Can Stablecoins Be the Answer to Cryptocurrency’s Biggest Problem?
Cryptocurrencies and Blockchain Technology probably represent one of the most radical and dynamic ways of redefining the future of our financial systems. Being characterized by decentralization, working on a peer-to-peer network, having complete anonymity, non-taxable nature, etc. they present an idyllic scenario of what finance should be.
However, when it comes to existing reality, they are found to be very divorced from it. In other words, cryptocurrencies like Bitcoin are too great a departure for them to become complete mainstream entities and be accepted as legal tender by governments, and financial institutions.
It should be pointed out that such issues should not take away all the incredible benefits of cryptocurrencies. For example, their transaction speed, their idea of holding global value across countries and continents and being completely safe and secure (un-hackable).
In this article, we are going to look at ‘Stablecoins’ and understand why they are slowly becoming a globally mutually accepted financial asset that has enormous implications for the future.
Stablecoins: Meaning and Definition
Stablecoins are digital currencies or tokens, which are backed by either of the two following values-
- Physical and tangible precious metals like Gold and Silver
- Traditional fiat currencies of a global nature like Dollar or the Euro
Unlike Bitcoins, which are mined and do not have any physical assets to dictate the price, value of stablecoins are calculated according to the reserve they are supported or backed by.
It is interesting to note that Stablecoins work on the same Blockchain technology as cryptocurrencies thereby maintaining all the benefits and advantages that are part of cryptocurrencies like Bitcoin.
One of the major criticisms of Bitcoins is its volatile nature. The cryptocurrency’s fluctuations is something, which has kept mainstream investors from taking part in it. With Stablecoins, this volatility is expected to be controlled, as it will be subject to universally accepted assets like gold, or even the global Dollar.
How Stablecoins are going to work in the Real World?
Imagine you had to do some business in say, China. You need to raise Capital to start factory production. This involves you moving your capital from USA to Australia. Sounds easy right, but here is where the problem starts.
The first thing you would need to do is ask your Bank in USA to move it to a Bank in Australia. Your personal bank would ask the Central Bank of USA for approval. Once the process is complete, the Australian authorities follow the same principle.
The result- you waste over a week to ten days in the complete process. Stablecoins are going to eliminate this problem. They are going to be a global denomination that helps entrepreneurs and businesses get access to ready finance and capital instantly through Blockchain technology.
Fast transfer of money and capital can help aid humanitarian relief efforts improve business and commerce and speed up tens and thousands of global processes within seconds. More importantly, when real assets back it, the value will not change across different countries and continents.
Is the World Working on Stablecoins in 2020?
In the last few years, the chatter and development behind different Stablecoins is picking up. The most notable example of the same being Facebook’s new crypto, Libra. It is very close to what you would call as a Stablecoins and bears all the features of one.
Other smaller entities are also exploring new stablecoins products in different countries across the world. Many Central Bank Digital Currencies (CBDCs) like the Chinese Digital Yuan has also been very closely modelled on Stablecoins.
From a normal human being, investing early in cryptocurrencies like Stablecoins can prove to be remarkably profitable through the crypto comeback login page. It can generate high profits, offer safety and ensure complete transparency in the way the crypto software works.