitcoin or lira in this indicator. In addition, in the future there may be a serious competitor for steyblkoinov tied to fiatnymi currencies.

Algorithmically stabilized cryptocurrency will not depend at all on any central bank or group of people. But first, these algo projects will have to acquire the same level of trust that fiat steablecoins have.

Conclusion

This is not the whole list of possible applications of stablockcoins. New projects and ideas appear constantly. At the same time, none of the existing models is ideal: tokens based on fiat money are too centralized, steakcoins attached to cryptocurrencies are subject to volatility, and algorithmic tokens often depend on the constant growth of the platform.

As new models and projects appear, unique ways to use stable cryptocurrencies may appear.

It is impossible to deny that steablokoiny play an increasingly important role in cryptocurrency markets. Assessing their impact on the market as a whole or making a decision on the purchase of a particular coin, it is important to understand the benefits they bring now and will be in the future.